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All 2016-FRR Test Inside GARP Questions

Page: 3 / 28
Total 387 questions

Financial Risk and Regulation (FRR) Series Questions and Answers

Question 9

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

Options:

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.

Question 10

To estimate the interest charges on the loan, an analyst should use one of the following four formulas:

Options:

A.

Loan interest = Risk-free rate - Probability of default x Loss given default + Spread

B.

Loan interest = Risk-free rate + Probability of default x Loss given default + Spread

C.

Loan interest = Risk-free rate - Probability of default x Loss given default - Spread

D.

Loan interest = Risk-free rate + Probability of default x Loss given default - Spread

Question 11

Which one of the following four statements correctly describes an American call option?

Options:

A.

An American call option gives the buyer of that call option the right to buy the underlying instrument on any date up to and including the expiry date.

B.

An American call option gives the buyer of that call option the right to sell the underlying instrument on any date up to and including the expiry date.

C.

An American call option gives the buyer of that call option the right to buy the underlying instrument on the expiry date.

D.

An American call option gives the buyer of that call option the right to sell the underlying instrument on the expiry date.

Question 12

Which one of the following four alternatives lists the three most widely traded currencies on the global foreign exchange market, as of April 2007, in the decreasing order of market share? EUR is the abbreviation of the European euro, JPY is for the Japanese yen, and USD is for the United States dollar, respectively.

Options:

A.

JPY, EUR, USD

B.

USD, EUR, JPY

C.

USD, JPY, EUR

D.

EUR, USD, JPY

Page: 3 / 28
Total 387 questions