GARP GARP Certifications ICBRR Questions & Answers

• Question 171:

  For two variables, which of the following is equal to the average product of the deviations from their respective means?

  A. Standard deviation

  B. Kurtosis

  C. Correlation

  D. Covariance

  Correct Answer: D

• Question 172:

  Floating rate bonds typically have ________ duration which means they have ________ sensitivity to interest rate changes.

  A. long, small

  B. long, high

  C. short, high

  D. short, small

  Correct Answer: D

• Question 173:

  From a risk point of view, which of the following factors will generally lead to the fluctuation of equity values with industry P/E levels and a company's individual earnings?

  A. Sales

  II. Cost management

  III. Commercial success of the company

  IV. Market sentiment

  B. I, II

  C. II, IV

  D. III, IV

  E. I, II, III

  Correct Answer: D

• Question 174:

  What does correlation between two variables measure?

  A. Symmetry of a joint distribution of the two variables.

  B. Association between the two variables and the strength of a possible statistical relationship.

  C. The proportion of variability in one of the variables that is explained by the other.

  D. Extreme returns of both variables.

  Correct Answer: B

• Question 175:

  A portfolio manager is interested in computing risk measures for his bond investment portfolio. Which of the following measures the sensitivity of duration to interest rates?

  A. Modified duration.

  B. Yield curve

  C. Convexity.

  D. Credit spread.

  Correct Answer: C

• Question 176:

  What do option deltas measure?

  A. The rate of change of the option value with respect to changes in volatility of the underlying instrument.

  B. The sensitivity of the option value to changes risk free interest rate.

  C. The rate of change of the option value with respect to changes in the price of the underlying instrument.

  D. The sensitivity of the option value to the passage of time.

  Correct Answer: C

• Question 177:

  Which of the following statements about parametric and nonparametric methods for calculating Value-atrisk is correct?

  A. Parametric methods generally assume returns are normally distributed, and non- parametric methods make no assumptions about return distributions.

  B. Parametric methods make no assumptions about return distributions, and non- parametric methods assume returns are normally distributed.

  C. Both parametric and nonparametric methods assume returns are normally distributed.

  D. Both parametric and nonparametric methods make no assumptions about return distributions.

  Correct Answer: A

• Question 178:

  Which one of the following four physical commodities markets has the right combination of characteristics that generally allows short selling in the market, without making the short- selling transaction prohibitively expensive?

  A. Oil

  B. Natural Gas

  C. Grain

  D. Gold

  Correct Answer: D

• Question 179:

  To estimate the required risk-adjusted rate of return on a highly volatile energy stock, a risk associate

  compiled the following statistics:

  Risk-free rate = 5%

  Beta = 2.5

  Market Risk = 8%

  Using the Capital Asset Pricing Model, she estimates the rate of return to be equal:

  A. 10%

  B. 15%

  C. 25%

  D. 40%

  Correct Answer: C

• Question 180:

  What is a common implicit assumption that is made when computing VaR using parametric methods?

  A. The expected returns are constant, but the standard deviation changes over time.

  B. The standard deviations of returns are constant, but the mean changes over time.

  C. The mean of and the standard deviations of returns are both constant.

  D. The mean and standard deviation of returns change periodically in response to crises.

  Correct Answer: C