2016-FRR Study Demo - 2016-FRR Clearer Explanation

You will be able to experience the real exam scenario by practicing with GARP 2016-FRR practice test questions. As a result, you should be able to pass your GARP 2016-FRR Exam on the first try. GARP 2016-FRR desktop software can be installed on Windows-based PCs only. There is no requirement for an active internet connection.

GARP 2016-FRR Exam is a challenging and comprehensive test of knowledge and skills related to financial risk management. Financial Risk and Regulation (FRR) Series certification is highly respected in the financial industry and can open up a wide range of career opportunities for risk professionals. Candidates who are interested in earning the FRR certification should devote significant time and effort to studying for the exam and preparing themselves for the challenges ahead.

To be eligible to take the FRR Series certification exam, candidates must meet certain education and work experience requirements. These requirements vary depending on the level of certification sought, but generally include a bachelor’s degree and several years of experience in the field of risk management. Candidates must also pass a rigorous exam that tests their knowledge and understanding of the concepts covered in the FRR Series curriculum. Successful completion of the FRR Series certification exam is a significant accomplishment that can open up new career opportunities and help professionals advance in their careers in risk management.

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GARP 2016-FRR Exam is part of the GARP (Global Association of Risk Professionals) FRR series, which includes several other exams related to financial risk and regulation. The FRR series is designed to provide professionals with the tools and knowledge needed to navigate the complex world of financial risk management and compliance.

GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q314-Q319):

NEW QUESTION # 314
A multinational bank just bought two bonds each worth $10,000. One of the bonds pays a fixed interest of 5% semi-annually and the other pays LIBOR semi-annually. The six month LIBOR is at 5% currently. The risk manager of the bank is concerned about the sensitivity to interest rates. Which of the following statements are true?

A. The given information is not enough to determine the sensitivity of the bond prices.
B. Both bond prices are equally sensitive to interest rates.
C. The price of the bond paying floating interest is more sensitive to interest rates than the bond paying fixed interest.
D. The price of the bond paying fixed interest is more sensitive to interest rates than the bond paying floating interest.

Answer: D

Explanation:
A bond that pays fixed interest is more sensitive to changes in interest rates than a bond that pays floating interest. This is because the fixed interest bond's coupon payments are constant, and its price will fluctuate more as interest rates change. In contrast, the floating interest bond adjusts its coupon payments according to the current interest rates, making its price less sensitive to changes in the market interest rates.

NEW QUESTION # 315
A proprietary trading desk for a large bank hedges an Arab light OTC forward position with Brent crude oil forwards. The trading desk benefits from using the most liquid OTC market to hedge, the market for the Brent crude, but hedging its using the Brent contract, exposes itself to the following type of risk:

A. Basis risk
B. Correlation risk
C. Term risk
D. Seasonality risk

Answer: A

Explanation:
When a proprietary trading desk hedges an Arab light OTC forward position with Brent crude oil forwards, they face basis risk. This is because the underlying commodities (Arab light and Brent crude oil) are different and may not move perfectly in sync, leading to a potential mismatch in the hedge.
References
Verified based on the discussion of basis risk in commodity trading provided in the book "How Finance Works".

NEW QUESTION # 316
As DeltaBank explores the securitization business, it is most likely to embrace securitization to:
I. Bring transparency to the bank's balance sheet
II. Create a new profit center for the bank
III. Strategically release risk capital and regulatory capital for redeployment IV. Generate cash for additional debt origination

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

Answer: A

Explanation:
* DeltaBank is likely to engage in securitization to create a new profit center, release risk and regulatory capital for redeployment, and generate cash for additional debt origination. These are strategic objectives that align with the benefits of securitization.
* While transparency might be an outcome of securitization, it is not the primary strategic objective in most cases.
References:
* How Finance Works: "Securitization is often used to create new profit centers, release risk capital, and generate cash for additional debt origination." .

NEW QUESTION # 317
To estimate the required risk-adjusted rate of return on a highly volatile energy stock, a risk associate
compiled the following statistics:
Risk-free rate = 5%
Beta = 2.5
Market Risk = 8%
Using the Capital Asset Pricing Model, she estimates the rate of return to be equal:

A. 40%
B. 10%
C. 15%
D. 25%

Answer: D

NEW QUESTION # 318
Which one of the following four statements does identify correctly the relationship between the value of an option and perceived exchange rate volatility?

A. With increases in perceived future foreign exchange volatility, the value of all foreign exchange
B. As the perceived future foreign exchange volatility decreases, the value of all options increases.
C. As the perceived future foreign exchange volatility increases, the value of all options increases.
D. Option values can only change due to the factors related to the demand for specific options

Answer: C

Explanation:
The value of an option is influenced by several factors, including the perceived volatility of the underlying asset, in this case, foreign exchange rates. As the perceived future volatility of foreign exchange rates increases, the value of all options (both calls and puts) also increases. This is because higher volatility increases the likelihood that the option will end up in-the-money, thereby increasing its potential payoff. This relationship is fundamental to option pricing models, such as the Black-Scholes model, which incorporate volatility as a key input.
References:This explanation aligns with the principles of option valuation discussed in "How Finance Works" document, which details the effects of volatility on option pricing.

NEW QUESTION # 319
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