Question 1

A credit analyst wants to determine a good pricing strategy to compensate for credit decisions that might have been made incorrectly. When analyzing her credit portfolio, the analyst focuses on the spreads in each loan to determine if they are sufficient to compensate the bank for all of the following costs and risks EXCEPT.

Options :

A : The marginal cost of funds provided.

B : The overhead cost of maintaining the loan and the account

C : The inherent risk of lending to this borrower while providing a return on the risk capital used to the support the loan.

D : The opportunity cost of risk-adjusted marginal cost of capital.

Answer: D

Question 2

An endowment asset manager with a focus on long/short equity strategies is evaluating therisks of an equity portfolio. Which of the following risk types does the asset manager needto consider when evaluating her diversified equity portfolio?I. Company-specific projected earnings and earnings riskII. Aggregate earnings expectationsIII. Market liquidityIV. Individual asset volatility

Options :

A : I

B : I, IV

C : II, III

D : I, II, IV

Answer: D

Question 3

The value of which one of the following four option types is typically dependent on both the final price of its underlying asset and its own price history?

Options :

A : Stout options

B : Power options

C : Chooser options

D : Basket options

Answer: D

Question 4

In the United States, foreign exchange derivative transactions typically occur between

Options :

A : A few large internationally active banks, where the risks become concentrated

B : All banks with international branches, where the risks become widely distributed based on trading exposures

C : Regional banks with international operations, where the risks depend on the specific derivative transactions.

D : Thrifts and large commercial banks, where the risks become isolated.

Answer: A

Question 5

Which of the following about the ratios between various Tiers of capital is not a requirement

of the Basel Committee?

Options :

A : Tier 2 capital cannot exceed 50% of the bank-s total regulatory capital.

B : Innovative instruments in Tier 1 are limited to a maximum of 15% of Tier 1 capital.

C : Lower Tier 2 capital may only equal 50% of core capital.

D : Upper Tier 2 capital may only equal 30% of core capital.

Answer: D

Free 2016-FRR Mock Exam – Practice Online Confidently

Buying Options: