Ultimate Guide to Prepare Free GARP 2016-FRR Exam Questions and Answer
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Get to know about the requirements for taking GARP 2016-FRR?
The requirements to take the GARP FRR Certification are not strict because it is an open examination. Variable requirements for the 2016-FRR are by the organizer and the region. Chapters are structured according to the country you are studying. Message the organizer email before submitting the application for GARP 2016-FRR Certification, If edits are required.
What is the Passing Score, Duration & No. of queries for the GARP 2016-FRR:
- Language: English
- Format of 2016-FRR: All multiple choice
- Duration: 175 minutes
- Number of Questions: 80
- Passing score: 54/80 (67.5%)
NEW QUESTION 166
To manage its credit portfolio, Beta Bank can directly sell the following portfolio elements:
I. Bonds
II. Marketable loans
III. Credit card loans
- A. I, II
- B. II
- C. I
- D. II, III
Answer: A
NEW QUESTION 167
Which one of the following four statements about market risk is correct? Market risk is
- A. The maximum likely loss in the market value of portfolios and financial instruments over a given period
of time. - B. The exposure to an adverse change in the market value of portfolios and financial instruments caused by
a change in market prices or rates. - C. The exposure to an adverse change in the credit quality in portfolios or of financial instruments.
- D. The maximum likely loss in the market value of portfolios and financial instruments caused by the
failure of the counterparty to meet its obligations.
Answer: B
NEW QUESTION 168
To hedge a foreign exchange exposure on behalf of a client, a small regional bank seeks to enter into an
offsetting foreign exchange transaction. It cannot access the large and liquid interbank market open primarily
to larger banks. At which one of the following exchanges can the smaller bank trade the currency futures
contracts?
I. The Tokyo Futures Exchange
II. The Euronext-Liffe Exchange
III. The Chicago Mercantile Exchange
- A. I, II, III
- B. I
- C. II, III
- D. III
Answer: A
NEW QUESTION 169
An asset-sensitive bank will have a ___ cumulative gap and will benefit from ___ interest rates.
- A. Negative; dropping
- B. Negative; rising
- C. Positive; rising
- D. Positive; dropping
Answer: C
NEW QUESTION 170
Which one of the following four statements about economic capital of a bank is correct?
- A. Economic capital reflects the possible losses that could occur based on the bank's own estimates of the
risks it is taking. - B. Economic capital is determined by rules imposed by an external authority.
- C. Economic capital is the present value of the earnings generated by the bank in the future.
- D. Economic capital measures how the economy is doing compared to the bank.
Answer: A
NEW QUESTION 171
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. 2.97.
- C. 2.88.
- D. 2,507.
Answer: C
NEW QUESTION 172
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?
- A. Going short on oranges futures contracts
- B. Entering into a customized forward contract with the bank
- C. Negotiating a credit line facility
- D. Going long on oranges futures contacts
Answer: A
NEW QUESTION 173
Banks duration match their assets and liabilities to manage their interest risk in their banking book. Currently,
the bank's assets and liabilities both have a duration of 10. To hedge against the risk of decreasing interest
rates, the bank should
I. Increase the duration of the liabilities
II. Increase the duration of the assets
III. Decrease the duration of the liabilities
IV. Decrease the duration of the assets
- A. I and II.
- B. I and IV
- C. I only.
- D. II and III.
Answer: B
NEW QUESTION 174
SigmaBank has many branches that offer the same products and services. Which one of the four following
statement presents an advantage of using RCSA questionnaire approach in the SigmaBank's operational risk
framework?
- A. This approach ensures that there has been full participation in the scoring, rather than a single view.
- B. The results can be collected electronically and the responses compared to identify themes, trends and
areas of potential control weakness or elevated risk. - C. It provides a forum for an in-depth discussion of the operational risks in the firm.
- D. The questionnaires are usually sent to specific nominated parties for completion.
Answer: B
NEW QUESTION 175
Which one of the following statements describes Macauley's duration?
- A. The weighted average life of the bond payments.
- B. The change in value of a bond when yields increase by 1 basis point.
- C. The present value of the future cash flows of a bond calculated at a yield equal to 1%.
- D. The percentage change in a bond price when the yields change by 1%.
Answer: A
NEW QUESTION 176
A large multinational bank is concerned that their duration measures may not be accurate since the yield curve
shifts are not parallel. Which of the following statements would be typically observed regarding variability of
interest rates?
- A. Short-term rates and long-term rates always move in opposite directions.
- B. Short-term rates are more variable than long-term rates.
- C. Short-term rates are less variable than long-term rates.
- D. Short-term rates are equally variable as long-term rates.
Answer: B
NEW QUESTION 177
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. $300
- C. $750
- D. $550
Answer: A
NEW QUESTION 178
Which of the activities represent examples of market manipulation?
- A. Crowded trades
- B. Stop-loss order
- C. Short squeeze
- D. Market gap
Answer: C
NEW QUESTION 179
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. Since the portfolio is duration hedged Sam does not need to take additional positions.
- B. Take positions to make the convexity zero
- C. Take positions to reduce the duration
- D. Take positions to increase the duration
Answer: B
NEW QUESTION 180
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, II
- D. I
Answer: A
NEW QUESTION 181
Which one of the following four statements correctly defines a typical carry trade?
- A. A bank borrows funds in a high-interest currency and places the funds in a long-term low volatility
investment vehicle. - B. A bank borrows funds in a low-interest currency, accumulates reserves, and lends in another
low-interest currency. - C. A bank borrows funds in a high-interest currency and invests the funds into high-yield emerging market
debt. - D. A bank borrows funds in a low-interest currency and places the funds on deposit in a high-interest
currency.
Answer: D
NEW QUESTION 182
For two variables, which of the following is equal to the average product of the deviations from their
respective means?
- A. Correlation
- B. Covariance
- C. Standard deviation
- D. Kurtosis
Answer: B
NEW QUESTION 183
Company A needs to provide a risk probability/frequency score for its RCSA program. If the event is likely to
happen once in 2 years, then the frequency score will be equal to:
- A. 0
- B. 0.5
- C. 0.2
- D. 1
Answer: B
NEW QUESTION 184
The exercise for an American type option prior to expiration day is virtually certain in the following case:
- A. In the event of a low dividend for an in-the-money put option
- B. In the event of a high dividend for an in-the-money put option
- C. In the event of a high dividend for an in-the-money call option
- D. In the event of a low dividend for an in-the-money call option
Answer: C
NEW QUESTION 185
For which one of the following four reasons do corporate customers use foreign exchange derivatives?
I. To lock in the current value of foreign-denominated receivables
II. To lock in the current value of foreign-denominated payables
III. To lock in the value of expected future foreign-denominated receivables
IV. To lock in the value of expected future foreign-denominated payables
- A. II and III
- B. II
- C. I and IV
- D. I, II, III, IV
Answer: D
NEW QUESTION 186
Which one of the following statements regarding collateralized mortgage obligations (CMO) is incorrect?
- A. CMOs are pools of mortgages that are divided according to the timing of cash flows.
- B. CMOs are asset-backed securities that have pools of collateralized debt obligations (CDOs) as
underlying collateral. - C. CMOs are generally less risky investment than CDOs.
- D. CMOs have senior tranches which are considered short-term, low-risk instruments by banks
Answer: B
NEW QUESTION 187
Which one of the following four statements correctly identifies the Basel II Accord's definition of operational
risk?
- A. Operational risk is all the risk that is not captured by market and credit risks.
- B. Operational risk is the risk of loss resulting from inadequate or failed processes, people and systems or
from external events. - C. Operational risk is a form of risk that summarizes the risks a company or firm undertakes when it
attempts to operate within a given field or industry. - D. Operational risk is a risk arising from execution of a company's business functions.
Answer: B
NEW QUESTION 188
Which one of the four following statements about technology systems for managing operational risk event
data is incorrect?
- A. The implementation of a new operational risk event loss database has to incorporate an analysis of the
advantages and disadvantages of external systems. - B. Operational risk loss event data collection software can be internally developed.
- C. Operational risk event databases are always integrated with the other components of the operational risk
management program. - D. Operational risk event databases are independent elements of the operational risk management
framework.
Answer: C
NEW QUESTION 189
US-based BetaBank have accumulated Japanese yen, Japanese government bonds, options on Japanese yen,
and positions in commodities that have a positive correlation with yen. Which one of the four following
non-statistical risk measures could be used to evaluate the BetaBank's exposure to the Japanese economy?
- A. Position volatility
- B. Position concentrations
- C. Position turnover
- D. Position sensitivities
Answer: B
NEW QUESTION 190
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Topics covered by the GARP 2016-FRR
Here is a list of the main subjects that will be covered in the 2016-FRR:
- Risk Management: 50%
- Financial Services: 15%
- Regulation, Supervision, Reporting, and Management: 20%
- Emerging Markets: 15%
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