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Who can take GARP 2016-FRR Certification
2016-FRR exam dumps recommend that individuals with three to five years' work experience in financial management. Bachelor's degree in finance, economics, administration, computer science, or mathematics and who received a GPA of 3.0 or higher. A valid GARP membership is required to take the Financial Risks and Regulation Certification. To return your GARP certification status to active, you must become a GARP member. Names of individuals who have passed the 2016-FRR Certification are provided to interested parties on a confidential basis.
NEW QUESTION 184
After entering the securitization business, Delta Bank increases its cash efficiency by selling off the lower risk
portions of the portfolio credit risk. This process ___ risk on the residual pieces of the credit portfolio, and as a
result it ___ return on equity for the bank.
- A. Increases; decreases;
- B. Decreases; increases;
- C. Increases; increases;
- D. Decreases; increases;
Answer: C
NEW QUESTION 185
According to Basel II what constitutes Tier 3 capital?
- A. Hybrid debt capital instruments that are similar to equity.
- B. Subordinated debt issues that pay interest.
- C. Debt capital that can only be used to support market risk in the trading book of the bank.
- D. Preference shares that confer on issuers the right to defer payment of a fixed dividend.
Answer: C
NEW QUESTION 186
US based Alpha Bank holds European corporate bonds and US inflation-indexed Treasury notes in its
investment portfolio. This investment portfolio is not exposed to changes in which of the following?
- A. Foreign exchange rates
- B. European interest rates
- C. Equity values
- D. Credit spread on the corporate bonds
Answer: C
NEW QUESTION 187
Which one of the four following statements about a minimal loss threshold in operational loss data collection
is incorrect?
- A. The operational loss data collection program has to capture all losses regardless of their size.
- B. The operational loss data collection program must include all material losses that are above minimal
gross loss threshold. - C. Setting an operational loss data collection threshold depends on the risk appetite of the firm and
regulatory requirements it needs to meet. - D. A company can have differing operational loss data collection and reporting thresholds for different
departments.
Answer: A
NEW QUESTION 188
When looking at the distribution of portfolio credit losses, the shape of the loss distribution is ___ , as the
likelihood of total losses, the sum of expected and unexpected credit losses, is ___ than the likelihood of no
credit losses.
- A. Symmetric; greater
- B. Asymmetric; greater
- C. Asymmetric; less
- D. Symmetric; less
Answer: B
NEW QUESTION 189
ThetaBank has extended substantial financing to two mortgage companies, which these mortgage lenders use
to finance their own lending. Individually, each of the mortgage companies have an exposure at default (EAD)
of $20 million, with a loss given default (LGD) of 100%, and a probability of default of 10%. ThetaBank's risk
department predicts the joint probability of default at 5%. If the default risk of these mortgage companies were
modeled as independent risks, the actual probability would be underestimated by:
- A. 3%
- B. 2%
- C. 4%
- D. 1%
Answer: C
NEW QUESTION 190
Which of the following are typical properties of a statistical distribution of potential losses that a bank might
sustain over a period of time?
I. The range of possible losses above the average loss is much greater than those below the average loss.
II. The loss that is most likely to occur is below the average loss.
III. The loss that is most likely to occur is above the average loss.
- A. III
- B. I, III
- C. I, II
- D. II
Answer: D
NEW QUESTION 191
Which of the following correctly identifies reasons for collecting internal operational risk event and loss
information?
I. Assessing the risk of specific areas of concern.
II. Evaluating risk events and outcomes.
III. Collecting data for capital modeling.
IV. Getting insight into risk events in other firms in the industry.
- A. I, II and III
- B. I and II
- C. II, III, and IV
- D. II and III
Answer: A
NEW QUESTION 192
Which one of the four following non-statistical risk measures are typically not used to quantify market risk?
- A. Convexity
- B. Option sensitivities
- C. Net closed positions
- D. Basis point values
Answer: C
NEW QUESTION 193
Which of the following statements describes correctly the objectives of position mapping ?
- A. Position mapping reduces the possible number of risk factors to a computationally manageable level.
- B. For VaR calculations, mapping converts positions based on their deltas to underlying factor risks.
- C. I and II
- D. Position mapping groups similar positions into one group based on the closeness of their respective
VaR. - E. II, III, and IV
- F. Position mapping models risk factors affecting the value of a position as combination of core risk factors
used in the VaR calculations. - G. I, II and III
- H. II and IV
Answer: F
NEW QUESTION 194
A corporate bond gives a yield of 6%. A same maturity government bond yields 2%. The probability of the
corporate bond defaulting is 2.5%. In case of default, investors expect to lose 60% of their investment. The
risk premium in the credit spread is:
- A. 0.5%
- B. 2.5%
- C. 4.5%
- D. 1.5%
Answer: B
NEW QUESTION 195
Which one of the four following statements regarding minimum loss data standards is not correct?
- A. The loss data program must comprehensively capture all material activities.
- B. The loss data entry should only include the date when the event was reported.
- C. The loss data entry may include descriptive information about the drivers or causes of the loss event.
- D. The loss data entry must include the actual loss amount.
