Maximum Grades By Making ready With 2016-FRR Dumps UPDATED 2022
Prepare 2016-FRR Exam Questions [2022] Recently Updated Questions
Clarify the importance of GARP 2016-FRR Certification
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The actual purpose of the GARP 2016-FRR Certification
The purpose of the Financial and Regulation (FRR) certification is to verify a candidate's ability to understand and live up to “the standard of knowledge, skill, and behavior” required by corporations for financial management professionals. It was developed with input from leading practitioners and academics and represents the body of knowledge and skills needed for success in this profession. 2016-FRR exam dumps and practice exams are helpful. Local regulators and management professionals have identified the GARP FRM certification as a benchmark for determining competence in financial management. Closed books, multiple-choice, and essay quizzes are used in the 2016-FRR to ensure the thoroughness of the subjects covered. Expressions of the candidate's reasons for answering each question are included in the scoring.
NEW QUESTION 202
In the United States, Which one of the following four options represents the largest component of securitized
debt?
- A. Education loans
- B. Credit card loans
- C. Real estate loans
- D. Lines of credit
Answer: C
NEW QUESTION 203
Bank Alpha is making a decision about lending 10-year loans in a sector that is fairly illiquid and is looking at
various options to fund the loans. Which of the following options to fund the loans exhibits the most
exogenous liquidity risk?
- A. Overnight interbank markets
- B. The 1-year treasury markets
- C. Foreign exchange markets
- D. The 6-month LIBOR markets
Answer: A
NEW QUESTION 204
Banks duration match their assets and liabilities to manage their interest risk in their banking book. A bank has
$100 million in interest rate sensitive assets and $100 million in interest rate sensitive liabilities. Currently the
bank's assets have a duration of 5 and its liabilities have a duration of 2. The asset-liability management
committee of the bank is in the process of duration-matching. Which of the following actions would best
match the durations?
- A. Decrease the duration of liabilities by 1 and decrease the duration of assets by 1.
- B. Decrease the duration of liabilities by 1 and increase the duration of assets by 1.
- C. Increase the duration of liabilities by 2 and decrease the duration of assets by 1.
- D. Increase the duration of liabilities by 2 and increase the duration of assets by 1.
Answer: C
NEW QUESTION 205
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. Fully captures option price risk, particularly for extreme price movements.
- B. Approximates more accurately the non-linear relationship of option values and risk.
- C. Overstates the risk of long option positions, but understate the risk of short option positions.
- D. Converts options into underlying factor risks according to their deltas and the gammas to those factors.
Answer: B
NEW QUESTION 206
Which one of the following four model types would assign an obligor to an obligor class based on the risk
characteristics of the borrower at the time the loan was originated and estimate the default probability based on
the past default rate of the members of that particular class?
- A. Dynamic models
- B. Causal models
- C. Credit rating models
- D. Historical frequency models
Answer: D
NEW QUESTION 207
A risk associate is trying to determine the required risk-adjusted rate of return on a stock using the Capital
Asset Pricing Model. Which of the following equations should she use to calculate the required return?
- A. Required return = risk-free return + 1/beta x market risk
- B. Required return = risk-free return + beta x (1 - market risk)
- C. Required return = risk-free return + beta x market risk
- D. Required return = (1-risk free return) + beta x market risk
Answer: C
NEW QUESTION 208
Which one of the following four physical commodities markets has the right combination of characteristics
that generally allows short selling in the market, without making the short-selling transaction prohibitively
expensive?
- A. Natural Gas
- B. Grain
- C. Oil
- D. Gold
Answer: D
NEW QUESTION 209
Which one of the following four options does NOT represent a benefit of compensating balances to the bank?
- A. Compensation balances influence the expected loss rate of the bank given the default obligor and
improve capital structure by controlling obligor type and avoiding payment delays. - B. Since the compensating balances cannot be withdrawn at short notice, if at all, they are not considered
transaction accounts and are able to provide a stable funding to the bank, reducing its reliance on more
volatile external inter-bank based funding sources. - C. Since the compensating balances reduce the next amount lent to the borrower, the earned return on the
loan is increased, further widening the bank's interest rate margin and profitability. - D. Compensating balances allow the bank to net some of the exposure they may have in case of default, by
taking funds from these specific deposit account one the borrower defaults.
