GARP 2016-FRR Online Practice Questions and Exam Preparation

GARP 2016-FRR Online Questions & Answers

• Question 231:

  Company A needs to provide a risk probability/frequency score for its RCSA program. If the event is likely to happen once in 2 years, then the frequency score will be equal to:

  A. 0.2
  B. 0.5
  C. 1
  D. 2
  B. 0.5

• Question 232:

  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 reals at this quoted price. Then the bank immediately buys the real at the market rate and completes foreign exchange matched transaction. What is the financial impact of this transaction for Alpha bank?

  A. This transaction leaves the bank a profit of AUD 10,101.
  B. This transaction leaves the bank a profit of BRL 10,101.
  C. This transaction leaves the bank a loss of AUD 10,101.
  D. This transaction leaves the bank a loss of BRL 10,101.
  A. This transaction leaves the bank a profit of AUD 10,101.

• Question 233:

  As DeltaBank explores the securitization business, it is most likely to embrace securitization to:

  I. Bring transparency to the bank's balance sheet

  II. Create a new profit center for the bank

  III. Strategically release risk capital and regulatory capital for redeployment

  IV.

  Generate cash for additional debt origination

  A. I, III
  B. II, IV
  C. I, II, III
  D. II, III, IV
  I. Bring transparency to the bank's balance sheet II. Create a new profit center for the bank III. Strategically release risk capital and regulatory capital for redeployment IV. Generate cash for additional debt origination
  D. II, III, IV

• Question 234:

  Nijenhaus Bruch is currently creating a program of operational loss data collection at a bank with a large branch network. Which minimal data standards should this collection approach include to meet minimum loss data collecting standards?

  A. Reports should only include the actual loss date.
  B. Reports should capture both the date of the event and the amount of loss.
  C. Reports should capture the date of the event, the amount of loss, and recoveries of gross loss amounts.
  D. Reports should be designed to be shared with external data loss consortia recipients.
  C. Reports should capture the date of the event, the amount of loss, and recoveries of gross loss amounts.

• Question 235:

  A trader attempts to hold long positions when markets are rising and hold short positions when markets are falling. Which one of the following four trading styles is she likely to use?

  A. Technical trading
  B. Contrarian trading
  C. Black box trading
  D. Market timing trading
  D. Market timing trading

• Question 236:

  James Arthur is a customer of a bank who has taken a floating rate loan from the bank. He is concerned that the rates may rise in the future increasing his payment amount. Which of the following instruments should he buy to hedge against the rise in interest rates?

  A. Interest rate floor
  B. Interest rate cap
  C. Index amortizing swap
  D. Interest rate swap that receives fixed and pays floating
  B. Interest rate cap

• Question 237:

  Bank Zilo has $2 million in cash and $10 million in loans coming due tomorrow with an expected default rate of 1%. The proceeds will be deposited overnight. The bank owes $ 10 million on a securities purchase that settles in two days and pays off $9 million in commercial paper in three days that is not expected to renew. How much money should the bank plan to raise so as to avoid a liquidity problem?

  A. $710 million
  B. $712 million
  C. $700 million
  D. $650 million
  A. $710 million

• Question 238:

  Short-selling is typically associated with the following risks:

  I. Potential for extreme losses

  II. Risk associated with the availability of shares to borrow

  III.

  Market behavior risk IV. Liquidity risk

  A. I, II
  B. I, III
  C. II, IV
  D. I, II, III, IV
  I. Potential for extreme losses II. Risk associated with the availability of shares to borrow III. Market behavior risk IV. Liquidity risk
  D. I, II, III, IV

• Question 239:

  Which one of the four following activities is NOT a component of the daily VaR computing process?

  A. Updating individual risk factor models.
  B. Computing portfolio risk by delta-normal or delta-gamma method.
  C. Updating factor interrelationships.
  D. Producing the VaR report.
  B. Computing portfolio risk by delta-normal or delta-gamma method.

• Question 240:

  Which one of the following four statements about the "market-maker" trading strategy is INCORRECT?

  A. A market maker that attracts buy and sell orders can make a profit from the spread quoted between the buy and sell price.
  B. A market maker can benefit from the market information she gets from the trades she is asked to execute.
  C. This strategy is independent of market liquidity and number of other market makers.
  D. This risk in this strategy is that traders have to take positions that may quickly incur a loss.
  C. This strategy is independent of market liquidity and number of other market makers.