2016-FRR Pre-Exam Practice Tests | (Updated 345 Questions)
Valid 2016-FRR Exam Q&A PDF - One Year Free Update
What is the Passing Score, Duration & No. of queries for the GARP 2016-FRR:
- Duration: 175 minutes
- Passing score: 54/80 (67.5%)
- Language: English
- Number of Questions: 80
- Format of 2016-FRR: All multiple choice
Who can take GARP 2016-FRR Certification
2016-FRR exam dumps recommend that individuals with three to five years' work experience in financial management. Bachelor's degree in finance, economics, administration, computer science, or mathematics and who received a GPA of 3.0 or higher. A valid GARP membership is required to take the Financial Risks and Regulation Certification. To return your GARP certification status to active, you must become a GARP member. Names of individuals who have passed the 2016-FRR Certification are provided to interested parties on a confidential basis.
NEW QUESTION 87
Which one of the following four statements describes the advantage of using delta-gamma method of mapping
options positions over delta-normal method?
Delta-gamma method
- A. Overstates the risk of long option positions, but understate the risk of short option positions.
- B. Converts options into underlying factor risks according to their deltas and the gammas to those factors.
- C. Approximates more accurately the non-linear relationship of option values and risk.
- D. Fully captures option price risk, particularly for extreme price movements.
Answer: C
NEW QUESTION 88
Which of the following attributes of duration gap model typically cause criticism?
I. Basis risk
II. Errors in the linear model
III. Costs of immunization
IV. Constant nature of calculation
- A. I, III, IV
- B. II, III, IV
- C. I, II, III
- D. I, II
Answer: C
NEW QUESTION 89
What is the order in which creditors and shareholders get repaid in the event of a bank liquidation?
- A. Debt holders, depositors, shareholders.
- B. Depositors, debt holders, shareholders.
- C. Depositors, shareholders, depositors.
- D. Depositors, shareholders, debt holders.
Answer: B
NEW QUESTION 90
To estimate the interest charges on the loan, an analyst should use one of the following four formulas:
- A. Loan interest = Risk-free rate + Probability of default x Loss given default + Spread
- B. Loan interest = Risk-free rate + Probability of default x Loss given default - Spread
- C. Loan interest = Risk-free rate - Probability of default x Loss given default - Spread
- D. Loan interest = Risk-free rate - Probability of default x Loss given default + Spread
Answer: A
NEW QUESTION 91
A portfolio consists of two floating rate bonds and one fixed rate bond.
Based on the information below, modified duration of this portfolio is
- A. 4.44
- B. 4.28
- C. 3.00
- D. 2.64
Answer: D
NEW QUESTION 92
James Johnson manages a bond portfolio with all investment grade bonds. Adding which of the following
bonds would minimize the credit risk of his portfolio?
- A. C
- B. B
- C. A
- D. D
Answer: C
NEW QUESTION 93
To improve the culture and awareness of the operational risk, Gamma Bank's CRO decides to promote three
activities within her organization. Which one of the following four activities is NOT typically used to develop
an operational risk framework?
- A. Marketing
- B. Planning
- C. Auditing
- D. Training
Answer: C
NEW QUESTION 94
Which of the following are the most common methods to increase liquidity in stressed conditions?
I. Selling or securitizing assets.
II. Obtaining additional credit lines.
III. Securing a better credit rating.
- A. II, III
- B. I
- C. I, II, III
- D. I, II
Answer: D
NEW QUESTION 95
A hedge fund trader buys options to establish an exposure in the currency market, thereby effectively
removing the risk of being able to participate in a gapping market. In this case the options premium represents
the price paid for eliminating the execution risk of
- A. The gamma-hedging strategy.
- B. The theta-hedging strategy.
- C. The vega-hedging strategy.
- D. The delta-hedging strategy.
