Free Practice GARP 2016-FRR Exam Questions 2025

Stay ahead with 100% Free Financial Risk and Regulation (FRR) Series 2016-FRR Dumps Practice Questions

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Total 345 Questions | Updated On: Apr 10, 2025

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Question 1

Which of the following statements regarding collateralized debt obligations (CDOs) is

correct?

I. CDOs typically have loans or bonds as underlying collateral.

II. CDOs generally less risky than CMOs.

III. There is a correlation among defaults in the CDO collateral which should be considered

in valuation of these complex instruments.

A : I only

B : I and III

C : II and III

D : I, II, and III

Answer: B

Question 2

Unico Delta stock is trading at $20 per share, its annualized dividend yield is 5% and the

12-month LIBOR is 3%. Given these statistics, the 12-month futures contact will trade at:

A : $10.08

B : $20.04

C : $30.04

D : $40.08

Answer: B

Question 3

What is a common implicit assumption that is made when computing VaR using parametric

methods?

A : The expected returns are constant, but the standard deviation changes over time.

B : The standard deviations of returns are constant, but the mean changes over time.

C : The mean of and the standard deviations of returns are both constant.

D : The mean and standard deviation of returns change periodically in response to crises.

Answer: C

Question 4

A corporate bond gives a yield of 6%. A same maturity government bond yields 2%. The

probability of the corporate bond defaulting is 2.5%. In case of default, investors expect to

lose 60% of their investment. The risk premium in the credit spread is:

A : 1.5%

B : 4.5%

C : 2.5%

D : 0.5%

Answer: C

Question 5

A bank considers issuing new capital to increase its Tier 1 capital levels. Which of the

following financial instruments would most likely to be considered?

A : Long-term and callable debt convertible to equity

B : Convertible preferred shares

C : Short-term callable debt

D : Short-term debt convertible to non-cumulative preferred shares

Answer: B

Page: 1 / 69

Total 345 Questions | Updated On: Apr 10, 2025

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