Answer: A
NEW QUESTION 210
Interest rate swaps are:
- A. OTC derivative contracts that allow banks to take positions in series of future exchange rates.
- B. Exchange traded derivative contracts that allow banks and customers to obtain the risk/reward profile of
long-term interest rates without having to use long-term funding. - C. OTC derivative contracts that allow banks and customers to obtain the risk/reward profile of long-term
interest rates without relying on long-term funding. - D. Exchange traded derivative contracts that allow banks to take positions in future interest rates.
Answer: C
NEW QUESTION 211
Which of the following statements about a bank's behavior regarding Risk Adjusted Return on Capital
(RAROC) is correct?
I. A bank should always seek to maximize their overall RAROC.
II. A bank should consider investing in a business even with negative RAROC if it increases the RAROC of
the bank as a whole.
III. A bank should minimize its overall RAROC by controlling the absolute and relative amount of risk of its
businesses.
IV. A bank should maximize its RAROC by always investing in a new business that maximizes the RAROC
for that business unit.
- A. I and II
- B. I, II and III
- C. II, III, and IV
- D. II and IV
Answer: A
NEW QUESTION 212
As Japan ___ its budget deficits and ___ its dependence on debt, the Japanese currency, JPY, would ___ in
value against other currencies.
- A. Reduces, reduces, appreciate
- B. Increases, reduces, appreciate
- C. Reduces, increases, depreciate
- D. Reduces, reduces, depreciate
Answer: A
NEW QUESTION 213
A trader for EtaBank wants to take a leveraged position in Collateralized Debt Obligations. These CDOs can
be used in a repurchase transaction at a 20% haircut. Starting with $100 worth of CDOs, which one of the
following four positions would completely utilize the available leverage?
- A. The trader can buy $100 in CDO's, and repo the CDO's to get back $20, plus interest.
- B. The trader can buy $100 in CDO's, and repo the CDO's to get back $100, less interest.
- C. The trader can buy $100 in CDO's, and repo the CDO's to get back $80, less interest.
- D. The trader can buy $100 in CDO's, and repo the CDO's to get back $60, plus interest.
Answer: C
NEW QUESTION 214
Banks duration match their assets and liabilities to manage their interest risk in their banking book. Currently,
the bank's assets and liabilities both have a duration of 10. To hedge against the risk of decreasing interest
rates, the bank should
I. Increase the duration of the liabilities
II. Increase the duration of the assets
III. Decrease the duration of the liabilities
IV. Decrease the duration of the assets
- A. II and III.
- B. I and II.
- C. I only.
- D. I and IV
Answer: D
NEW QUESTION 215
Which one of the four following statements about the Risk Adjusted Return on Capital (RAROC) is correct?
RAROC is the ratio of:
- A. Profitability to the risk of a trading portfolio or bank business unit.
- B. Risk to the profitability of a trading portfolio or a business unit within the bank.
- C. Profitability to the expected return of a trading portfolio or bank business unit.
- D. Value-at-risk to the profitability of a trading portfolio or a business unit.
Answer: A
NEW QUESTION 216
The value of which one of the following four option types is typically dependent on both the final price of its
underlying asset and its own price history?
- A. Power options
- B. Stout options
- C. Chooser options
- D. Basket options
Answer: B
NEW QUESTION 217
Which one of the following four statements about economic capital of a bank is correct?
- A. Economic capital reflects the possible losses that could occur based on the bank's own estimates of the
risks it is taking. - B. Economic capital is the present value of the earnings generated by the bank in the future.
- C. Economic capital measures how the economy is doing compared to the bank.
- D. Economic capital is determined by rules imposed by an external authority.
Answer: A
NEW QUESTION 218
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