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2016-FRR Test Dumps.zip - Valid Dumps 2016-FRR Book

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Pass Guaranteed Quiz 2016-FRR - Authoritative Financial Risk and Regulation (FRR) Series Test Dumps.zip

It is very necessary for candidates to get valid 2016-FRR dumps collection because it can save your time and help you get succeed in IT filed by clearing 2016-FRR actual test. Passing real exam is not easy task so many people need to take professional suggestions to prepare 2016-FRR Practice Exam. The reason that we get good reputation among dump vendors is the most reliable 2016-FRR pdf vce and the best-quality service.

GARP 2016-FRR Exam is a comprehensive test that covers a wide range of topics related to financial risk and regulation. It consists of two parts, Part I and Part II, each of which contains 80 multiple-choice questions. The topics covered in the exam include market risk, credit risk, operational risk, liquidity risk, regulatory compliance, and risk management frameworks. 2016-FRR Exam is designed to test the candidate's knowledge and understanding of these topics, as well as their ability to apply this knowledge in practical scenarios. Passing 2016-FRR exam demonstrates a high level of proficiency and expertise in financial risk management and regulatory compliance.

GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q67-Q72):

NEW QUESTION # 67
Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). The loan is collateralized with $55,000. The loan also has an annual expected default rate of 2%, and loss given default at 50%. In this case, what will the bank's expected loss be?

A. $500
B. $750
C. $1,000
D. $1,300

Answer: C

Explanation:
To determine the bank's expected loss, we need to calculate the expected loss given default (LGD) and then use the annual expected default rate to find the total expected loss.
* Loan Amount (Exposure at Default, EAD):$100,000
* Collateral:$55,000
* Net Exposure (EAD - Collateral):$100,000 - $55,000 = $45,000
* Loss Given Default (LGD):50% of Net Exposure###=50%×$45,000=$22,500LGD=50%×$45,000
=$22,500
* Annual Expected Default Rate:2%
* Expected Loss:Annual Expected Default Rate × LGDExpected Loss=2%×$22,500=0.02×22,
500=$450Expected Loss=2%×$22,500=0.02×22,500=$450
Hence, the expected loss due to default is $450, but we need to find the total expected loss including the interest, which is typically considered the exposure part.
Total expected loss is primarily focusing on the loan risk and the direct calculation of LGD × Default Rate.

NEW QUESTION # 68
The Basel II Accord's operational risk definition excludes all of the following items EXCEPT:

A. Strategic risk
B. Legal risk
C. Reputational risk
D. Geopolitical risk

Answer: B

NEW QUESTION # 69
A bank customer can use either a plain vanilla option or an option contract with volumetric flexibility to reduce the following risks:
I). Market Risk
II). Basis Risk
III). Operational Risk

A. I, II
B. I
C. II
D. II, III

Answer: A

Explanation:
A bank customer can use either a plain vanilla option or an option contract with volumetric flexibility to reduce market risk and basis risk. Market risk involves the risk of changes in market prices, and basis risk involves the risk that the derivative's price does not move perfectly with the underlying asset. Operational risk, on the other hand, involves risks related to internal processes, systems, or external events, which are not typically managed through financial derivatives like options.
References
Verified from the discussion on managing market and basis risks with options in the book "How Finance Works".

NEW QUESTION # 70
Which one of the following statements regarding collateralized mortgage obligations (CMO) is incorrect?

A. CMOs are pools of mortgages that are divided according to the timing of cash flows.
B. CMOs have senior tranches which are considered short-term, low-risk instruments by banks
C. CMOs are generally less risky investment than CDOs.
D. CMOs are asset-backed securities that have pools of collateralized debt obligations (CDOs) as
underlying collateral.

Answer: D

NEW QUESTION # 71
Which of the following statements about the interest rates and option prices is correct?

A. If rho is positive, rising interest rates decrease option prices.
B. If rho is positive, rising interest rates increase option prices.
C. As interest rates fall, all options will rise in value.
D. As interest rates rise, all options will rise in value.

Answer: B

Explanation:
Rho is a measure of the sensitivity of an option's price to changes in interest rates. If rho is positive, it means that the price of the option will increase when interest rates rise. This is because higher interest rates generally increase the cost of carry, which can make holding the underlying asset more expensive and thus increase the value of the option.

NEW QUESTION # 72
......

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