[2024] Valid 2016-FRR test answers & GARP 2016-FRR exam pdf
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The FRR Series Certification Exam is a rigorous assessment of the skills and knowledge required to effectively manage financial risks. 2016-FRR exam covers a wide range of topics including market risk, credit risk, operational risk, and liquidity risk. It also includes sections on regulatory compliance, ethics, and governance. 2016-FRR exam is open to individuals who have a minimum of two years of work experience in the field of financial risk management.
NEW QUESTION # 160
A bank customer expecting to pay its Brazilian supplier BRL 100 million asks Alpha Bank to buy Australian
dollars and sell Brazilian reals. Alpha bank does not hold Brazilian reals so it asks for a quote to buy Brazilian
reals in the market. The market rate is 100. The bank quotes a selling rate of 101 to its customer, sells the
reals, and receives AUD 1,010,000. To perform foreign exchange matched position trading, the banks should
- A. Immediately sell the real above the market rate of 105 and receive AUD 1,050,050.
- B. Immediately sell the real at the market rate of 100 and receive AUD 1,000,000.
- C. Immediately buy the real at the market rate of 100 and pay AUD 1,000,000.
- D. Immediately buy the real above the market rate of 105 and pay AUD 1,050,050.
Answer: C
NEW QUESTION # 161
In the United States, Which one of the following four options represents the largest component of securitized
debt?
- A. Lines of credit
- B. Real estate loans
- C. Credit card loans
- D. Education loans
Answer: B
NEW QUESTION # 162
Which one of the four following statements regarding minimum loss data standards is not correct?
- A. The loss data entry may include descriptive information about the drivers or causes of the loss event.
- B. The loss data entry should only include the date when the event was reported.
- C. The loss data entry must include the actual loss amount.
- D. The loss data program must comprehensively capture all material activities.
Answer: B
NEW QUESTION # 163
Which of the following statements are reasons for mathematical valuation and risk assessment models to be
misleading or inaccurate?
I. There could be missing factors in models.
II. The data used as input for the model could be bad or wrong.
III. Model results could be misinterpreted.
IV. There could be errors in the derivation of the model.
- A. III and IV
- B. I, II, III IV
- C. I, III, and IV
- D. I, II, and III
Answer: B
NEW QUESTION # 164
Which one of the following four statements regarding bank's exposure to credit and default risk is
INCORRECT?
- A. In debt management, the goal is to minimize the effect of any defaults.
- B. The more the bank diversifies its credit portfolio, the better spread its credit risks become.
- C. Default risk cannot be hedged away fully, and it will always exist for the holder of the credit or for the
person insuring against the credit or default event. - D. In debt management, the value of any loan exposure will change typically in a fashion similar the same
way that an equity investment can.
Answer: D
NEW QUESTION # 165
A credit analyst wants to determine a good pricing strategy to compensate for credit decisions that might have
been made incorrectly. When analyzing her credit portfolio, the analyst focuses on the spreads in each loan to
determine if they are sufficient to compensate the bank for all of the following costs and risks EXCEPT.
- A. The opportunity cost of risk-adjusted marginal cost of capital.
- B. The inherent risk of lending to this borrower while providing a return on the risk capital used to the
support the loan. - C. The marginal cost of funds provided.
- D. The overhead cost of maintaining the loan and the account.
Answer: A
NEW QUESTION # 166
A financial analyst is trying to distinguish credit risk from market risk. A $100 loan collateralized with $200 in
stock has limited ___, but an uncollateralized obligation issued by a large bank to pay an amount linked to the
long-term performance of the Nikkei 225 Index that measures the performance of the leading Japanese stocks
on the Tokyo Stock Exchange likely has more ___ than ___.
- A. Legal risk; market risk; credit risk
- B. Market risk; credit risk; market risk
- C. Market risk; market risk; credit risk
- D. Credit risk, legal risk; market risk
Answer: C
NEW QUESTION # 167
Sam has hedged a portfolio of bonds against a small parallel shift in the yield curve using the duration
measure. What should Sam do to ensure that the portfolio is hedged against larger parallel shifts in the yield
curve?
- A. Take positions to make the convexity zero
- B. Take positions to increase the duration
- C. Since the portfolio is duration hedged Sam does not need to take additional positions.
- D. Take positions to reduce the duration
Answer: A
NEW QUESTION # 168
An options trader is assessing the aggregate risk of her currency options exposures. As an options buyer, she
can potentially ___ lose more than the premium originally paid. As an option seller, however, she has a ___
risk on the contract and always receives a premium.
- A. Sometimes, unlimited
- B. Never, unlimited
- C. Sometimes, limited
- D. Never, limited
Answer: B
NEW QUESTION # 169
The retail banking business of BankGamma has an expected P & L of $50 million and a VaR of $100 million.
