GARP 2016-FRR Online Practice Questions and Exam Preparation

GARP 2016-FRR Online Questions & Answers

• Question 291:

  Present value of a basis point (PVBP) is one of the ways to quantify the risk of a bond, and it measures:

  A. The change in value of a bond when yields increase by 0.01%.
  B. The percentage change in bond price when yields change by 1 basis point.
  C. The present value of the future cash flows of a bond calculated at a yield equal to 1%.
  D. The percentage change in bond price when the yields change by 1%.
  A. The change in value of a bond when yields increase by 0.01%.

• Question 292:

  Bank Muri has $4 million in cash and $5 million in loans coming due tomorrow with an expected default rate of 1%. The proceeds will be deposited overnight. The bank owes $ 9 million on a securities purchase that settles in two days and pays off $8 million in commercial paper in three days that is not expected to renew. On day 2, $1 million in loans is coming in with an expected default rate of 1% and on day 3, $2 million in loans is coming in with expected default rate of 2%. How much should the bank plan to raise in order to avoid liquidity problems?

  A. $500 million
  B. $510 million
  C. $508 million
  D. $550 million
  B. $510 million

• Question 293:

  Which statements correctly describe the features of using subscription databases for operational loss data analysis? Subscription databases

  I. Provide central data repositories and benchmarking services to their members.

  II. Can provide insight into whether the losses in a firm reflect the usual losses in their industry.

  III. Assist with mapping the events to the appropriate business lines, risk categories and causes.

  IV.

  Reflect only events that are interesting to the press and are reported in the press.

  A. I and II
  B. II and III
  C. I, II and III
  D. II, III, and IV
  I. Provide central data repositories and benchmarking services to their members. II. Can provide insight into whether the losses in a firm reflect the usual losses in their industry. III. Assist with mapping the events to the appropriate business lines, risk categories and causes. IV. Reflect only events that are interesting to the press and are reported in the press.
  B. II and III

• Question 294:

  The operational risk policy should include:

  I. The firm's definition of risk

  II. The governance of operational risk including who owns it, what it owns, and how issues should be escalated

  III.

  The main activities and elements that are managed by the operational risk function

  A. I, II
  B. I, III
  C. II, III
  D. I, II, III
  I. The firm's definition of risk II. The governance of operational risk including who owns it, what it owns, and how issues should be escalated III. The main activities and elements that are managed by the operational risk function
  D. I, II, III

• Question 295:

  Operational risk team for a large international bank is implementing business continuity planning (BCP). Which of the following BCP activities fall within the definition of operational risk and represent Basel II Accord's operational risk categories:

  I. Damage to Physical Assets

  II. Business Disruption and System Failures

  III. Social Distancing Requirements

  IV.

  Potential for Extreme Losses

  A. I and II
  B. III
  C. I and IV
  D. III and IV
  I. Damage to Physical Assets II. Business Disruption and System Failures III. Social Distancing Requirements IV. Potential for Extreme Losses
  A. I and II

• Question 296:

  By foreign exchange market convention, spot foreign exchange transactions are to be exchanged at the spot date based on the following settlement rule:

  A. One-day rule
  B. Two-day rule
  C. Three-day rule
  D. Four-day rule
  B. Two-day rule

• Question 297:

  What is the order in which creditors and shareholders get repaid in the event of a bank liquidation?

  A. Depositors, shareholders, debt holders.
  B. Debt holders, depositors, shareholders.
  C. Depositors, debt holders, shareholders.
  D. Depositors, shareholders, depositors.
  C. Depositors, debt holders, shareholders.

• Question 298:

  Alpha Bank estimates its 1-month, 95% VaR is 30 million EUR. This means that in the next month, there is a

  A. 95% chance that AlphaBank can lose more than 30 million EUR.
  B. 95% chance that AlphaBank will lose exactly 30 million EUR.
  C. 95% chance that AlphaBank can lose at most 30 million EUR.
  D. 95% chance that AlphaBank will at least lose 30 million EUR.
  C. 95% chance that AlphaBank can lose at most 30 million EUR.

• Question 299:

  Changes to which one of the following four factors would typically not increase the cost of credit?

  A. Increasing inflation rates in a country.
  B. Increase in consumption of goods and services.
  C. Higher risk premium on a fixed income instrument.
  D. Higher return earned on alternative investments.
  C. Higher risk premium on a fixed income instrument.

• Question 300:

  Which one of the following four alternatives correctly identifies the purpose of a clearinghouse in trading activities?

  A. Reduction of counterparty risk and liquidity risk
  B. Reduction of basis risk and mark-to-market risk
  C. Reduction of operational risk and credit risk
  D. Reduction of market risk and credit risk
  A. Reduction of counterparty risk and liquidity risk