[Nov-2022] 100% Actual 2016-FRR dumps Q&As with Explanations Verified & Correct Answers [Q164-Q180]

QUESTION 164
Which one of the following four options is NOT a typical component of a currency swap?

QUESTION 165
10 basis points are equal to:

QUESTION 166
To protect the oranges harvest price level, a farmer needs to take a hedge position. Provided that he produces
the amount he hedged, which one of the following four strategies will allow the farmer to accomplish his goal?

QUESTION 167
A trader for EtaBank wants to take a leveraged position in Collateralized Debt Obligations. If these CDOs can
be used in a repo transaction at a 20% haircut, what is the maximum leverage factor for a transaction with the
CDOs?

QUESTION 168
Bank G has a 1-year VaR of USD 20 million at 99% confidence level while bank H has a 1-year VaR of USD
10 million at the same confidence level. Which bank is in a more risky position as measured by VaR?

QUESTION 169
Suppose that a regulator deems all corporate debt to have the same risk level. Which of the following behavior
of banks would be an example of regulatory arbitrage?

QUESTION 170
Which of the following statements about the option gamma is correct? Gamma is the
I. Second derivative of the option value with respect to the volatility.
II. Percentage change in option value per percentage change in the price of the underlying instrument.
III. Second derivative of the value function with respect to the price of the underlying instrument.
IV. Rate of change of the option delta with respect to changes in the underlying price.

QUESTION 171
Which one of the following four statements correctly defines an option’s delta?

QUESTION 172
Mega Bank has $100 million in deposits on which it pays 3% interest, and $20 million in equity on which it
pays no interest. The loan portfolio of $120 million earns an average rate of 10%. If the rates remain the same,
what is the net interest income of Mega Bank?

QUESTION 173
Which one of the four following statements describes a specific characteristic of risk and control
self-assessments (RCSA) which distinguishes it from both control assessments and risk and control
assessments?

QUESTION 174
The potential failure of a manufacturer to honor a warranty might be called ____, whereas the potential failure
of a borrower to fulfill its payment requirements, which include both the repayment of the amount borrowed,
the principal and the contractual interest payments, would be called ___.

QUESTION 175
Alpha Bank, a small bank,has a long position with larger BetaBank and has an identical short position with
another larger bank GammaBank. Each large bank requires a 20% initial collateral to support the trade. As
prices fluctuate in either direction, one large bank will require additional collateral from the small bank, while
the risk of loss to the other large bank will increase. By running the trades through a clearinghouse, the small
bank can achieve all of the following objectives EXCEPT:

QUESTION 176
Rising TED spread is typically a sign of increase in what type of risk among large banks?
I. Credit risk
II. Market risk
III. Liquidity risk
IV. Operational risk

QUESTION 177
Which one of the four following non-statistical risk measures are typically not used to quantify market risk?

QUESTION 178
As DeltaBank explores the securitization business, it is most likely to embrace securitization to:
I. Bring transparency to the bank’s balance sheet
II. Create a new profit center for the bank
III. Strategically release risk capital and regulatory capital for redeployment
IV. Generate cash for additional debt origination

QUESTION 179
Samuel Teng owns a portfolio of bonds and is trying to compute the convexity of his portfolio. Which of the
following choices equals the convexity of Samuel’s portfolio?

QUESTION 180
Which one of the following four statements about economic capital of a bank is correct?