2023 Updated Verified 2016-FRR Downloadable Printable Exam Dumps
The Ultimate GARP 2016-FRR Dumps PDF Review
To prepare for the GARP 2016-FRR exam, candidates are encouraged to use a variety of study materials, including textbooks, online courses, and practice exams. Many candidates also participate in study groups or attend review courses to help them prepare for the exam. 2016-FRR exam is challenging, but those who pass the exam will be well-equipped to manage financial risk and navigate the complex regulatory landscape of the financial industry.
One of the key benefits of earning the GARP FRR certification is the ability to demonstrate your expertise and credibility in the field of financial risk and regulation. Financial Risk and Regulation (FRR) Series certification is highly respected by employers and peers alike, and can help you advance your career and increase your earning potential. In addition, the GARP FRR certification is recognized by regulatory bodies around the world, making it an essential qualification for professionals who work in the financial services industry.
NEW QUESTION # 30
US based Alpha Bank holds European corporate bonds and US inflation-indexed Treasury notes in its
investment portfolio. This investment portfolio is not exposed to changes in which of the following?
- A. Credit spread on the corporate bonds
- B. Foreign exchange rates
- C. Equity values
- D. European interest rates
Answer: C
NEW QUESTION # 31
The probability of default on a bond is 3%, and in the case of default, investors expect to lose 70% of their
investment. The bond's risk premium is 1.9%. The expected loss and the credit spread of the bond are,
respectively:
- A. 1.6% and 2.5%.
- B. 2.1% and 4%.
- C. 1.6% and 3.5%.
- D. 2.1% and 3%.
Answer: B
NEW QUESTION # 32
To estimate the price of gold forwards, an investment analyst focuses on the cost of holding physical gold
(bullion) and the cost of shorting the same. Given that physical gold spot price is $1,000, the annual risk-free
rate is 5%, and the gold lease rate equals 2% annually, the analyst's best estimate of the gold forward price to
equal
- A. $1100
- B. $1070
- C. $1030
- D. $950
Answer: C
NEW QUESTION # 33
An asset and liability manager for a large financial institution has to recognize that retail products ___ include
embedded options, which are often not rationally exercised, while wholesale products ___ carry penalties for
repayment or include rights to terminate wholesale contracts on very different terms than are common in retail
products.
- A. Hardly ever; rarely
- B. Frequently; typically
- C. Frequently; rarely
- D. Hardly ever; typically
Answer: B
NEW QUESTION # 34
A trader for EtaBank wants to take a leveraged position in Collateralized Debt Obligations. These CDOs can
be used in a repurchase transaction at a 20% haircut. Starting with $100 worth of CDOs, which one of the
following four positions would completely utilize the available leverage?
- A. The trader can buy $100 in CDO's, and repo the CDO's to get back $60, plus interest.
- B. The trader can buy $100 in CDO's, and repo the CDO's to get back $100, less interest.
- C. The trader can buy $100 in CDO's, and repo the CDO's to get back $80, less interest.
- D. The trader can buy $100 in CDO's, and repo the CDO's to get back $20, plus interest.
Answer: C
NEW QUESTION # 35
Bank Sigma has an opportunity to do a securitization deal for a credit card company, but has to retain a portion
of the residual risk of the deal with an estimated VaR of $8 MM. Its fees for the deal are $2 MM, and the
short-term financing costs are $600,000. What would be the RAROC for this transaction?
- A. 25%
- B. 17.5%
- C. 12%
- D. 33%
Answer: B
NEW QUESTION # 36
To estimate a partial change in option price, a risk manager will use the following formula:
- A. Partial change in option price = Delta x Change in underlying price
- B. Partial change in option price = Delta x Gamma x (1+ Change in underlying price)
- C. Partial change in option price = Delta x Gamma x Change in underlying price
- D. Partial change in option price = Delta x (1+ Change in underlying price)
Answer: A
NEW QUESTION # 37
What are some of the drawbacks of correlation estimates? Which of the following statements identifies major
problems with correlation calculations?
I. Correlation estimates are not able to capture increases in factor co-movements in extreme market scenarios.
II. Correlation estimates tend to be unstable.
III. Historical correlations may not forecast future correlations correctly.
IV. Correlation estimates assume normally distributed returns.
- A. I and IV
- B. I, II and III
- C. II, III, and IV
- D. I and II
Answer: B
NEW QUESTION # 38
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. Unexpected loss
- B. Factor sensitivity
- C. Expected loss
- D. Credit VaR
Answer: C
NEW QUESTION # 39
Forward rate agreements (FRA) are:
- A. OTC derivative contracts that allow banks to take positions in forward interest rates.
