Get Latest [Jan-2022] Conduct effective penetration tests using VCE4Plus 2016-FRR
Penetration testers simulate 2016-FRR exam PDF
NEW QUESTION 107
Which one of the following four options does NOT represent a benefit of compensating balances to the bank?
- A. Compensation balances influence the expected loss rate of the bank given the default obligor and
improve capital structure by controlling obligor type and avoiding payment delays. - B. Compensating balances allow the bank to net some of the exposure they may have in case of default, by
taking funds from these specific deposit account one the borrower defaults. - C. Since the compensating balances reduce the next amount lent to the borrower, the earned return on the
loan is increased, further widening the bank's interest rate margin and profitability. - D. Since the compensating balances cannot be withdrawn at short notice, if at all, they are not considered
transaction accounts and are able to provide a stable funding to the bank, reducing its reliance on more
volatile external inter-bank based funding sources.
Answer: A
NEW QUESTION 108
A risk manager is analyzing a call option on the GBP with a vega of 0.02. When the perceived future volatility
increases by 1%, the call option
- A. Decreases in value by 0.02.
- B. Increases in value by 2.
- C. Increases in value by 0.02.
- D. Decreases in value by 2.
Answer: C
NEW QUESTION 109
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 buy the real at the market rate of 100 and pay AUD 1,000,000.
- B. Immediately sell the real at the market rate of 100 and receive AUD 1,000,000.
- C. Immediately buy the real above the market rate of 105 and pay AUD 1,050,050.
- D. Immediately sell the real above the market rate of 105 and receive AUD 1,050,050.
Answer: A
NEW QUESTION 110
Which one of the following four statements regarding the basic Net Interest Income model is INCORRECT?
- A. Assets and liabilities have the same interest rate sensitivities.
- B. The amount of intermediated funds can be a function of interest rate levels.
- C. Net interest income risk does not address the impact of changing interest rates on bank equity value.
- D. Effective repricing date can be different than contractual repricing.
Answer: A
NEW QUESTION 111
Which one of the following four formulas correctly identifies the expected loss for all credit instruments?
- A. Expected Loss = Probability of Default x Loss Given Default - Exposure at Default
- B. Expected Loss = Probability of Default x Loss Given Default / Exposure at Default
- C. Expected Loss = Probability of Default x Loss Given Default x Exposure at Default
- D. Expected Loss = Probability of Default x Loss Given Default + Exposure at Default
Answer: C
NEW QUESTION 112
Securitization is the process by which banks
I. Issue bonds where the payment of interest and repayment of principal on the bonds depends on the cash flow
generated by a pool of bank assets.
II. Issue bonds where the bank has transferred its legal right to payment of interest and repayment of principal
to bondholders.
III. Sell illiquid assets.
- A. I, II, III
- B. I, III
- C. I
- D. I, II
Answer: A
NEW QUESTION 113
Altman's Z-score incorporates all the following variables that are predictive of bankruptcy EXCEPT:
- A. Equity to debt
- B. Return on total assets
- C. Return on equity
- D. Sales to total assets
Answer: C
NEW QUESTION 114
Which of the following attributes of duration gap model typically cause criticism?
I. Basis risk
II. Errors in the linear model
III. Costs of immunization
IV. Constant nature of calculation
- A. I, II, III
- B. I, III, IV
- C. II, III, IV
- D. I, II
Answer: A
NEW QUESTION 115
Bank customers traditionally trade commodity futures with banks in order to achieve which of the following
goals?
I. To express their own price views
II. To reverse undesired short-term exposure created from fixed commodity sales
III. To reach short-term budgetary targets
- A. I, II, III
- B. II
- C. I, III
- D. I
Answer: A
NEW QUESTION 116
The Treasury function of a bank typically manages all of the following components EXCEPT:
- A. Bank's assets and liabilities
- B. Bank's performance estimates
- C. Bank's capital
- D. Bank's liquidity
Answer: B
NEW QUESTION 117
Nijenhaus Bruch is currently creating a program of operational loss data collection at a bank with a large
branch network. Which minimal data standards should this collection approach include to meet minimum loss
data collecting standards?
- A. Reports should capture the date of the event, the amount of loss, and recoveries of gross loss amounts.
- B. Reports should capture both the date of the event and the amount of loss.
- C. Reports should be designed to be shared with external data loss consortia recipients.
- D. Reports should only include the actual loss date.
Answer: A
NEW QUESTION 118
An options trader for a large institutional investor takes a long equity option position. Which of the following
risks need to be considered when taking this position?
I. All the risks of underlying equities
II. Perceived volatility changes
III. Future dividends yields
IV. Risk-free interest rates
- A. III, IV
- B. II, III
- C. I, II, III, IV
- D. I, II
Answer: C
NEW QUESTION 119
Which of the following assets on the bank's balance sheet has greatest endogenous liquidity risk?
- A. A 1-week corporate loan with a AAA rated company
- B. A 3-year subprime mortgage
- C. A 10-year U.S treasury bond
- D. A 2-year U.S treasury bond
Answer: B
NEW QUESTION 120
Which of the activities represent examples of market manipulation?
- A. Short squeeze
- B. Stop-loss order
- C. Market gap
- D. Crowded trades
Answer: A
NEW QUESTION 121
Which one of the four following statements about technology systems for managing operational risk event
data is incorrect?
- A. Operational risk event databases are always integrated with the other components of the operational risk
management program. - B. The implementation of a new operational risk event loss database has to incorporate an analysis of the
advantages and disadvantages of external systems. - C. Operational risk loss event data collection software can be internally developed.
- D. Operational risk event databases are independent elements of the operational risk management
framework.
Answer: A
NEW QUESTION 122
According to Basel II what constitutes Tier 2 capital?
- A. Debt that is subordinate to equity.
- B. Debt that is not subordinated to equity and innovative capital products that would count as Tier 1 capital
and excluding perpetual non-cumulative preference shares. - C. Core capital excluding undisclosed reserves and general reserves that the bank may make against its
expected loan losses. - D. Equity capital and debt together.
Answer: B
NEW QUESTION 123
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