GARP 2016-FRR Online Practice Questions and Exam Preparation

GARP 2016-FRR Online Questions & Answers

• Question 141:

  Suppose that a regulator deems all corporate debt to have the same risk level. Which of the following behavior of banks would be an example of regulatory arbitrage?

  A. Banks increase their exposure to corporate debt.
  B. Banks decrease their exposure to corporate debt.
  C. Banks shift their exposure to more risky corporate debt.
  D. Banks shift their exposure to less risky corporate debt.
  C. Banks shift their exposure to more risky corporate debt.

• Question 142:

  A risk associate responsible for the operational risk function wants to evaluate the upward reporting governance structure and to assess its critical features. Which one of the four attributes does not represent a critical feature of the upward reporting governance structure?

  A. Independence
  B. Importance
  C. Relevance
  D. Security
  D. Security

• Question 143:

  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 Brazilian 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, sells the reals, and receives AUD 1,010,000. To perform foreign exchange matched position trading, the banks should

  A. Immediately buy the real at the market rate of 100 and pay AUD 1,000,000.
  B. Immediately buy the real above the market rate of 105 and pay AUD 1,050,050.
  C. Immediately sell the real at the market rate of 100 and receive AUD 1,000,000.
  D. Immediately sell the real above the market rate of 105 and receive AUD 1,050,050.
  A. Immediately buy the real at the market rate of 100 and pay AUD 1,000,000.

• Question 144:

  A credit risk analyst is evaluating factors that quantify credit risk exposures. The risk that the borrower would fail to make full and timely repayments of its financial obligations over a given time horizon typically refers to:

  A. Duration of default.
  B. Exposure at default.
  C. Loss given default.
  D. Probability of default.
  D. Probability of default.

• Question 145:

  According to the principles of the Basel II Accord, the implementation and relative weights of the elements of the operational risk framework depend on:

  I. The culture of the financial institution

  II. Regulatory drivers

  III. Business drivers

  IV.

  The bank's reporting currency

  A. I, IV
  B. II, III
  C. II, IV
  D. I, II, III
  I. The culture of the financial institution II. Regulatory drivers III. Business drivers IV. The bank's reporting currency
  D. I, II, III

• Question 146:

  For which one of the following four reasons do corporate customers use foreign exchange derivatives?

  I. To lock in the current value of foreign-denominated receivables

  II. To lock in the current value of foreign-denominated payables

  III. To lock in the value of expected future foreign-denominated receivables

  IV.

  To lock in the value of expected future foreign-denominated payables

  A. II
  B. I and IV
  C. II and III
  D. I, II, III, IV
  I. To lock in the current value of foreign-denominated receivables II. To lock in the current value of foreign-denominated payables III. To lock in the value of expected future foreign-denominated receivables IV. To lock in the value of expected future foreign-denominated payables
  D. I, II, III, IV

• Question 147:

  Which one of the four following aspects of legal risk is NOT included in the Basel II Accord?

  A. Exposure to fines
  B. Private settlements
  C. Punitive damages resulting from supervisory actions
  D. Negative publicity resulting from reputational damages
  D. Negative publicity resulting from reputational damages

• Question 148:

  Bank customers traditionally trade commodity futures with banks in order to achieve which of the following goals?

  I. To express their own price views

  II. To reverse undesired short-term exposure created from fixed commodity sales

  III.

  To reach short- term budgetary targets

  A. I
  B. II
  C. I, III
  D. I, II, III
  I. To express their own price views II. To reverse undesired short-term exposure created from fixed commodity sales III. To reach short- term budgetary targets
  D. I, II, III

• Question 149:

  Which one of the following four options correctly identifies the core difference between bonds and loans?

  A. These instruments receive a different legal treatment.
  B. These instruments have different pricing drivers.
  C. These instruments cannot be used to estimate credit capital under provisions of the Basel II Accord.
  D. These instruments are subject to different credit counterparty regulations.
  A. These instruments receive a different legal treatment.

• Question 150:

  Why do regulatory standards impose formulaic capital calculations for all of the banks activities?

  I. If the banks use different models it is difficult for a regulator to compare results across banks.

  II. By imposing standardized calculations regulators can make sure that banks are not missing key risks in their calculations.

  III.

  By imposing standardized calculations regulators can make sure that banks do not use capital calculations to game the banking regulation system.

  A. I
  B. I,II
  C. II, III
  D. I,II, III
  I. If the banks use different models it is difficult for a regulator to compare results across banks. II. By imposing standardized calculations regulators can make sure that banks are not missing key risks in their calculations. III. By imposing standardized calculations regulators can make sure that banks do not use capital calculations to game the banking regulation system.
  D. I,II, III