QUESTION: 25 Exam Topic: 1 Volume A

A credit risk analyst is evaluating factors that quantify credit risk exposures. The risk that the borrower would fail to make full and timely repayments of its financial obligations over a given time horizon typically refers to:

Duration of default.
Exposure at default.
Loss given default.
Probability of default.

Answer(s): D

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QUESTION: 26 Exam Topic: 1 Volume A

Which one of the following four options correctly identifies the core difference between bonds and loans?

These instruments receive a different legal treatment.
These instruments have different pricing drivers.
These instruments cannot be used to estimate credit capital under provisions of the Basel II Accord.
These instruments are subject to different credit counterparty regulations.

Answer(s): A

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QUESTION: 27 Exam Topic: 1 Volume A

Which one of the following four formulas correctly identifies the expected loss for all credit instruments?

Expected Loss = Probability of Default x Loss Given Default x Exposure at Default
Expected Loss = Probability of Default x Loss Given Default + Exposure at Default
Expected Loss = Probability of Default x Loss Given Default - Exposure at Default
Expected Loss = Probability of Default x Loss Given Default / Exposure at Default

Answer(s): A

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QUESTION: 28 Exam Topic: 1 Volume A

Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). The loan is collateralized with $55,000. The loan also has an annual expected defaultrate of 2%, and loss given default at 50%. In this case, what will the bank's exposure at default (EAD) be?

$25,000
$50,000
$75,000
$105,000

Answer(s): B

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QUESTION: 25 Exam Topic: 1 Volume A

QUESTION: 26 Exam Topic: 1 Volume A

QUESTION: 27 Exam Topic: 1 Volume A

QUESTION: 28 Exam Topic: 1 Volume A