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GARP Updated 2016-FRR Exam Questions and Answers by taylor

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GARP 2016-FRR Exam Overview :

Exam Name: Financial Risk and Regulation (FRR) Series
Exam Code: 2016-FRR Dumps
Vendor: GARP Certification: Financial Risk and Regulation
Questions: 387 Q&A's Shared By: taylor
Question 36

Which of the following factors would typically increase the credit spread?

I. Increase in the probability of default of the issuer.

II. Decrease in risk premium.

III. Decrease in loss given default of the issuer.

IV. Increase in expected loss.

Options:

A.

I

B.

II and III

C.

I and IV

D.

I, II, and IV

Discussion
Question 37

A bank customer chooses a mortgage with low initial payments and payments that increase over time because the customer knows that she will have trouble making payments in the early years of the loan. The bank makes this type of mortgage with the same default assumptions uses for ordinary mortgages, thus underestimating the risk of default and becoming exposed to:

Options:

A.

Moral hazard

B.

Adverse selection

C.

Banking speculation

D.

Sampling bias

Discussion
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Question 38

To estimate the interest charges on the loan, an analyst should use one of the following four formulas:

Options:

A.

Loan interest = Risk-free rate - Probability of default x Loss given default + Spread

B.

Loan interest = Risk-free rate + Probability of default x Loss given default + Spread

C.

Loan interest = Risk-free rate - Probability of default x Loss given default - Spread

D.

Loan interest = Risk-free rate + Probability of default x Loss given default - Spread

Discussion
Question 39

A financial analyst is trying to distinguish credit risk from market risk. A $100 loan collateralized with $200 in stock has limited ___, but an uncollateralized obligation issued by a large bank to pay an amount linked to the long-term performance of the Nikkei 225 Index that measures the performance of the leading Japanese stocks on the Tokyo Stock Exchange likely has more ___ than ___.

Options:

A.

Legal risk; market risk; credit risk

B.

Market risk; market risk; credit risk

C.

Market risk; credit risk; market risk

D.

Credit risk, legal risk; market risk

Discussion
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