2016-FRR New Real Test | Valid 2016-FRR Study Notes

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By taking and passing the GARP 2016-FRR Exam, you’ll earn the Financial Risk and Regulation (FRR) credential, which will set you apart from your peers and make you a more attractive candidate for a wide range of roles within the financial services industry. 2016-FRR exam covers a breadth of topics including market risk, credit risk, operational risk, and liquidity risk, among others, and provides a deep understanding of global regulatory processes that are meant to maintain stability within the financial services industry. You’ll also gain an appreciation for operational and reputational risks that are critical to managing any organization, but particularly those that specialize in the financial services industry.

Preparing for the GARP 2016-FRR Certification Exam requires a significant amount of time and effort. Candidates must have a strong understanding of financial risk management principles and practices and must be able to apply that knowledge to real-world scenarios. They must also be familiar with the regulatory landscape and understand the requirements and expectations of regulators. With the right preparation and dedication, however, candidates can successfully earn the GARP 2016-FRR Certification and take their careers in risk management to the next level.

The FRR Series Exam is designed to equip professionals with the necessary knowledge and skills to navigate the complex and rapidly changing landscape of financial risk management and regulation. It covers a wide range of topics, including risk governance, risk measurement and management, regulatory and ethical issues, and financial markets and products. 2016-FRR exam is divided into two parts, each comprising of 80 multiple-choice questions, and is conducted over a period of four hours. Passing the GARP 2016-FRR Exam is a testament to a professional's knowledge and expertise in the field of financial risk management and regulation.

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Valid 2016-FRR Study Notes - Valid 2016-FRR Exam Answers

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GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q388-Q393):

NEW QUESTION # 388
Which type of risk does a bank incur on loans that are in the "pipeline", i.e loans that are in the process of origination but not yet originated?

A. Credit Risk only
B. The bank does not incur any risk since the loan is not yet originated
C. Interest rate risk and credit risk
D. Interest rate risk only

Answer: C

Explanation:
When a bank has loans in the "pipeline," it means these loans are in the process of origination but have not yet been originated. During this period, the bank is exposed to both interest rate risk and credit risk.
* Interest Rate Risk: This risk arises because changes in interest rates can affect the bank's profitability on these loans. If interest rates change unfavorably between the time the loan terms are set and the time the loan is actually issued, the bank might end up earning less than expected. This is particularly relevant in a volatile interest rate environment.
* Credit Risk: Even though the loans are not yet originated, the bank assesses the creditworthiness of the potential borrowers during the pipeline stage. If the financial condition of a borrower deteriorates before the loan is finalized, the bank faces the risk of having to deal with a higher probability of default.
These risks are inherent to the loan origination process and are present even before the loan is officially on the bank's books.

NEW QUESTION # 389
Which one of the following four statements about market risk is correct? Market risk is

A. The exposure to an adverse change in the market value of portfolios and financial instruments caused by a change in market prices or rates.
B. The maximum likely loss in the market value of portfolios and financial instruments caused by the failure of the counterparty to meet its obligations.
C. The maximum likely loss in the market value of portfolios and financial instruments over a given period of time.
D. The exposure to an adverse change in the credit quality in portfolios or of financial instruments.

Answer: A

Explanation:
Market risk is the exposure to an adverse change in the market value of portfolios and financial instruments caused by a change in market prices or rates. This definition encompasses the variability in market prices, such as interest rates, foreign exchange rates, and equity prices, which can impact the value of financial instruments and portfolios.

NEW QUESTION # 390
As an example of the balance sheet effect, if rates rise, Delta Bank can expect:

A. Its fixed rate assets to drop in value, while that effect will be amplified by a reduction in the value of its fixed rate liabilities.
B. Its fixed rate assets to drop in value, although that effect will be offset by a reduction in the value of its fixed rate liabilities.
C. Its fixed rate assets to increase in value, while that effect will be amplified by a reduction in the value of its fixed rate liabilities.
D. Its fixed rate assets to increase in value, although that effect will be offset by a reduction in the value of its fixed rate liabilities.

Answer: B

Explanation:
When interest rates rise, the value of fixed-rate assets held by a bank, such as bonds, will typically decrease because newer bonds will offer higher yields. However, the value of fixed-rate liabilities, such as fixed-rate deposits or debt, will also decrease. This decrease in liabilities can offset the drop in asset values to some extent, stabilizing the bank's balance sheet.
References: No specific reference found in the document for this question. The provided answer is based on standard financial principles related to interest rate risk and balance sheet effects.

NEW QUESTION # 391
Which one of the four following aspects of legal risk is NOT included in the Basel II Accord?

A. Exposure to fines
B. Negative publicity resulting from reputational damages
C. Private settlements
D. Punitive damages resulting from supervisory actions

Answer: B

NEW QUESTION # 392
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. $30.04
C. $40.08
D. $20.04

Answer: D

Explanation:
To calculate the 12-month futures price for Unico Delta stock, we use the formula for pricing equity futures, considering the current stock price, dividend yield, and the risk-free rate (LIBOR in this case):
=×()F=S×e(rd)t
Where:
* F is the futures price
* S is the current stock price ($20)
* r is the risk-free rate (3% or 0.03)
* d is the dividend yield (5% or 0.05)
* t is the time to maturity (1 year)
Plugging in the values:
=20×(0.030.05)×1F=20×e(0.030.05)×1 =20×0.02F=20×e0.02 20×0.9802F20×0.9802 20.04F20.04 Therefore, the 12-month futures contract will trade at approximately $20.04.
References
* How Finance Works.pdf, p. 206

NEW QUESTION # 393
......

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