Answer: D
NEW QUESTION 96
A bank customer expecting to pay its Brazilian supplier BRL 100 million asks Alpha Bank to buy Australian
dollars and sell Brazilian reals. Alpha bank does not hold reals so it asks for a quote to buy Brazilian reals in
the market. The market rate is 100. The bank quotes a selling rate of 101 to its customer and sells the real at
this quoted price. Then the bank immediately buys the real at the market rate and completes foreign exchange
matched transaction. What is the impact of this transaction on the bank's risk profile?
- A. This transaction eliminates market risk.
- B. This transaction eliminates operational risk.
- C. This transaction eliminates credit risk.
- D. This transaction eliminates counterparty risk.
Answer: A
NEW QUESTION 97
BetaFin, a financial services firm, does not have retail branches, but has fixed income, equity, and asset
management divisions. Which one of the four following risk and control self-assessment (RCSA) methods fits
the firm's operational risk framework the best?
- A. RCSA loss data approach
- B. RCSA scenario analysis approach
- C. RCSA workshop approach
- D. RCSA questionnaire approach
Answer: C
NEW QUESTION 98
Gamma Bank is active in loan underwriting and securitization business, and given its collective credit
exposure, it will be typically most interested in the following types of portfolio credit risk:
I. Expected loss
II. Duration
III. Unexpected loss
IV. Factor sensitivities
- A. I
- B. I, III
- C. I, III, IV
- D. II
Answer: C
NEW QUESTION 99
Which one of the following four statements correctly identifies the Basel II Accord's definition of operational
risk?
- A. Operational risk is all the risk that is not captured by market and credit risks.
- B. Operational risk is the risk of loss resulting from inadequate or failed processes, people and systems or
from external events. - C. Operational risk is a risk arising from execution of a company's business functions.
- D. Operational risk is a form of risk that summarizes the risks a company or firm undertakes when it
attempts to operate within a given field or industry.
Answer: B
NEW QUESTION 100
To estimate the price of gold forwards, an investment analyst focuses on the cost of holding physical gold
(bullion) and the cost of shorting the same. Given that physical gold spot price is $1,000, the annual risk-free
rate is 5%, and the gold lease rate equals 2% annually, the analyst's best estimate of the gold forward price to
equal
- A. $1100
- B. $950
- C. $1030
- D. $1070
Answer: C
NEW QUESTION 101
After entering the securitization business, Delta Bank increases its cash efficiency by selling off the lower risk
portions of the portfolio credit risk. This process ___ risk on the residual pieces of the credit portfolio, and as a
result it ___ return on equity for the bank.
- A. Increases; increases;
- B. Decreases; increases;
- C. Decreases; increases;
- D. Increases; decreases;
Answer: A
NEW QUESTION 102
On January 1, 2010 the TED (treasury-euro dollar) spread was 0.4%, and on January 31, 2010 the TED spread
is 0.9%. As a risk manager, how would you interpret this change?
- A. The decrease in the TED spread indicates an increase in credit risk on interbank loans.
- B. Increase in credit risk on T-bills.
- C. The decrease in the TED spread indicates a decrease in credit risk on interbank loans.
- D. Increase in interest rates on both interbank loans and T-bills.
Answer: A
NEW QUESTION 103
Which one of the following four variables of the Black-Scholes model is typically NOT known at a point in
time?
- A. The time to maturity
- B. The underlying relevant exchange rates
- C. The future volatility of the exchange rates
- D. The underlying interest rates
Answer: C
NEW QUESTION 104
An associate from the finance group has been identified as an operational risk coordinator (ORC) for her
department. To fulfill her ORC responsibilities the associate will need to:
I. Provide main communication contact with operational risk department
II. Provide main reporting contact with audit department
III. Coordinate collection of key risk indicators in her area
IV. Coordinate training and awareness activities in her area
- A. II, III, IV
- B. I, III, IV
- C. I, II, III
- D. I, II
Answer: B
NEW QUESTION 105
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Financial Risk and Regulation (FRR) Series Free Update Certification Sample Questions: https://exam-labs.exam4tests.com/2016-FRR-pdf-braindumps.html