Free GARP 2016-FRR Practice Test & Real Exam Questions

Gamma Bank estimates its monthly portfolio volatility at 5%.The portfolio's annual volatility is closest to which of the following?

Which one of the following four statements regarding the current value of a transaction and its purposes is INCORRECT?

Which one of the four following statements describes a specific characteristic of risk and control self- assessments (RCSA) which distinguishes it from both control assessments and risk and control assessments?

In analyzing market option pricing dynamics, a risk manager evaluates option value changes throughout the entire trading day. Which of the following factors would most likely affect foreign exchange option values?
I. Change in the value of the underlying
II. Change in the perception of future volatility
III. Change in interest rates
IV. Passage of time

The operational risk policy should include:
I. The firm's definition of risk
II. The governance of operational risk including who owns it, what it owns, and how issues should be escalated III. The main activities and elements that are managed by the operational risk function

Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). The loan is collateralized with $55,000. The loan also has an annual expected default rate of 2%, and loss given default at 50%. In this case, what will the bank's expected loss be?

Alpha Bank determined that Delta Industrial Machinery Corporation has 2% change of default on a one-year no-payment of USD $1 million, including interest and principal repayment. The bank charges 3% interest rate spread to firms in the machinery industry, and the risk-free interest rate is 6%. Alpha Bank receives both interest and principal payments once at the end the year. Delta can only default at the end of the year. If Delta defaults, the bank expects to lose 50% of its promised payment.
What may happen to the Delta's initial credit parameter and the value of its loan if the machinery industry experiences adverse structural changes?

Which one of the four following statements about consortium databases is correct?
Consortium databases

A risk manager analyzes a long position with a USD 10 million value. To hedge the portfolio, it seeks to use options that decrease JPY 0.50 in value for every JPY 1 increase in the long position. At first approximation, what is the overall exposure to USD depreciation?

All of the following performance statistics typically benefit country's creditworthiness EXCEPT:

A risk associate responsible for the operational risk function wants to evaluate the upward reporting governance structure and to assess its critical features. Which one of the four attributes does not represent a critical feature of the upward reporting governance structure?

A bank owns a portfolio of bonds whose composition is shown below.

What is the modified duration of the portfolio?

Using a forward transaction, Omega Bank buys 100 metric tones of aluminum for delivery in six-months' time. However, after two months, the bank becomes concerned with the potential fluctuations in aluminum prices and wants to hedge its potential exposure against a possible decline in aluminum prices. Which one of the following four strategies could the bank use to offset the risk from its current exposure to aluminum as it sets the price for selling the commodity in four-months' time?

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?