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Pass Guaranteed Quiz GARP - Professional 2016-FRR - Financial Risk and Regulation (FRR) Series Exam Sample Online

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GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q349-Q354):

NEW QUESTION # 349
James Johnson bought a coupon bond yielding 4.7% for $1,000. Assuming that the price drops to $976 when yield increases to 4.71%, what is the PVBP of the bond.

A. $870.
B. $976.
C. $26.
D. $76.

Answer: C

Explanation:
The PVBP (Present Value of a Basis Point) can be calculated by taking the change in the bond's price and dividing it by the change in yield (expressed in basis points). Here, the bond's price drops from $1,000 to $976 when the yield increases from 4.7% to 4.71%, which is a 1 basis point increase. The change in price is $1,000
- $976 = $24. Therefore, the PVBP is $24 / 1 = $24.

NEW QUESTION # 350
Which of the following measure describes the symmetry of a statistical distribution?

A. Standard deviation
B. Kurtosis
C. Mean
D. Skewness

Answer: D

NEW QUESTION # 351
Which one of the following four statements correctly defines a typical carry trade?

A. A bank borrows funds in a high-interest currency and places the funds in a long-term low volatility investment vehicle.
B. A bank borrows funds in a low-interest currency and places the funds on deposit in a high-interest currency.
C. A bank borrows funds in a low-interest currency, accumulates reserves, and lends in another low-interest currency.
D. A bank borrows funds in a high-interest currency and invests the funds into high-yield emerging market debt.

Answer: B

Explanation:
A carry trade typically involves borrowing in a currency with low-interest rates and investing in a currency with high-interest rates to profit from the difference in interest rates.
* Identify the currencies:
* Low-interest currency: Typically, these are currencies of countries with low-interest rates, such as Japan (JPY) or Switzerland (CHF).
* High-interest currency: These are currencies of countries with high-interest rates, such as emerging market currencies or certain developed countries during specific periods.
* Mechanics of carry trade:
* The bank borrows in a low-interest currency.
* The bank then converts these funds into a high-interest currency.
* The funds are deposited or invested in high-yield instruments denominated in the high-interest currency.
* The profit arises from the differential between the interest paid on the borrowed currency and the interest earned on the invested currency.
This strategy benefits from interest rate differentials and can yield significant profits if exchange rates remain stable or move favorably.
ReferencesSource: How Finance Works

NEW QUESTION # 352
In the United States, during the second quarter of 2009, transactions in foreign exchange derivative contracts
comprised approximately what proportion of all types of derivative transactions between financial institutions?

A. 43%
B. 7%
C. 2%
D. 25%

Answer: B

NEW QUESTION # 353
Which of the following statements about endogenous and exogenous types of liquidity are accurate?
I. Endogenous liquidity is the liquidity inherent in the bank's assets themselves.
II. Exogenous liquidity is the liquidity provided by the bank's liquidity structure to fund its assets and maturing liabilities.
III. Exogenous liquidity is the non-contractual and contingent capital supplied by investors to support the bank in times of liquidity stress.
IV. Endogenous liquidity is the same as funding liquidity.

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

Answer: B

Explanation:
* Statement I: "Endogenous liquidity is the liquidity inherent in the bank's assets themselves." This is correct as endogenous liquidity refers to the natural liquidity of the assets.
* Statement II: "Exogenous liquidity is the liquidity provided by the bank's liquidity structure to fund its assets and maturing liabilities." This is also correct as exogenous liquidity comes from external sources and the bank's liquidity management framework.
* Statement III: Incorrect because exogenous liquidity is not necessarily non-contractual and contingent capital; it is more about external sources like interbank loans and central bank facilities.
* Statement IV: Incorrect as endogenous liquidity is not the same as funding liquidity, which generally refers to the bank's ability to meet its liabilities.
References
Based on detailed descriptions of endogenous and exogenous liquidity concepts in the document.

NEW QUESTION # 354
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Lou Young Lou Young

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