Free Access GARP.2016-FRR.v2022-06-22.q122 Practice Test (Page 6)

Question 21

In additional to the commodity-specific risks, which of the following risks represent the main commodity
derivative risks?
I. Basis
II. Term
III. Correlation
IV. Seasonality

A.II, III

B.I, II

C.I, IV

D.I, II, III, IV

Question 22

The exercise for an American type option prior to expiration day is virtually certain in the following case:

A.In the event of a low dividend for an in-the-money call option

B.In the event of a low dividend for an in-the-money put option

C.In the event of a high dividend for an in-the-money call option

D.In the event of a high dividend for an in-the-money put option

Question 23

The market risk manager of SigmaBank is concerned with the value of the assets in the bank's trading book.
Which one of the four following positions would most likely be not included in that book?

A.300,000 options on IBM shares worth $10,000,000.

B.$10,000,000 loan to IBM worth $9,800,000.

C.10,000 shares of IBM worth $10,000,000.

D.$10,000,000 bond issued by IBM worth $11,000,000.

Question 24

Which one of the following four statements on factors affecting the value of options is correct?

A.As the value of underlying security increases, the value of the put option increases.

B.As volatility rises, options increase in value.

C.As time passes, options will increase in value.

D.As interest rates rise and option's rho is positive, option prices will decrease.

Question 25

Which one of the following four statements correctly defines credit risk?

A.Credit risk is a form of performance risk in contractual relationship.

B.Credit risk is the risk that complements market and liquidity risks.

C.Credit risk is the risk arising from execution of a company's strategy.

D.Credit risk is the risk that summarizes the exposures a company or firm assumes when it attempts to
operate within a given field or industry.

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Question 21

Question 22

Question 23

Question 24

Question 25

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