GARP 2016-FRR Online Practice Questions and Exam Preparation

GARP 2016-FRR Online Questions & Answers

• Question 41:

  An asset-sensitive bank will have a ___ cumulative gap and will benefit from ___ interest rates.

  A. Positive; dropping
  B. Positive; rising
  C. Negative; dropping
  D. Negative; rising
  B. Positive; rising

• Question 42:

  Which of the following statements are reasons for mathematical valuation and risk assessment models to be misleading or inaccurate?

  I. There could be missing factors in models.

  II. The data used as input for the model could be bad or wrong.

  III. Model results could be misinterpreted.

  IV.

  There could be errors in the derivation of the model.

  A. I, II, III IV
  B. III and IV
  C. I, II, and III
  D. I, III, and IV
  I. There could be missing factors in models. II. The data used as input for the model could be bad or wrong. III. Model results could be misinterpreted. IV. There could be errors in the derivation of the model.
  A. I, II, III IV

• Question 43:

  Which one of the following is a reason for a bank to keep a commercial loan in its portfolio until maturity?

  I. Commercial loans usually have attractive risk-return profile.

  II. Commercial loans are difficult to sell due to non standard features.

  III. Commercial loans could be used to maintain good relations with important customers.

  IV.

  The credit risk in commercial loans is low.

  A. I, II and III
  B. III and IV
  C. II and IV
  D. IV only
  I. Commercial loans usually have attractive risk-return profile. II. Commercial loans are difficult to sell due to non standard features. III. Commercial loans could be used to maintain good relations with important customers. IV. The credit risk in commercial loans is low.
  A. I, II and III

• Question 44:

  In hedging transactions, derivatives typically have the following advantages over cash instruments:

  I. Lower credit risk

  II. Lower funding requirements

  III. Lower dealing costs

  IV.

  Lower capital charges

  A. I, II
  B. I, III
  C. II, IV
  D. I, II, III, IV
  I. Lower credit risk II. Lower funding requirements III. Lower dealing costs IV. Lower capital charges
  D. I, II, III, IV

• Question 45:

  Which of the following statements about endogenous and exogenous types of liquidity are accurate?

  I. Endogenous liquidity is the liquidity inherent in the bank's assets themselves.

  II. Exogenous liquidity is the liquidity provided by the bank's liquidity structure to fund its assets and maturing liabilities.

  III. Exogenous liquidity is the non-contractual and contingent capital supplied by investors to support the bank in times of liquidity stress.

  IV.

  Endogenous liquidity is the same as funding liquidity.

  A. I, II
  B. I, III
  C. II, III
  D. I, II, IV
  I. Endogenous liquidity is the liquidity inherent in the bank's assets themselves. II. Exogenous liquidity is the liquidity provided by the bank's liquidity structure to fund its assets and maturing liabilities. III. Exogenous liquidity is the non-contractual and contingent capital supplied by investors to support the bank in times of liquidity stress. IV. Endogenous liquidity is the same as funding liquidity.
  A. I, II

• Question 46:

  In analyzing the historical performance of a financial product, you are concerned about "fat tails", the probability of extreme returns compared to realized returns. Which of the following measures should you use to determine if the product return distribution of the product has "fat tails"?

  A. Mean
  B. Standard deviation
  C. Skewness
  D. Kurtosis
  D. Kurtosis

• Question 47:

  In early March, an energy trader takes a long position in natural gas futures for delivery in June, and hedges this exposure by taking a position in futures for July delivery. These trades were executed on the expectation that over time, the relative prices of the June and July contracts will come into alignment, the movement in these two contracts will largely mirror each other, and as a result of this, the net exposure is minimized and the position is protected against absolute price movements. However, if the two relative prices do not come into alignment with each other due to the scarcity of any of the two traded contracts in the futures market, the trader is likely to become exposed to the

  A. Location basis
  B. Quality basis
  C. Product basis
  D. Calendar spreads basis
  D. Calendar spreads basis

• Question 48:

  Which one of the four following statements about Basis point values is correct? Basis point value:

  A. Is a widely used statistical tool used to measure market risk.
  B. Refers to the change in the value of a fixed income position for a very small change yields.
  C. Is a risk sensitivity measure used to measure the point spread risk in the banking book.
  D. Provides a quick estimate of the sensitivity of the bank's banking book, to increasing volatility in interest rates.
  B. Refers to the change in the value of a fixed income position for a very small change yields.

• Question 49:

  To estimate the responsiveness of a particular equity portfolio to the overall market, a trader should use the portfolio's

  A. Alpha
  B. Beta
  C. CVaR
  D. VaR
  B. Beta

• Question 50:

  Which one of the following four statements regarding the current value of a transaction and its purposes is INCORRECT?

  A. For cash settled instrument the final market value is used to settle the transaction with the counterparty
  B. Profit and loss calculations are made by comparing the current values to the intrinsic values.
  C. Margin call by futures exchanges are based on the current market value.
  D. Counterparty credit risk calculations are made by analyzing the current values of all deals with the same counterparty.
  B. Profit and loss calculations are made by comparing the current values to the intrinsic values.