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GARP 2016-FRR Exam Questions
Financial Risk and Regulation (FRR) Series (Page 13 )

Updated On: 18-Mar-2026
Page 13 of 70
PDF with 387 Questions

Which one of the following four features is NOT a typical characteristic of futures contracts?

  1. Fixed notional amount per contract
  2. Fixed dates for delivery
  3. Traded Over-the-counter only
  4. Daily margin calls

Answer(s): C



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.

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

Answer(s): B



The pricing of credit default swaps is a function of all of the following EXCEPT:

  1. Probability of default
  2. Duration
  3. Loss given default
  4. Market spreads

Answer(s): B



Which one of the following four statements does identify correctly the relationship between the value of an option and perceived exchange rate volatility?

  1. With increases in perceived future foreign exchange volatility, the value of all foreign exchange
  2. As the perceived future foreign exchange volatility decreases, the value of all options increases.
  3. As the perceived future foreign exchange volatility increases, the value of all options increases.
  4. Option values can only change due to the factors related to the demand for specific options

Answer(s): C



To estimate the interest charges on the loan, an analyst should use one of the following four formulas:

  1. Loan interest = Risk-free rate - Probability of default x Loss given default + Spread
  2. Loan interest = Risk-free rate + Probability of default x Loss given default + Spread
  3. Loan interest = Risk-free rate - Probability of default x Loss given default - Spread
  4. Loan interest = Risk-free rate + Probability of default x Loss given default - Spread

Answer(s): B



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