GARP 2016-FRR Practice Exam Questions (Desktop & Web-based)

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Where can you take the GARP 2016-FRR

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2016-FRR Latest Exam Format - Free PDF 2016-FRR - First-grade Financial Risk and Regulation (FRR) Series Exam Vce Format

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GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q181-Q186):

NEW QUESTION # 181
Which of the following about the ratios between various Tiers of capital is not a requirement of the Basel Committee?

A. Lower Tier 2 capital may only equal 50% of core capital.
B. Tier 2 capital cannot exceed 50% of the bank's total regulatory capital.
C. Upper Tier 2 capital may only equal 30% of core capital.
D. Innovative instruments in Tier 1 are limited to a maximum of 15% of Tier 1 capital.

Answer: C

Explanation:
Basel Committee regulations stipulate certain limitations on the ratios between different tiers of capital.
Specifically, Tier 2 capital cannot exceed 100% of Tier 1 capital, innovative instruments in Tier 1 are limited to a maximum of 15% of Tier 1 capital, and Lower Tier 2 capital can only equal up to 50% of core capital.
However, the requirement stating that Upper Tier 2 capital may only equal 30% of core capital is not a requirement under the Basel Committee regulations, making option D the correct answer as it is the statement that is not a requirement.

NEW QUESTION # 182
According to a Moody's study, the most important drivers of the loss given default historically have been all of the following EXCEPT:
I. Debt type and seniority
II. Macroeconomic environment
III. Obligor asset type
IV. Recourse

A. III, IV
B. II
C. I
D. I, II

Answer: A

Explanation:
* Key Drivers of Loss Given Default: According to Moody's study, the most important drivers of loss given default (LGD) historically have been debt type and seniority, and the macroeconomic environment. These factors directly impact the severity of losses in the event of default by determining the priority of debt repayments and the overall economic conditions affecting the obligor's ability to recover.
* Exclusions: The asset type of the obligor and recourse are not considered primary drivers of LGD in Moody's historical analysis. While they can influence the recovery process, they do not hold the same level of importance as the debt structure and economic conditions.

NEW QUESTION # 183
Which one of the following four metrics represents the difference between the expected loss and unexpected
loss on a credit portfolio?

A. Credit VaR
B. Loss given default
C. Probability of default
D. Modified duration

Answer: A

NEW QUESTION # 184
Mega Bank has $100 million in deposits on which it pays 3% interest, and $20 million in equity on which it
pays no interest. The loan portfolio of $120 million earns an average rate of 10%. If the rates remain the same
and Mega Bank is able to earn the same net interest income in perpetuity at a 5% discount rate, what will the
present value of this holding be?

A. $180 million
B. $100 million
C. $150 million
D. $200 million

Answer: A

NEW QUESTION # 185
After entering the securitization business, Delta Bank increases its cash efficiency by selling off the lower risk portions of the portfolio credit risk. This process ___ risk on the residual pieces of the credit portfolio, and as a result it ___ return on equity for the bank.

A. Decreases; increases;
B. Increases; increases;
C. Decreases; increases;
D. Increases; decreases;

Answer: B

Explanation:
When Delta Bank sells off the lower-risk portions of its credit portfolio, it retains the higher-risk residual pieces. This process inherently increases the risk associated with the remaining portfolio because the lower-risk assets, which provided a cushion, are no longer part of the portfolio. As the risk increases, the potential return on these higher-risk assets also increases to compensate for the additional risk taken on by the bank. Consequently, this higher risk and potential return increase the bank's return on equity (ROE), as the bank is now leveraging more volatile assets that have higher potential returns.
References
* Verified information on risk and return from the document

NEW QUESTION # 186
......

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GARP 2016-FRR Practice Exam Questions (Desktop & Web-based)

Where can you take the GARP 2016-FRR

2016-FRR Latest Exam Format - Free PDF 2016-FRR - First-grade Financial Risk and Regulation (FRR) Series Exam Vce Format

GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q181-Q186):

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