The bank seeks to diversify its revenue, and is considering the opportunity to acquire a credit card business
with an expected P & L of $50 million and a VaR of $150 million. What will be the overall RAROC if the
bank acquires the new business?
- A. 33.3%.
- B. 50%.
- C. 72%.
- D. 58%.
Answer: D
NEW QUESTION # 170
A bank customer can use either a plain vanilla option or an option contract with volumetric flexibility to
reduce the following risks:
I. Market Risk
II. Basis Risk
III. Operational Risk
- A. I
- B. I, II
- C. II
- D. II, III
Answer: B
NEW QUESTION # 171
Which one of the following four statements presents a challenge of using external loss databases in the
operational risk framework?
- A. External events are usually not of interest to senior management.
- B. Use of benchmarked data reflects similar data collection standards.
- C. If the external data is gathered from news sources, it may only reflect events that are interesting to the
press. - D. They provide a source of data on what operational loss events will occur.
Answer: C
NEW QUESTION # 172
James Johnson bought a coupon bond yielding 4.7% for $1,000. Assuming that the price drops to $976 when
yield increases to 4.71%, what is the PVBP of the bond.
- A. $976.
- B. $870.
- C. $26.
- D. $76.
Answer: C
NEW QUESTION # 173
Which of the following statements about implementation of a successful RCSA program is correct?
- A. An RCSA is only complete after all possible mitigating actions have been identified and analyzed as a
result of the assessment process. - B. Internal loss data help to identify the risks and control weaknesses that need to be addressed in the
RCSA; external events are not helpful in informing the discussions around potential risks. - C. The RCSA scoring methodology should include only financial impacts and not include reputational,
legal, regulatory, client and life safety impacts. - D. To ensure that the RCSA is well designed, it is important to interview participants, stakeholders and
support functions prior to the launching the RCSA.
Answer: D
NEW QUESTION # 174
In additional to the commodity-specific risks, which of the following risks represent the main commodity
derivative risks?
I. Basis
II. Term
III. Correlation
IV. Seasonality
- A. I, IV
- B. I, II
- C. I, II, III, IV
- D. II, III
Answer: C
NEW QUESTION # 175
Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). The loan
also has an annual expected default rate of 2%, and loss given default at 50%. In this case, what will the bank's
expected loss be? What is the expected loss of this loan?
- A. $1,050
- B. $750
- C. $550
- D. $300
Answer: A
NEW QUESTION # 176
Which of the following would a bank resort to as a "lender of last resort" in the event of an extreme liquidity
crisis?
- A. Discount window
- B. LIBOR markets
- C. Futures Markets
- D. U.S treasury markets
Answer: A
NEW QUESTION # 177
Alpha Bank determined that Delta Industrial Machinery Corporation has 2% change of default on a one-year
no-payment of USD $1 million, including interest and principal repayment. The bank charges 3% interest rate
spread to firms in the machinery industry, and the risk-free interest rate is 6%. Alpha Bank receives both
interest and principal payments once at the end the year. Delta can only default at the end of the year. If Delta
defaults, the bank expects to lose 50% of its promised payment.
What may happen to the Delta's initial credit parameter and the value of its loan if the machinery industry
experiences adverse structural changes?
- A. Probability of default and loss at default may decrease simultaneously, while duration falls causing the
loan value to decrease. - B. Probability of default and loss at default may increase simultaneously, while duration falls causing the
loan value to decrease. - C. Probability of default and loss at default may increase simultaneously, while duration rises causing the
loan value to decrease. - D. Probability of default and loss at default may decrease simultaneously, while duration rises causing the
loan value to decrease.
Answer: B
NEW QUESTION # 178
Which of the following statements regarding bonds is correct?
I. Interest rates on bonds are typically stated on an annualized rate.
II. Bonds can pay floating coupons that are directly linked to various interest rate indices.
III. Convertible bonds have an element of prepayment risk.
IV. Callable bonds have an element of equity risk.
- A. I only
- B. II, III, and IV
- C. I, II, and III
- D. I and II
Answer: D
NEW QUESTION # 179
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GARP 2016-FRR (Financial Risk and Regulation) Certification Exam is a globally recognized certification program in the field of financial risk management. Financial Risk and Regulation (FRR) Series certification is designed to provide professionals with the knowledge and skills necessary to navigate the complex regulatory landscape and effectively manage financial risks in their organizations. The GARP 2016-FRR Certification Exam is offered by the Global Association of Risk Professionals (GARP), a leading professional association for risk management practitioners.
Topics covered by the GARP 2016-FRR
Here is a list of the main subjects that will be covered in the 2016-FRR:
- Emerging Markets: 15%
- Risk Management: 50%
- Financial Services: 15%
- Regulation, Supervision, Reporting, and Management: 20%
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