- B. Exchange traded derivative contracts that allow banks to take positions in future exchange rates.
- C. Exchange traded derivative contracts that allow banks to take positions in forward interest rates.
- D. OTC derivative contracts that allow banks and customers to obtain the risk/reward profile of long-term
interest rates by relying on long-term funding.
Answer: A
NEW QUESTION # 40
Which one of the following statements describes Macauley's duration?
- A. The present value of the future cash flows of a bond calculated at a yield equal to 1%.
- B. The change in value of a bond when yields increase by 1 basis point.
- C. The weighted average life of the bond payments.
- D. The percentage change in a bond price when the yields change by 1%.
Answer: C
NEW QUESTION # 41
A risk analyst at EtaBank wants to estimate the risk exposure in a leveraged position in Collateralized Debt
Obligations. These particular CDOs can be used in a repurchase transaction at a 20% haircut. If the VaR on a
$100 unleveraged position is estimated to be $30, what is the VaR for the final, fully leveraged position?
- A. $20
- B. $150
- C. $100
- D. $50
Answer: B
NEW QUESTION # 42
An options trader for a large institutional investor takes a long equity option position. Which of the following
risks need to be considered when taking this position?
I. All the risks of underlying equities
II. Perceived volatility changes
III. Future dividends yields
IV. Risk-free interest rates
- A. I, II
- B. III, IV
- C. II, III
- D. I, II, III, IV
Answer: D
NEW QUESTION # 43
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 global demand for US products decreases
- B. The economic performance in the US weakens
- C. The expected US inflation rate increases
- D. The US current account surplus increases
Answer: D
NEW QUESTION # 44
The exercise for an American type option prior to expiration day is virtually certain in the following case:
- A. In the event of a high dividend for an in-the-money call option
- B. In the event of a low dividend for an in-the-money put option
- C. In the event of a low dividend for an in-the-money call option
- D. In the event of a high dividend for an in-the-money put option
Answer: A
NEW QUESTION # 45
Present value of a basis point (PVBP) is one of the ways to quantify the risk of a bond, and it measures:
- A. The present value of the future cash flows of a bond calculated at a yield equal to 1%.
- B. The percentage change in bond price when the yields change by 1%.
- C. The change in value of a bond when yields increase by 0.01%.
- D. The percentage change in bond price when yields change by 1 basis point.
Answer: C
NEW QUESTION # 46
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. Capitalization-weighted equity indices are not generally considered better to track the performance of an
overall market. - C. Price-weighted equity indices give greater weight to shares trading at high prices.
- D. Equity indices do not trade in cash form, rather, they are meant to track the overall performance of an
equity market.
Answer: B
NEW QUESTION # 47
Why is economic capital across market, credit and operational risks simply added up to arrive at an estimate of
aggregate economic capital in practice?
- A. Regulators require banks to add up economic capital across market, credit and operational risks.
- B. In practice, it is very difficult to estimate the correlations between the risk categories and as a result a
conservative estimate is obtained by adding up the risks. - C. Market, credit and operational risks are perfectly correlated which justifies adding up their associated
economic capital. - D. Since market, credit and operational risks are significantly different measures of risk, there is no
diversification benefit to computing economic capital to banks across types of risks.
Answer: B
NEW QUESTION # 48
Which one of the following four parameters is NOT a required input in the Black-Scholes model to price a
foreign exchange option?
- A. Underlying interest rates
- B. Option exercise price
- C. Underlying exchange rates
- D. Discrete future stock prices
Answer: D
NEW QUESTION # 49
Which one of the following four statements about hedging is INCORRECT?
- A. Traders can hedge their portfolio risks by taking a position in a different instrument.
- B. Traders can hedge their risks by taking an appropriate position in the underlying instrument.
- C. A large number of hedge positions is generally required to match the underlying transaction completely.
- D. For a fully hedged portfolio, any changes in markets prices will typically produce significant changes in
the market value of the portfolio.
Answer: D
NEW QUESTION # 50
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The Global Association of Risk Professionals (GARP) offers the Financial Risk and Regulation (FRR) Series Certification Exam to individuals who have an interest in risk management and regulation within the financial industry. The FRR Series exam is designed to evaluate an individual’s understanding of financial risk management and regulatory compliance as they relate to financial institutions. 2016-FRR exam covers topics such as market, credit, operational, and liquidity risk, as well as regulatory frameworks and guidelines.
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