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Free ICBRR Exam Braindumps (page: 34)

Page 34 of 87
PDF with 342 Questions

Arnold Wu owns a floating rate bond. He is concerned that the rates may fall in the future decreasing his payment amount.
Which of the following instruments should he buy to hedge against the fall in interest rates?

  1. Interest rate floor
  2. Interest rate cap
  3. Index amortizing swap
  4. Interest rate swap that receives floating and pays fixed

Answer(s): A



Which one of the following statements regarding collateralized mortgage obligations (CMO) is incorrect?

  1. CMOs have senior tranches which are considered short-term, low-risk instruments by banks
  2. CMOs are asset-backed securities that have pools of collateralized debt obligations (CDOs) as underlying collateral.
  3. CMOs are generally less risky investment than CDOs.
  4. CMOs are pools of mortgages that are divided according to the timing of cash flows.

Answer(s): B



On January 1, 2010 the TED (treasury-euro dollar) spread was 0.4%, and on January 31, 2010 the TED spread is 0.9%. As a risk manager, how would you interpret this change?

  1. The decrease in the TED spread indicates a decrease in credit risk on interbank loans.
  2. The decrease in the TED spread indicates an increase in credit risk on interbank loans.
  3. Increase in interest rates on both interbank loans and T-bills.
  4. Increase in credit risk on T-bills.

Answer(s): B



Which of the following statements regarding collateralized debt obligations (CDOs) is correct?

I) CDOs typically have loans or bonds as underlying collateral.
II) CDOs generally less risky than CMOs.
III) There is a correlation among defaults in the CDO collateral which should be considered in valuation of these complex instruments.

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

Answer(s): B



Page 34 of 87



Post your Comments and Discuss GARP ICBRR exam with other Community members:

Vey commented on May 27, 2023
highly appreciate for your sharing.
CAMBODIA
upvote

Vey commented on May 27, 2023
Highly appreciate for your sharing.
CAMBODIA
upvote