GARP 2016-FRR Online Practice Questions and Exam Preparation

GARP 2016-FRR Online Questions & Answers

• Question 271:

  Which one of the following changes would typically increase the price of a fixed income instrument, such as a bond?

  A. Decrease in inflation rates in a country.
  B. Increase in time to maturity.
  C. Increase in risk premium.
  D. Increase in demand for goods and services.
  A. Decrease in inflation rates in a country.

• Question 272:

  Which one of the following four regulatory drivers for operational risk management includes risk and control requirements for financial statements in the United States?

  A. Basel II Accord
  B. Solvency II
  C. The Markets in Financial Instruments Directive
  D. The Sarbanes-Oxley Act
  D. The Sarbanes-Oxley Act

• Question 273:

  James Johnson bought a 3-year plain vanilla bond that has yield of 4.7% and 4% coupon paid annually, for $87,139. Macauley's duration of the bond is 2.94 years. Rate volatility is 20% of the yield. The bond's annualized volatility is therefore:

  A. 3.15%.
  B. 2.90%.
  C. 2.81%.
  D. 2.64%.
  D. 2.64%.

• Question 274:

  The data available to estimate the statistical distribution of bank losses is difficult to assemble for which of the following reasons?

  I. The needed data is vast in quantity.

  II. The data requires bringing together significantly different measures of risk.

  III.

  Some risks are difficult to quantify and hence the data might involve subjective elements.

  A. I, II
  B. I, III
  C. II, III
  D. I, II, III
  I. The needed data is vast in quantity. II. The data requires bringing together significantly different measures of risk. III. Some risks are difficult to quantify and hence the data might involve subjective elements.
  C. II, III

• Question 275:

  Which one of the following four models is typically used to grade the obligations of small- and medium-size enterprises?

  A. Causal models
  B. Historical frequency models
  C. Credit scoring models
  D. Credit rating models
  C. Credit scoring models

• Question 276:

  Which one of the following four statements about hedging is INCORRECT?

  A. Traders can hedge their risks by taking an appropriate position in the underlying instrument.
  B. Traders can hedge their portfolio risks by taking a position in a different instrument.
  C. For a fully hedged portfolio, any changes in markets prices will typically produce significant changes in the market value of the portfolio.
  D. A large number of hedge positions is generally required to match the underlying transaction completely.
  C. For a fully hedged portfolio, any changes in markets prices will typically produce significant changes in the market value of the portfolio.

• Question 277:

  Which of the following statements about implementation of a successful RCSA program is correct?

  A. An RCSA is only complete after all possible mitigating actions have been identified and analyzed as a result of the assessment process.
  B. Internal loss data help to identify the risks and control weaknesses that need to be addressed in the RCSA; external events are not helpful in informing the discussions around potential risks.
  C. The RCSA scoring methodology should include only financial impacts and not include reputational, legal, regulatory, client and life safety impacts.
  D. To ensure that the RCSA is well designed, it is important to interview participants, stakeholders and support functions prior to the launching the RCSA.
  D. To ensure that the RCSA is well designed, it is important to interview participants, stakeholders and support functions prior to the launching the RCSA.

• Question 278:

  Which one of the four following statements about the Risk Adjusted Return on Capital (RAROC) is correct? RAROC is the ratio of:

  A. Risk to the profitability of a trading portfolio or a business unit within the bank.
  B. Value-at-risk to the profitability of a trading portfolio or a business unit.
  C. Profitability to the expected return of a trading portfolio or bank business unit.
  D. Profitability to the risk of a trading portfolio or bank business unit.
  D. Profitability to the risk of a trading portfolio or bank business unit.

• Question 279:

  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. Decreases; increases;
  B. Increases; increases;
  C. Increases; decreases;
  D. Decreases; increases;
  B. Increases; increases;

• Question 280:

  Arnold Wu owns a floating rate bond. He is concerned that the rates may fall in the future decreasing his payment amount. Which of the following instruments should he buy to hedge against the fall in interest rates?

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