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2016-FRR Exam Questions & Answers

Exam Code: 2016-FRR

Exam Name: Financial Risk and Regulation (FRR) Series

Updated:

Q&As: 342

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Practice These Free Questions and Answers to Pass the Financial Risk and Regulation Exam

Questions 1

Which one of the following four exotic option types has another option as its underlying asset, and as a result of its construction is generally believed to be very difficult to model?

A. Spread options

B. Chooser options

C. Binary options

D. Compound options

Show Answer
Questions 2

Which one of the following four statements correctly defines credit risk?

A. Credit risk is the risk that complements market and liquidity risks.

B. Credit risk is a form of performance risk in contractual relationship.

C. Credit risk is the risk arising from execution of a company's strategy.

D. Credit risk is the risk that summarizes the exposures a company or firm assumes when it attempts to operate within a given field or industry.

Show Answer
Questions 3

Which of the following statements regarding bonds is correct?

I. Interest rates on bonds are typically stated on an annualized rate.

II. Bonds can pay floating coupons that are directly linked to various interest rate indices.

III. Convertible bonds have an element of prepayment risk.

IV.

Callable bonds have an element of equity risk.

A.

I only

B.

I and II

C.

I, II, and III

D.

II, III, and IV

Show Answer
Questions 4

Which one of the following four statements regarding bank's exposure to credit and default risk is INCORRECT?

A. The more the bank diversifies its credit portfolio, the better spread its credit risks become.

B. In debt management, the value of any loan exposure will change typically in a fashion similar the same way that an equity investment can.

C. In debt management, the goal is to minimize the effect of any defaults.

D. Default risk cannot be hedged away fully, and it will always exist for the holder of the credit or for the person insuring against the credit or default event.

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Questions 5

Forward rate agreements (FRA) are:

A. Exchange traded derivative contracts that allow banks to take positions in forward interest rates.

B. OTC derivative contracts that allow banks and customers to obtain the risk/reward profile of long-term interest rates by relying on long-term funding.

C. Exchange traded derivative contracts that allow banks to take positions in future exchange rates.

D. OTC derivative contracts that allow banks to take positions in forward interest rates.

Show Answer

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