GARP 2016-FRR Online Practice Questions and Exam Preparation

GARP 2016-FRR Online Questions & Answers

• Question 81:

  Which one of the following four relationships should be used to price equity forwards or futures?

  A. Equity forward or futures price = market equity price + (1 + risk-free rate ?expected dividend rate)t
  B. Equity forward or futures price = market equity price x (1 - risk-free rate ?expected dividend rate)t
  C. Equity forward or futures price = market equity price x (1 + risk-free rate ?expected dividend rate)t
  D. Equity forward or futures price = market equity price + (1 + risk-free rate + expected dividend rate)t
  C. Equity forward or futures price = market equity price x (1 + risk-free rate ?expected dividend rate)t

• Question 82:

  Bank Sigma takes a long position in the oil futures market that requires a 2% margin, i.e., the bank has to deposit 2% of the value of the contract with the broker. The futures contracts were priced at $50 per barrel (bbl) at inception, and rose by $5 to $55. The VaR on the position is estimated to be $10. What is the return on this transaction on a risk adjusted basis?

  A. 50%
  B. 10%
  C. 500%
  D. 20%
  A. 50%

• Question 83:

  Which of the following statements is a key difference between customer loans and interbank loans?

  A. Customers are less credit-worthy than banks on average and hence yields are higher on average for customer loans as compared to interbank loans
  B. Customer loans are of shorter duration than interbank loans
  C. Customer loans are easier to sell than interbank loans
  D. Interbank loans are more customized than commercial loans
  A. Customers are less credit-worthy than banks on average and hence yields are higher on average for customer loans as compared to interbank loans

• Question 84:

  A risk manager has a long forward position of USD 1 million but the option portfolio decreases JPY 0.50 for every JPY 1 increase in his forward position. At first approximation, what is the overall result of the options positions?

  A. The options positions hedge the forward position by 25%.
  B. The option positions hedge the forward position by 50%.
  C. The option positions hedge the forward position by 75%.
  D. The option positions hedge the forward position by 100%.
  B. The option positions hedge the forward position by 50%.

• Question 85:

  A bank owns a portfolio of bonds whose composition is shown below.

  

  What is the modified duration of the portfolio?

  A. 1.30
  B. 8.5
  C. 2.30
  D. 0.5
  A. 1.30

• Question 86:

  Foreign exchange rates are determined by various factors. Considering the drivers of exchange rates, which one of the following changes would most likely strengthen the value of the USD against other foreign currencies?

  A. The expected US inflation rate increases
  B. The global demand for US products decreases
  C. The economic performance in the US weakens
  D. The US current account surplus increases
  D. The US current account surplus increases

• Question 87:

  Which one of the following areas does not typically report into a central operational risk function?

  A. Business continuity planning
  B. Information security
  C. Geopolitical and strategic planning
  D. Embedded operational risk coordinators or specialists or managers
  C. Geopolitical and strategic planning

• Question 88:

  Which of the following factors can cause obligors to default at the same time?

  I. Obligors may be harmed by exposures to similar risk factors simultaneously.

  II. Obligors may exhibit herd behavior.

  III. Obligors may be subject to the sampling bias.

  IV.

  Obligors may exhibit speculative bias.

  A. I
  B. II, III
  C. I, II
  D. III, IV
  I. Obligors may be harmed by exposures to similar risk factors simultaneously. II. Obligors may exhibit herd behavior. III. Obligors may be subject to the sampling bias. IV. Obligors may exhibit speculative bias.
  C. I, II

• Question 89:

  To quantify the aggregate average loss for the credit portfolio and its possible constituent subportfolios, a credit portfolio manager should use the following metric:

  A. Credit VaR
  B. Expected loss
  C. Unexpected loss
  D. Factor sensitivity
  B. Expected loss

• Question 90:

  Which one of the following four statements about equity indices is INCORRECT?

  A. Equity indices are numerical calculations that reflect the performance of hypothetical equity portfolios.
  B. Equity indices do not trade in cash form, rather, they are meant to track the overall performance of an equity market.
  C. Capitalization-weighted equity indices are not generally considered better to track the performance of an overall market.
  D. Price-weighted equity indices give greater weight to shares trading at high prices.
  C. Capitalization-weighted equity indices are not generally considered better to track the performance of an overall market.