Online Access Free 2016-FRR Practice Test

A trader for EtaBank wants to take a leveraged position in Collateralized Debt Obligations. If these CDOs can be used in a repo transaction at a 20% haircut, what is the maximum leverage factor for a transaction with the CDOs?

• A.5
• B.3
• C.0.8
• D.1.5

Bank Milo has $4 million in cash and $5 million in loans coming due tomorrow with an expected default rate of 1%. The proceeds will be deposited overnight. The bank owes $ 9 million on a securities purchase that settles in two days and pays off $8 million in commercial paper in three days that is not expected to renew. On what days does the bank face negative cumulative liquidity?

• A.Days 1, 2 and 3.
• B.Day 3 only.
• C.Day 2 only.
• D.Days 2 and 3.

What is the role of market risk management function within a bank?
I. Control and minimize the risks the bank should take.
II. Establish a comprehensive market risk policy framework.
III. Define, approve and monitor risk limits.
IV. Perform stress tests and other qualitative risk assessments.

• A.II and IV
• B.II, III, and IV
• C.I and III
• D.I, II and III

Which of the following are the most common methods to increase liquidity in stressed conditions?
I). Selling or securitizing assets.
II). Obtaining additional credit lines.
III). Securing a better credit rating.

• A.I, II, III
• B.I, II
• C.II, III
• D.I

US-based BetaBank have accumulated Japanese yen, Japanese government bonds, options on Japanese yen, and positions in commodities that have a positive correlation with yen. Which one of the four following non- statistical risk measures could be used to evaluate the BetaBank's exposure to the Japanese economy?

• A.Position turnover
• B.Position sensitivities
• C.Position volatility
• D.Position concentrations