Question 1

Which one of the following is a typical source of funding for a commercial banks assets?

Options :

A : Consumer deposits

B : Cash

C : Commercial lending

D : Commodities markets

Answer: A

Question 2

Which one of the four following statements about the Risk Adjusted Return on Capital(RAROC) is correct?RAROC is the ratio of:

Options :

A : Risk to the profitability of a trading portfolio or a business unit within the bank.

B : Value-at-risk to the profitability of a trading portfolio or a business unit.

C : Profitability to the expected return of a trading portfolio or bank business unit.

D : Profitability to the risk of a trading portfolio or bank business unit.

Answer: D

Question 3

If a bank is long £500 million pounds, short £300 million in delta-equivalent pound options,

and long £100 million in pound-denominated stocks, what is the amount of pound exposure

that would be shown in the aggregated risk reports?

Options :

A : £300 million pounds

B : £500 million pounds

C : £800 million pounds

D : £900 million pounds

Answer: A

Question 4

Which one of the following four statements regarding the analysis of recoveries in operational risk reporting is correct?

Options :

A : Recoveries are usually driven by automated processes

B : Recovery analysts cannot be used to improve the recovery rate

C : Recovery analysis can demonstrate the importance of the operational risk function

D : The experience of personnel within the recovery team has no effect on the recovery rate

Answer: C

Question 5

A customer asks a broker employed by AlphaBank to buy Eureka Corporation bonds for her account. While this trade was executed correctly and the bonds were bought, the trade was mistakenly accounted for as a sell order. If the price of Eureka Corporation bonds goes up, this trade would result in a significantly larger loss than if the market had remained stable. However, if the market drops, the customer will benefit from the incorrect accounting and gain from this trade. This trading scenario can serve as an example that

Options :

A : Market risk in this transaction can magnify operational risk.

B : Credit risk in this transaction can magnify operational risk.

C : Liquidity risk in this transaction can magnify operational risk.

D : Strategic risk in this transaction can magnify operational risk.

Answer: A

Free 2016-FRR Mock Exam – Practice Online Confidently

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