Free 2016-FRR Exam Braindumps (page: 30)

Page 30 of 86

James manages a loans portfolio. He has to evaluate a large number of loans to choose which of them he will keep in the bank's books.
Which one of the following four loans would he be most likely to sell to another bank?

  1. Loan to a major customer who is also a director and a large owner.
  2. Loan made to a highly risky borrower that is fully collateralized by the customer's deposits.
  3. Loan to a commercial customer with a good payment history and collateral.
  4. Loan to a borrower who has been delinquent previously, but now is performing as agreed.

Answer(s): C



Which of the following risk measures are based on the underlying assumption that interest rates across all maturities change by exactly the same amount?
I) Present value of a basis point.
II) Yield volatility.
III) Macaulay's duration.
IV) Modified duration.

  1. I and II
  2. I, II, and III
  3. I, III, and IV
  4. I, II, III, and IV

Answer(s): C



Forward rate agreements (FRA) are:

  1. Exchange traded derivative contracts that allow banks to take positions in forward interest rates.
  2. 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.
  3. Exchange traded derivative contracts that allow banks to take positions in future exchange rates.
  4. OTC derivative contracts that allow banks to take positions in forward interest rates.

Answer(s): D



Which one of the four following activities is NOT a component of the daily VaR computing process?

  1. Updating individual risk factor models.
  2. Computing portfolio risk by delta-normal or delta-gamma method.
  3. Updating factor interrelationships.
  4. Producing the VaR report.

Answer(s): B



Page 30 of 86



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