Answer: B
NEW QUESTION 196
Which of the following statements defines Value-at-risk (VaR)?
- A. VaR is the maximum of past losses over a given period of time.
- B. VaR is the maximum likely loss on a financial instrument or a portfolio of financial instruments over a
given time period with a given degree of probabilistic confidence. - C. VaR is the minimum likely loss on a financial instrument or a portfolio of financial instruments with a
given degree of probabilistic confidence. - D. VaR is the worst possible loss on a financial instrument or a portfolio of financial instruments over a
given time period.
Answer: B
NEW QUESTION 197
Which one of the following four statements regarding commodity exchanges is INCORRECT?
- A. Customers rarely trade physical commodities with banks.
- B. Banks trade in OTC contracts primarily to serve clients and facilitate client hedging and lending.
- C. Commodity markets are mot liquid than debt markets.
- D. Banks have no natural direct exposure to commodities.
Answer: C
NEW QUESTION 198
The probability of default on a bond is 3%, and in the case of default, investors expect to lose 70% of their
investment. The bond's risk premium is 1.9%. The expected loss and the credit spread of the bond are,
respectively:
- A. 2.1% and 3%.
- B. 1.6% and 2.5%.
- C. 1.6% and 3.5%.
- D. 2.1% and 4%.
Answer: D
NEW QUESTION 199
A risk manager has a long forward position of USD 1 million but the option portfolio decreases JPY 0.50 for
every JPY 1 increase in his forward position. At first approximation, what is the overall result of the options
positions?
- A. The option positions hedge the forward position by 75%.
- B. The options positions hedge the forward position by 25%.
- C. The option positions hedge the forward position by 100%.
- D. The option positions hedge the forward position by 50%.
Answer: D
NEW QUESTION 200
An asset manager just bought a coupon paying bond with principal value $100,000 for $87,000 with a current
yield of 4.7%. He assumes that if the yields change to 5.7% the price of the bond would be $84,500. Based on
this assumption what is the modified duration of the bond?
- A. 97.12.
- B. 2,507.
- C. 2.88.
- D. 2.97.
Answer: C
NEW QUESTION 201
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. $76.
- C. $870.
- D. $26.
Answer: D
NEW QUESTION 202
Forward rate agreements (FRA) are:
- A. Exchange traded derivative contracts that allow banks to take positions in forward interest rates.
- B. 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. - C. Exchange traded derivative contracts that allow banks to take positions in future exchange rates.
- D. OTC derivative contracts that allow banks to take positions in forward interest rates.
Answer: D
NEW QUESTION 203
BetaFin, a financial services firm, does not have retail branches, but has fixed income, equity, and asset
management divisions. Which one of the four following risk and control self-assessment (RCSA) methods fits
the firm's operational risk framework the best?
- A. RCSA scenario analysis approach
- B. RCSA workshop approach
- C. RCSA questionnaire approach
- D. RCSA loss data approach
Answer: B
NEW QUESTION 204
By lowering the spread on lower credit quality borrowers, the bank will typically achieve all of the following
outcomes EXCEPT:
- A. Higher losses in case of default
- B. Lower probability of default
- C. Aggressively courting of new business
- D. Rapid growth
Answer: B
NEW QUESTION 205
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. II
- B. I, II, III
- C. I
- D. I, III
Answer: B
NEW QUESTION 206
To ensure good risk management which of the following should be true about the CRO role and function?
- A. The CRO should not be involved with the setting of risk limits.
- B. To ensure efficient flow of information the CRO should not be independent of business units.
- C. The CRO should receive compensation that is directly determined by the profit of the trading desk.
- D. The CRO should report to the CEO or the Board of Directors.
Answer: D
NEW QUESTION 207
Which of the following are among the main uses of risk reports?
I. Identification of exceptional situations that require managerial attention.
II. Display the relative risk among different trades.
III. Specify how RAROC will be maximized within the bank.
IV. Estimate the overall risk levels of the bank.
- A. II, III, and IV
- B. I, II and IV
- C. II and III
- D. II and IV
Answer: B
NEW QUESTION 208
Which of the following reports have been suggested by the FDIC that banks should produce in addition to the
usual probabilistic analysis and stress tests in order to gauge liquidity issues?
I. Cash flow gaps
II. Funding availability
III. Critical assumptions used in credit projections
- A. I, II, III
- B. I
- C. I, III
- D. I, II
Answer: A
NEW QUESTION 209
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The actual purpose of the GARP 2016-FRR Certification
The purpose of the Financial and Regulation (FRR) certification is to verify a candidate's ability to understand and live up to “the standard of knowledge, skill, and behavior” required by corporations for financial management professionals. It was developed with input from leading practitioners and academics and represents the body of knowledge and skills needed for success in this profession. 2016-FRR exam dumps and practice exams are helpful. Local regulators and management professionals have identified the GARP FRM certification as a benchmark for determining competence in financial management. Closed books, multiple-choice, and essay quizzes are used in the 2016-FRR to ensure the thoroughness of the subjects covered. Expressions of the candidate's reasons for answering each question are included in the scoring.
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