Free GARP 2016-FRR Exam Questions

Become GARP Certified with updated 2016-FRR exam questions and correct answers

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Total 345 Questions | Updated On: Dec 13, 2021

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Question 1

A bank customer expecting to pay its Brazilian supplier BRL 100 million asks Alpha Bank to

buy Australian dollars and sell Brazilian reals. Alpha bank does not hold reals so it asks for

a quote to buy Brazilian reals in the market. The market rate is 100. The bank quotes a

selling rate of 101 to its customer and sells the reals at this quoted price. Then the bank

immediately buys the real at the market rate and completes foreign exchange matched

transaction. What is the financial impact of this transaction for Alpha bank?

A : is transaction leaves the bank a profit of AUD 10,101.

B : is transaction leaves the bank a profit of BRL 10,101.

C : is transaction leaves the bank a loss of AUD 10,101.

D : is transaction leaves the bank a loss of BRL 10,101.

Answer: A

Question 2

Which of the following statements regarding collateralized debt obligations (CDOs) is

correct?

I. CDOs typically have loans or bonds as underlying collateral.

II. CDOs generally less risky than CMOs.

III. There is a correlation among defaults in the CDO collateral which should be considered

in valuation of these complex instruments.

A : only

B : and III

C : and III

D : II, and III

Answer: B

Question 3

When trading exotic options, one needs to consider the following risks:

I. Spot foreign exchange risks

II. Forward foreign exchange risks

III. Plain vanilla options risks

IV. Option-specific risks

A : III

B : II, III, IV

C : II, IV

D : II, III, IV

Answer: D

Question 4

Which of the following statements are reasons for mathematical valuation and risk assessment models to be misleading or inaccurate? I. There could be missing factors in models. II. The data used as input for the model could be bad or wrong. III. Model results could be misinterpreted. IV. There could be errors in the derivation of the model.

A : II, III IV

B : I and IV

C : II, and III

D : III, and IV

Answer: A

Question 5

Which of the following about the ratios between various Tiers of capital is not a requirement

of the Basel Committee?

A : er 2 capital cannot exceed 50% of the bank's total regulatory capital.

B : novative instruments in Tier 1 are limited to a maximum of 15% of Tier 1 capital.

C : wer Tier 2 capital may only equal 50% of core capital.

D : per Tier 2 capital may only equal 30% of core capital.

Answer: B

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Total 345 Questions | Updated On: Dec 13, 2021

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