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Pass 2016-FRR Exam Guide

Page: 9 / 28
Total 387 questions

Financial Risk and Regulation (FRR) Series Questions and Answers

Question 33

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:

Options:

A.

Speculation

B.

Short bias

C.

Moral hazard

D.

Adverse selection

Question 34

To safeguard its capital and obtain insurance if the borrowers cannot repay their loans, Gamma Bank accepts financial collateral to manage its credit risk and mitigate the effect of the borrowers' defaults. Gamma Bank will typically accept all of the following instruments as financial collateral EXCEPT?

Options:

A.

Unrated bonds issued and traded on a recognized exchange

B.

Equities and convertible bonds included in a main market index

C.

Commercial debts owed to a company in a form of receivables

D.

Mutual fund shares and similar unit investment vehicles subject to daily quotes

Question 35

To estimate a partial change in option price, a risk manager will use the following formula:

Options:

A.

Partial change in option price = Delta x Change in underlying price

B.

Partial change in option price = Delta 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 Gamma x (1+ Change in underlying price)

Question 36

In the United States, during the second quarter of 2009, transactions in foreign exchange derivative contracts comprised approximately what proportion of all types of derivative transactions between financial institutions?

Options:

A.

2%

B.

7%

C.

25%

D.

43%

Page: 9 / 28
Total 387 questions