2016-FRR Exam Questions Tutorials

Financial Risk and Regulation (FRR) Series Questions and Answers

Question 41

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

Options:

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

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

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

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

Question 42

Changes to which one of the following four factors would typically not increase the cost of credit?

Options:

Increasing inflation rates in a country.

Increase in consumption of goods and services.

Higher risk premium on a fixed income instrument.

Higher return earned on alternative investments.

Question 43

According to a Moody's study, the most important drivers of the loss given default historically have been all of the following EXCEPT:

I. Debt type and seniority

II. Macroeconomic environment

III. Obligor asset type

IV. Recourse

Options:

I, II

III, IV

Question 44

To safeguard its capital and obtain insurance if the borrowers cannot repay their loans, Gamma Bank accepts financial collateral to manage its credit risk and mitigate the effect of the borrowers' defaults. Gamma Bank will typically accept all of the following instruments as financial collateral EXCEPT?

Options:

Unrated bonds issued and traded on a recognized exchange

Equities and convertible bonds included in a main market index

Commercial debts owed to a company in a form of receivables

Mutual fund shares and similar unit investment vehicles subject to daily quotes

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Financial Risk and Regulation (FRR) Series Questions and Answers

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