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Online 2016-FRR Questions Video

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Total 342 questions
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Financial Risk and Regulation (FRR) Series Questions and Answers

Question 45

In the United States, Which one of the following four options represents the largest component of securitized debt?

Options:

A.

Education loans

B.

Credit card loans

C.

Real estate loans

D.

Lines of credit

Question 46

A credit analyst wants to determine a good pricing strategy to compensate for credit decisions that might have been made incorrectly. When analyzing her credit portfolio, the analyst focuses on the spreads in each loan to determine if they are sufficient to compensate the bank for all of the following costs and risks EXCEPT.

Options:

A.

The marginal cost of funds provided.

B.

The overhead cost of maintaining the loan and the account.

C.

The inherent risk of lending to this borrower while providing a return on the risk capital used to the support the loan.

D.

The opportunity cost of risk-adjusted marginal cost of capital.

Question 47

Beta Insurance Company is only allowed to invest in investment grade bonds. To maximize the interest income, Beta Insurance Company should invest in bonds with which of the following ratings?

Options:

A.

AAA

B.

AA

C.

A

D.

B

Question 48

Which one of the following four options does NOT represent a benefit of compensating balances to the bank?

Options:

A.

Compensating balances allow the bank to net some of the exposure they may have in case of default, by taking funds from these specific deposit account one the borrower defaults.

B.

Since the compensating balances cannot be withdrawn at short notice, if at all, they are not considered transaction accounts and are able to provide a stable funding to the bank, reducing its reliance on more volatile external inter-bank based funding sources.

C.

Compensation balances influence the expected loss rate of the bank given the default obligor and improve capital structure by controlling obligor type and avoiding payment delays.

D.

Since the compensating balances reduce the next amount lent to the borrower, the earned return on the loan is increased, further widening the bank's interest rate margin and profitability.

Page: 12 / 13
Total 342 questions
Get 2016-FRR Full Access Download 2016-FRR PDF