Free Access GARP.2016-FRR.v2025-03-20.q179 Practice Test (Page 5)

Question 16

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 expected return 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 risk of a trading portfolio or bank business unit.

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

Question 17

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

B.I, II

C.I, II, III

D.II, III

Question 18

Which one of the following four physical commodities markets has the right combination of characteristics
that generally allows short selling in the market, without making the short-selling transaction prohibitively
expensive?

A.Gold

B.Natural Gas

C.Oil

D.Grain

Question 19

Which one of the following four statements about planning for the operational risk framework is
INCORRECT?

A.An operational risk framework is a complex and evolving challenge, and to keep its development under
control it is important to apply strong project management skills to the design and implementation of
each new element.

B.Planning for the operational risk framework involves setting clear goals, realistic milestones and
achievable deliverables that add value.

C.Once the elements of an operational risk framework are up and running, they need to be monitored to
ensure they maintain their integrity and do not deteriorate over time.

D.Planning for the operational risk framework suggests that short-term planning and focus on immediate
benefits is strongly preferred to the long-term planning approach.

Question 20

Which one of the following four interest rate related yield curves is used to revalue loan and deposit positions
in banks?

A.Basis

B.Derivative

C.Cash

D.Bond

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Question 16

Question 17

Question 18

Question 19

Question 20

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