2016-FRR Leak Questions

Financial Risk and Regulation (FRR) Series Questions and Answers

Question 5

Which one of the following four exercise features is typical for the most exchange-traded equity options?

Options:

Asian exercise feature

American exercise feature

European exercise feature

A shout option exercise feature

Question 6

On January 1, 2010 the TED (treasury-euro dollar) spread was 0.9%, and on January 31, 2010 the TED spread is 0.4%. As a risk manager, how would you interpret this change?

Options:

The decrease in the TED spread indicates a decrease in credit risk on interbank loans.

The decrease in the TED spread indicates an increase in credit risk on interbank loans.

Increase in interest rates on both interbank loans and T-bills.

Increase in credit risk on T-bills.

Question 7

James Johnson bought a 3-year plain vanilla bond that has yield of 4.7% and 4% coupon paid annually, for $87,139. Macauley's duration of the bond is 2.94 years. Rate volatility is 20% of the yield. The bond's annualized volatility is therefore:

Options:

3.15%.

2.90%.

2.81%.

2.64%.

Question 8

A large multinational bank is concerned that their duration measures may not be accurate since the yield curve shifts are not parallel. Which of the following statements would be typically observed regarding variability of interest rates?

Options:

Short-term rates are more variable than long-term rates.

Short-term rates are less variable than long-term rates.

Short-term rates are equally variable as long-term rates.

Short-term rates and long-term rates always move in opposite directions.

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Financial Risk and Regulation (FRR) Series Questions and Answers

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