A fully updated 2025 2016-FRR Exam Dumps exam guide from training expert TestKingFree [Q92-Q114]

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A fully updated 2025 2016-FRR Exam Dumps exam guide from training expert TestKingFree

Provides complete coverage of every objective on exam and exam preparation 2016-FRR

NO.92 From the bank’s point of view, repricing the retail debt portfolio will introduce risks of fluctuations in:
I. Duration
II. Loss given default
III. Interest rates
IV. Bank spreads

I, II

III, IV

NO.93 Which one of the four following statements about a minimal loss threshold in operational loss data collection is incorrect?

A company can have differing operational loss data collection and reporting thresholds for different departments.

The operational loss data collection program has to capture all losses regardless of their size.

Setting an operational loss data collection threshold depends on the risk appetite of the firm and regulatory requirements it needs to meet.

The operational loss data collection program must include all material losses that are above minimal gross loss threshold.

NO.94 Which of the following bank events could stress the bank’s liquidity position?
I. Obligations to fund assets like mortgages
II. Unusually large depositor withdrawals
III. Counterparty collateral calls
IV. Nonperforming assets

I, II

III, IV

I, II, III and IV

NO.95 Gamma Bank is active in loan underwriting and securitization business, and given its collective credit exposure, it will be typically most interested in the following types of portfolio credit risk:
I. Expected loss
II. Duration
III. Unexpected loss
IV. Factor sensitivities

I, III

I, III, IV

NO.96 For two variables, which of the following is equal to the average product of the deviations from their
respective means?

Standard deviation

Kurtosis

Correlation

Covariance

NO.97 Which of the following statements describes a bank’s reasons to set risk limits?
I. To control and minimize a bank’s current risk exposure.
II. To predict future risks.
III. To allocate risks to business units.
IV. To keep risk within tolerance levels.

I and II

III and IV

I, II, and III

I, III, and IV

NO.98 All of the following performance statistics typically benefit country’s creditworthiness EXCEPT:

Low unemployment

Low inflation

High degrees of investment

Low degrees of savings

NO.99 Altman’s Z-score incorporates all the following variables that are predictive of bankruptcy EXCEPT:

Return on total assets

Sales to total assets

Equity to debt

Return on equity

NO.100 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

I only

II only

I and IV

I, II, and III

NO.101 Which one of the following four statements on the seniority of corporate bonds is incorrect?

Senior bonds typically have lower credit spreads than junior bonds with the same maturity and payment characteristics.

Seniority refers to the priority of a bond in bankruptcy.

Junior bonds always pay higher coupons than subordinated bonds.

In bankruptcy, holders of senior bonds are paid in full before any holders of subordinated bonds receive payment.

NO.102 To estimate a partial change in option price, a risk manager will use the following formula:

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

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

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

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

NO.103 An asset manager for a large mutual fund is considering forward exchange positions traded in a clearinghouse
system and needs to mitigate the risks created as a result of this operation. Which of the following risks will be
created as a result of the forward exchange transaction?

Exchange rate risk

Exchange rate and interest rate risk

Credit risk

Exchange rate and credit risk

NO.104 Which one of the following four statements regarding the basic Net Interest Income model is INCORRECT?

Assets and liabilities have the same interest rate sensitivities.

Effective repricing date can be different than contractual repricing.

The amount of intermediated funds can be a function of interest rate levels.

Net interest income risk does not address the impact of changing interest rates on bank equity value.

NO.105 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?

25%

17.5%

33%

12%

NO.106 Which one of the following four statements about planning for the operational risk framework is
INCORRECT?

Planning for the operational risk framework involves setting clear goals, realistic milestones and
achievable deliverables that add value.

An operational risk framework is a complex and evolving challenge, and to keep its development under
control it is important to apply strong project management skills to the design and implementation of
each new element.

Planning for the operational risk framework suggests that short-term planning and focus on immediate
benefits is strongly preferred to the long-term planning approach.

Once the elements of an operational risk framework are up and running, they need to be monitored to
ensure they maintain their integrity and do not deteriorate over time.

NO.107 An associate from the finance group has been identified as an operational risk coordinator (ORC) for her department. To fulfill her ORC responsibilities the associate will need to:
I. Provide main communication contact with operational risk department
II. Provide main reporting contact with audit department
III. Coordinate collection of key risk indicators in her area
IV. Coordinate training and awareness activities in her area

I, II

II, III, IV

I, II, III

I, III, IV

NO.108 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?

The expected US inflation rate increases

The global demand for US products decreases

The economic performance in the US weakens

The US current account surplus increases

NO.109 Which of the following statements presents an advantage of using risk and control self-assessments (RCSA) in the operational risk framework?
I. RCSA provides very accurate scoring of risks and controls due to its subjective nature.
II. RCSA program provides insight into risks that exist in a firm, but that may or may not have occurred before.
III. RCSA program can produce biased but transparent operational risk reporting.
IV. RCSA program allows each department to take ownership of its own risks and controls.

I and III

II and IV

I, II and III

II, III, and IV

NO.110 Forward rate agreements (FRA) are:

Exchange traded derivative contracts that allow banks to take positions in forward interest rates.

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.

Exchange traded derivative contracts that allow banks to take positions in future exchange rates.

OTC derivative contracts that allow banks to take positions in forward interest rates.

NO.111 Which one of the following statements is an advantage of using implied volatility as an input when calculating VaR?

Implied volatility assumes volatilities are constant which makes it easy to implement in models.

Current market data is used to determine implied volatilities, which makes them forward looking measures

Implied volatilities are better at predicting actual volatilities

Loss probabilities from the standard normal distribution are used to compute implied volatilities, which makes it easy to compute the.

NO.112 Which of the following are the most common methods to increase liquidity in stressed conditions?
I. Selling or securitizing assets.
II. Obtaining additional credit lines.
III. Securing a better credit rating.

I, II

I, II, III

II, III

NO.113 Bank Milo has $4 million in cash and $5 million in loans coming due tomorrow with an expected default rate
of 1%. The proceeds will be deposited overnight. The bank owes $ 9 million on a securities purchase that
settles in two days and pays off $8 million in commercial paper in three days that is not expected to renew. On
what days does the bank face negative cumulative liquidity?

Day 3 only.

Days 2 and 3.

Day 2 only.

Days 1, 2 and 3.

NO.114 Which one of the following four exotic option types has another option as its underlying asset, and as a result of its construction is generally believed to be very difficult to model?

Spread options

Chooser options

Binary options

Compound options

To prepare for the GARP 2016-FRR exam, candidates are encouraged to study a wide range of materials, including textbooks, online resources, and practice exams. GARP also offers a variety of study materials and courses for candidates who want extra support. Candidates who pass the exam will earn the prestigious FRR certification, which is recognized by financial institutions around the world as a mark of expertise in risk management.

Tested Material Used To 2016-FRR: https://www.testkingfree.com/GARP/2016-FRR-practice-exam-dumps.html