Free Access GARP.2016-FRR.v2022-06-22.q122 Practice Test (Page 15)

Question 66

To ensure good risk management which of the following should be true about the CRO role and function?

A.The CRO should report to the CEO or the Board of Directors.

B.To ensure efficient flow of information the CRO should not be independent of business units.

C.The CRO should not be involved with the setting of risk limits.

D.The CRO should receive compensation that is directly determined by the profit of the trading desk.

Question 67

In the United States, stock investors must comply with the Regulation T of the Federal Reserve Bank and may
borrow up to ___ of the value of the securities from their brokers.

A.50%

B.60%

C.30%

D.40%

Question 68

Which one of the four following statements about the Risk Adjusted Return on Capital (RAROC) is correct?
RAROC is the ratio of:

A.Profitability to the risk of a trading portfolio or bank business unit.

B.Risk to the profitability of a trading portfolio or a business unit within the bank.

C.Profitability to the expected return of a trading portfolio or bank business unit.

D.Value-at-risk to the profitability of a trading portfolio or a business unit.

Question 69

An asset manager for a large mutual fund is considering forward exchange positions traded in a clearinghouse
system and needs to mitigate the risks created as a result of this operation. Which of the following risks will be
created as a result of the forward exchange transaction?

A.Exchange rate and interest rate risk

B.Credit risk

C.Exchange rate risk

D.Exchange rate and credit risk

Question 70

Which one of the following four statements regarding the basic Net Interest Income model is INCORRECT?

A.Effective repricing date can be different than contractual repricing.

B.Assets and liabilities have the same interest rate sensitivities.

C.The amount of intermediated funds can be a function of interest rate levels.

D.Net interest income risk does not address the impact of changing interest rates on bank equity value.

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Question 66

Question 67

Question 68

Question 69

Question 70

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