GARP 2016-FRR Exam Questions - Real Practice Questions for Guaranteed Success

Question 1

A customer of EtaBank, Alfred Fall, fell on the marble floors of the bank and sustained substantial injuries. Subsequently, he won a personal injury claim of $50,000 against EtaBank. How should EtaBank's operational loss data event information database categorize this event?

AThis event would qualify as 'Business Disruption and System Failures'.

BThis event would qualify as 'Employment Practices and Workplace Safety'.

CThis event would not qualify as an operational risk event.

DThis event would qualify as 'Legal Risk'.

Correct : B

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AThis event would qualify as 'Business Disruption and System Failures'.

BThis event would qualify as 'Employment Practices and Workplace Safety'.

CThis event would not qualify as an operational risk event.

DThis event would qualify as 'Legal Risk'.

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Question 2

What does Pillar 2 of the Basel II Accord focus on?

AIdentifying risk-weighted assets for reputational risk

BImproving the transparency of the different types of banking risks

CEnsuring that the bank properly manages all of the risks it takes

DEnsuring that the bank has minimum levels of capital against market, credit, and operational risk

Correct : C

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AIdentifying risk-weighted assets for reputational risk

BImproving the transparency of the different types of banking risks

CEnsuring that the bank properly manages all of the risks it takes

DEnsuring that the bank has minimum levels of capital against market, credit, and operational risk

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Question 3

A multinational bank just bought two bonds each worth $10,000. One of the bonds pays a fixed interest of 5% semi-annually and the other pays LIBOR semi-annually. The six month LIBOR isat 5% currently. The risk manager of the bank is concerned about the sensitivity to interest rates. Which of the following statements are true?

AThe price of the bond paying floating interest is more sensitive to interest rates than the bond paying fixed interest.

BThe price of the bond paying fixed interest is more sensitive to interest rates than the bond paying floating interest.

CBoth bond prices are equally sensitive to interest rates.

DThe given information is not enough to determine the sensitivity of the bond prices.

Correct : B

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AThe price of the bond paying floating interest is more sensitive to interest rates than the bond paying fixed interest.

BThe price of the bond paying fixed interest is more sensitive to interest rates than the bond paying floating interest.

CBoth bond prices are equally sensitive to interest rates.

DThe given information is not enough to determine the sensitivity of the bond prices.

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Question 4

A bank considers issuing new capital to increase its Tier 1 capital levels. Which of the following financial instruments would most likely to be considered?

ALong-term and callable debt convertible to equity

BConvertible preferred shares

CShort-term callable debt

DShort-term debt convertible to non-cumulative preferred shares

Correct : B

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ALong-term and callable debt convertible to equity

BConvertible preferred shares

CShort-term callable debt

DShort-term debt convertible to non-cumulative preferred shares

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Question 5

What are the add-on losses faced by a bank that is going bankrupt?

I . The discount accepted by the bank for selling its assets in a fire sale.

II . The increased cost of funding liabilities in a financially distressed situation.

III . The reduction in the present value of future growth opportunities.

IV . Loss of goodwill and intangible assets.

AI, II

BII, III, IV

CIII, IV

DI, II, III, IV .

Correct : D

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AI, II

BII, III, IV

CIII, IV

DI, II, III, IV .

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Master GARP 2016-FRR Exam with Reliable Practice Questions

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