GARP GARP Certifications ICBRR Questions & Answers

• Question 261:

  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

  Correct Answer: B

• Question 262:

  A credit associate extending a loan to an obligor suspects that the obligor may change his behavior after the loan has been originated. The obligor in this case may use the loan proceeds for purposes not sanctioned by the lender, thereby increasing the risk of default. Hence, the credit associate must estimate the probability of default based on the assumptions about the applicability of the following tendency to this lending situation:

  A. Speculation

  B. Short bias

  C. Moral hazard

  D. Adverse selection

  Correct Answer: C

• Question 263:

  Which one of the following four statements about the relationship between exchange rates and option values is correct?

  A. As the dollar appreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate decreases.

  B. As the dollar appreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate increases.

  C. As the dollar depreciates relative to the pound, the right to buy dollars at a fixed pound exchange rate increases.

  D. As the dollar appreciates relative to the pound, the right to sell dollars at a fixed pound exchange rate increases.

  Correct Answer: B

• Question 264:

  Counterparty credit risk assessment differs from traditional credit risk assessment in all of the following features EXCEPT:

  A. Exposures can often be netted

  B. Exposure at default may be negatively correlated to the probability of default

  C. Counterparty risk creates a two-way credit exposure

  D. Collateral arrangements are typically static in nature

  Correct Answer: D

• Question 265:

  Which one of the following statements about futures contracts is correct?

  A. Futures contracts are subject to the same risks as the underlying instruments.

  II. Futures contracts have additional interest rate risk die to the future delivery date.

  III. Futures contracts traded in a clearinghouse system are exposed to credit risk with numerous counterparties.

  B. I

  C. I, III

  D. II, III

  E. I, II, III

  Correct Answer: A

• Question 266:

  All of the following performance statistics typically benefit country's creditworthiness EXCEPT:

  A. Low unemployment

  B. Low inflation

  C. High degrees of investment

  D. Low degrees of savings

  Correct Answer: D

• Question 267:

  Which one of the following four options correctly identifies the core difference between bonds and loans?

  A. These instruments receive a different legal treatment.

  B. These instruments have different pricing drivers.

  C. These instruments cannot be used to estimate credit capital under provisions of the Basel II Accord.

  D. These instruments are subject to different credit counterparty regulations.

  Correct Answer: A

• Question 268:

  Beta Insurance Company is only allowed to invest in investment grade bonds. To maximize the interest income, Beta Insurance Company should invest in bonds with which of the following ratings?

  A. AAA

  B. AA

  C. A

  D. B

  Correct Answer: C

• Question 269:

  Which one of the following four statements on factors affecting the value of options is correct?

  A. As volatility rises, options increase in value.

  B. As time passes, options will increase in value.

  C. As interest rates rise and option's rho is positive, option prices will decrease.

  D. As the value of underlying security increases, the value of the put option increases.

  Correct Answer: A

• Question 270:

  By lowering the spread on lower credit quality borrowers, the bank will typically achieve all of the following outcomes EXCEPT:

  A. Aggressively courting of new business

  B. Lower probability of default

  C. Rapid growth

  D. Higher losses in case of default

  Correct Answer: B