HOT 2016-FRR QUESTIONS, NEW 2016-FRR TEST TIPS

Hot 2016-FRR Questions, New 2016-FRR Test Tips

Hot 2016-FRR Questions, New 2016-FRR Test Tips

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Tags: Hot 2016-FRR Questions, New 2016-FRR Test Tips, 2016-FRR Hottest Certification, Reliable 2016-FRR Exam Tips, 2016-FRR Regualer Update

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2025 Accurate GARP Hot 2016-FRR Questions

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The 2016-FRR Exam is the latest version of the FRR Series. 2016-FRR exam was updated to reflect the changing regulatory environment and the evolving nature of financial risks. The 2016-FRR exam is designed to test candidates' knowledge of the latest regulations and best practices in risk management. It is also designed to help candidates develop the skills and knowledge they need to succeed in today's fast-paced financial industry.

The Global Association of Risk Professionals (GARP) is a non-profit organization that is committed to promoting and advancing the risk profession worldwide. One of the primary ways that GARP accomplishes this goal is through its certification program, which includes the Financial Risk and Regulation (FRR) Series. The FRR Series is designed to provide professionals with a deep understanding of financial risk management and regulatory requirements.

GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q161-Q166):

NEW QUESTION # 161
After one year and spending USD 1.0 million, a bank finally succeeds in recovering USD 10 million on an exposure that, at the time of its default, was valued at USD 20 million. If the recovery discount rate is 10%, what is the estimate of the recovery rate?

  • A. 41%
  • B. 46%
  • C. 36%
  • D. 31%

Answer: A

Explanation:
Comprehensive and Detailed In-Depth Explanation:
The recovery rate is the percentage of the original exposure recovered, adjusted for the time value of money and recovery costs. Here, the exposure at default (EAD) is USD 20 million, the gross recovery after one year is USD 10 million, and the recovery cost is USD 1 million. The recovery discount rate is 10%, reflecting the time value of money over one year.
Step-by-step calculation:
* Net Recovery Amount:Gross recovery - Recovery costs = USD 10 million - USD 1 million = USD 9 million.
* Present Value of Recovery:Since the recovery occurs after one year, discount the net recovery at 10%:
PV = USD 9 million / (1 + 0.10) = USD 9 million / 1.1 # USD 8.1818 million.
* Recovery Rate:Divide the present value of the recovery by the original exposure:Recovery Rate = (USD 8.1818 million / USD 20 million) × 100 # 40.91%, which rounds to 41%.
This aligns with Basel II/III definitions of Loss Given Default (LGD = 1 - Recovery Rate) and the discounting approach for recovery cash flows in credit risk models.
Reference:BCBS, "Basel II: International Convergence of Capital Measurement and Capital Standards," June
2006, para. 286-287; GARP FRR Study Notes, Credit Risk Section.


NEW QUESTION # 162
An associate from the finance group has been identified as an operational risk coordinator (ORC) for her
department. To fulfill her ORC responsibilities the associate will need to:
I. Provide main communication contact with operational risk department
II. Provide main reporting contact with audit department
III. Coordinate collection of key risk indicators in her area
IV. Coordinate training and awareness activities in her area

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

Answer: D


NEW QUESTION # 163
Which one of the following four statements regarding floating rate bonds is incorrect?

  • A. Floating rate bonds typically have less price risk than fixed rate bonds.
  • B. Floating rate bonds are very sensitive to changes in interest rates.
  • C. Floating rate bonds only have a small degree of interest rate risk.
  • D. Floating rate bonds have coupon payments tied to floating interest rates or floating interest rate indexes.

Answer: B

Explanation:
Floating rate bonds have coupon payments that are tied to a floating interest rate or index, such as LIBOR.
This means their coupon payments adjust periodically with changes in the underlying interest rates. Due to this mechanism, floating rate bonds typically have less price risk compared to fixed-rate bonds because their coupon payments reset in line with current market rates. Hence, floating rate bonds are generally not very sensitive to changes in interest rates since the adjustments in coupon payments help maintain their value.
Therefore, the statement that floating rate bonds are very sensitive to changes in interest rates is incorrect.


NEW QUESTION # 164
To protect the oranges harvest price level, a farmer needs to take a hedge position. Provided that he produces the amount he hedged, which one of the following four strategies will allow the farmer to accomplish his goal?

  • A. Negotiating a credit line facility
  • B. Going long on oranges futures contacts
  • C. Entering into a customized forward contract with the bank
  • D. Going short on oranges futures contracts

Answer: D

Explanation:
* To hedge against the price risk of a future harvest, a farmer would take a position opposite to their exposure.
* By going short on futures contracts, the farmer locks in a selling price for the oranges, protecting against a potential decline in market prices at the time of harvest.
* This strategy effectively sets a future selling price, ensuring revenue stability regardless of market
* fluctuations.


NEW QUESTION # 165
After entering the securitization business, Delta Bank increases its cash efficiency by selling off the lower risk
portions of the portfolio credit risk. This process ___ risk on the residual pieces of the credit portfolio, and as a
result it ___ return on equity for the bank.

  • A. Decreases; increases;
  • B. Increases; decreases;
  • C. Decreases; increases;
  • D. Increases; increases;

Answer: D


NEW QUESTION # 166
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