Free 2016-FRR Exam Questions - Easiest Way for Success

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Total 345 Questions | Updated On: Sep 14, 2024

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Question 1

An options trader for a large institutional investor takes a long equity option position. Which

of the following risks need to be considered when taking this position?

I. All the risks of underlying equities

II. Perceived volatility changes

III. Future dividends yields

IV. Risk-free interest rates

A : I, II

B : II, III

C : III, IV

D : I, II, III, IV

Answer: D

Question 2

Gamma Bank is operating in a highly volatile interest rate environment and wants to

stabilize its net income by shifting the sources of its earnings from interest rate sensitive

sources to less interest rate sensitive sources. All of the following strategies can help

achieve this objective EXCEPT:

A : Charge bank fees for underwriting loans

B : Provide trust, asset management, and trading services to customers

C : Extend different types of credit

D : Originate more floating interest rate loans

Answer: D

Question 3

Which of the following about the ratios between various Tiers of capital is not a requirement

of the Basel Committee?

A : Tier 2 capital cannot exceed 50% of the bank's total regulatory capital.

B : Innovative instruments in Tier 1 are limited to a maximum of 15% of Tier 1 capital.

C : Lower Tier 2 capital may only equal 50% of core capital.

D : Upper Tier 2 capital may only equal 30% of core capital.

Answer: B

Question 4

What is a difference between currency swaps and interest rate swaps?

A : Currency swaps do not require the exchange of notional principal on maturity.

B : Currency swaps allow banks and customers to obtain the risk/reward profile of long-terminterest rates without having to use long-term funding.

C : Currency swaps are OTC derivative contracts.

D : Currency swaps generate foreign exchange rate risk in addition to interest rate risk.

Answer: D

Question 5

Which of the following statements about the interest rates and option prices is correct?

A : If rho is positive, rising interest rates increase option prices.

B : If rho is positive, rising interest rates decrease option prices.

C : As interest rates rise, all options will rise in value.

D : As interest rates fall, all options will rise in value

Answer: A

Page: 1 / 69

Total 345 Questions | Updated On: Sep 14, 2024

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