Online Access Free 8011 Practice Test

Company A issues bonds with a face value of $100m, sold at issuance at $98. Bank B holds $10m in face of these bonds acquired at a price of $70. What is Bank B's exposure to the debt issued by Company A?

• A.$7m
• B.$9.8m
• C.$6.86m
• D.$10m

Which of the following is not a parameter to be determined by the risk manager that affects the level of economic credit capital:

• A.Definition of credit losses
• B.Confidence level
• C.Probability of default
• D.Risk horizon

For a 10 year interest rate swap, what would be the worst time for a counterparty to default (in terms of the maximum likely credit exposure)

• A.7 years
• B.2 years
• C.10 years
• D.Right after inception

long bond position is hedged using a short position in the futures market. If the hedge performs as expected, then which of the following statements is most accurate:

• A.the investor will be able to avoid losses
• B.the investor will be able to avoid losses but will also forgo the gains on his positions
• C.None of the above
• D.the investor will be able to avoid losses and will also be able to keep the gains on his positions

Which of the following statements is true in relation to the Supervisory Capital Assessment Program (SCAP):
I. The SCAP is an annual exercise conducted by the Treasury Department to determine the health of key financial institutions in the US economy II. The SCAP was essentially a stress test where the stress scenarios were specified by the regulators III. Capital buffers calculated under the SCAP represented the amount of capital that the institutions covered by SCAP held in excess of Basel II requirements IV. The SCAP focused on both total Tier 1 capital as well as Tier 1 common capital

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