RELIABLE 2016-FRR EXAM SIMULATOR, VCE 2016-FRR FORMAT

Reliable 2016-FRR Exam Simulator, Vce 2016-FRR Format

Reliable 2016-FRR Exam Simulator, Vce 2016-FRR Format

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Tags: Reliable 2016-FRR Exam Simulator, Vce 2016-FRR Format, 2016-FRR Practice Tests, 2016-FRR Valid Test Objectives, 2016-FRR Valid Test Pdf

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GARP 2016-FRR Certification Exam is a computer-based exam that consists of 100 multiple-choice questions. Candidates have four hours to complete the exam. 2016-FRR Exam is offered in English and can be taken at various testing centers around the world. The passing score for the exam is 70%.

GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q30-Q35):

NEW QUESTION # 30
As an example of the balance sheet effect, if rates rise, Delta Bank can expect:

  • A. Its fixed rate assets to increase in value, although that effect will be offset by a reduction in the value of
    its fixed rate liabilities.
  • B. Its fixed rate assets to increase in value, while that effect will be amplified by a reduction in the value of
    its fixed rate liabilities.
  • C. Its fixed rate assets to drop in value, while that effect will be amplified by a reduction in the value of its
    fixed rate liabilities.
  • D. Its fixed rate assets to drop in value, although that effect will be offset by a reduction in the value of its
    fixed rate liabilities.

Answer: D


NEW QUESTION # 31
When a credit risk manager analyzes default patterns in a specific neighborhood, she finds that defaults are
increasing as the stigma of default evaporates, and more borrowers default. This phenomenon constitutes

  • A. Herd behavior
  • B. Moral hazard
  • C. Speculative bias
  • D. Adverse selection

Answer: A


NEW QUESTION # 32
When a credit risk manager analyzes default patterns in a specific neighborhood, she finds that defaults are increasing as the stigma of default evaporates, and more borrowers default. This phenomenon constitutes

  • A. Herd behavior
  • B. Moral hazard
  • C. Speculative bias
  • D. Adverse selection

Answer: A

Explanation:
* Herd behavior in the context of credit defaults refers to a situation where the stigma of default decreases, leading more borrowers to default as they see others doing the same. This creates a pattern of increasing defaults in the neighborhood as more borrowers follow the trend.
References:
* How Finance Works: "Defaults increasing as the stigma evaporates and more borrowers follow suit is indicative of herd behavior."


NEW QUESTION # 33
Mega Bank holds a $250 million mortgage loan portfolio, which reprices every 5 years at LIBOR + 10%. The bank also has $150 million in deposits that reprices every month at LIBOR + 3%. What is the amount of Mega Bank's rate sensitive liabilities?

  • A. $200 million
  • B. $150 million
  • C. $250 million
  • D. $100 million

Answer: B

Explanation:
The amount of Mega Bank's rate-sensitive liabilities includes the $150 million in deposits that reprice every month at LIBOR + 3%. These deposits are considered rate-sensitive liabilities because their interest rates are adjusted monthly based on LIBOR.


NEW QUESTION # 34
Banks duration match their assets and liabilities to manage their interest risk in their banking book. A bank has
$100 million in interest rate sensitive assets and $100 million in interest rate sensitive liabilities. Currently the bank's assets have a duration of 5 and its liabilities have a duration of 2. The asset-liability management committee of the bank is in the process of duration-matching. Which of the following actions would best match the durations?

  • A. Increase the duration of liabilities by 2 and increase the duration of assets by 1.
  • B. Decrease the duration of liabilities by 1 and increase the duration of assets by 1.
  • C. Increase the duration of liabilities by 2 and decrease the duration of assets by 1.
  • D. Decrease the duration of liabilities by 1 and decrease the duration of assets by 1.

Answer: C

Explanation:
To match the durations of assets and liabilities, the bank needs to adjust the durations so that they are equal.
Currently, the assets have a duration of 5 and the liabilities have a duration of 2.
One way to match the durations is to increase the duration of liabilities by 2 (making it 4) and decrease the duration of assets by 1 (making it 4). This results in both the assets and liabilities having the same duration, thereby matching them.


NEW QUESTION # 35
......

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