NEW GARP 2016-FRR EXAM QUESTION & EXAM 2016-FRR PREVIEW

New GARP 2016-FRR Exam Question & Exam 2016-FRR Preview

New GARP 2016-FRR Exam Question & Exam 2016-FRR Preview

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Tags: New 2016-FRR Exam Question, Exam 2016-FRR Preview, VCE 2016-FRR Dumps, 2016-FRR Pdf Free, 2016-FRR Exam PDF

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Difficulty in writing GARP 2016-FRR

The difficulty level of writing the GARP 2016-FRR is high. The inquiries on the 2016-FRR are designed to assess your knowledge, skills, and practical abilities as a financial management professional. The passing score for this is also relatively high as compared with other certifications for professionals in this industry. This means that you have to have a good understanding of the subjects before you can attempt it. If you are not familiar with certain subjects, you should spend more time studying 2016-FRR exam dumps before scheduling a date to take 2016-FRR. It is advisable that you schedule multiple dates so that if one date does not work out for some reason, there will be others available to use instead. Edit your working schedule so that there are enough hours available to take the examination.

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High Pass Rate 2016-FRR Exam Questions to Pass 2016-FRR Exam

You can trust ValidVCE 2016-FRR exam real questions and start preparation without wasting further time. We are quite confident that with the ValidVCE 2016-FRR real exam questions you will get everything that you need to learn, prepare and pass the challenging GARP 2016-FRR Certification Exam easily.

To ensure that candidates are adequately prepared for the exam, GARP provides a range of study materials and support services. This includes access to practice questions and exams, as well as opportunities to attend webinars and conferences that cover the topics tested on the exam. Additionally, GARP has a community of financial risk professionals who are available to offer guidance and support to candidates as they prepare for the exam.

GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q346-Q351):

NEW QUESTION # 346
Which one of the following four statements regarding commodity derivative risks is INCORRECT?

  • A. Some commodities can be both in backwardation and a have a strong seasonal element.
  • B. In most commodities, the longest term contracts are the most volatile, while the shortest term forward contract are the least volatile.
  • C. Calendar spreads represent a special case of basis risk and occur when the relative prices of commodity futures do not come in alignment and the trader becomes exposed to the absolute price movements.
  • D. Because of the different demand/supply balance in each region and the cost of transporting the oil between regions, a tanker of Brent crude oil in the UK will have a different value to a UK buyer than a tanker of Arab light crude oil in Singapore, which results in the basis risk.

Answer: B

Explanation:
This statement is incorrect because it is generally observed that longer-term contracts can be less volatile due to the smoothing effect over time, whereas short-term contracts can be more sensitive to immediate market conditions and supply-demand imbalances.
References
Verified with information on the volatility of term contracts in commodity derivatives discussed in the book
"How Finance Works".


NEW QUESTION # 347
A risk analyst at EtaBank wants to estimate the risk exposure in a leveraged position in Collateralized Debt Obligations. These particular CDOs can be used in a repurchase transaction at a 20% haircut. If the VaR on a
$100 unleveraged position is estimated to be $30, what is the VaR for the final, fully leveraged position?

  • A. $50
  • B. $20
  • C. $150
  • D. $100

Answer: C

Explanation:
To determine the VaR for the fully leveraged position, we need to understand how leverage affects VaR.
Leverage magnifies both returns and risks, which means that the VaR for a leveraged position is greater than that of an unleveraged position.
* Calculate the leverage ratio:
* In a repurchase transaction with a 20% haircut, 20% of the asset's value must be provided as collateral, meaning 80% can be borrowed.
* Leverage ratio LLL = 1Haircutfrac{1}{text{Haircut}}Haircut1 = 10.2frac{1}{0.2}0.21 = 5.
* Calculate the leveraged position:
* If the initial unleveraged position is $100, then the leveraged position is $100 times 5 = $500.
* Calculate the VaR for the leveraged position:
* The unleveraged VaR is $30 on $100.
* Therefore, the leveraged VaR will be magnified by the leverage ratio:
Leveraged VaR=Unleveraged VaR×Leverage Ratiotext{Leveraged VaR} = text{Unleveraged VaR} times text{Leverage Ratio}Leveraged VaR=Unleveraged VaR×Leverage Ratio = $30
times 5 = $150.
ReferencesSource: How Finance Works


NEW QUESTION # 348
For which one of the following four reasons do corporate customers use foreign exchange derivatives?
I. To lock in the current value of foreign-denominated receivables
II. To lock in the current value of foreign-denominated payables
III. To lock in the value of expected future foreign-denominated receivables IV. To lock in the value of expected future foreign-denominated payables

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

Answer: C

Explanation:
Corporate customers use foreign exchange derivatives for several reasons:
* To lock in the current value of foreign-denominated receivables (I)
* To lock in the current value of foreign-denominated payables (II)
* To lock in the value of expected future foreign-denominated receivables (III)
* To lock in the value of expected future foreign-denominated payables (IV) These derivatives are used as a hedging mechanism to manage currency risk and provide certainty regarding future cash flows and costs.


NEW QUESTION # 349
Which one of the following four alternatives correctly identifies the purpose of a clearinghouse in trading activities?

  • A. Reduction of market risk and credit risk
  • B. Reduction of operational risk and credit risk
  • C. Reduction of basis risk and mark-to-market risk
  • D. Reduction of counterparty risk and liquidity risk

Answer: D

Explanation:
A clearinghouse serves several vital functions in trading activities, mainly focusing on reducing various types of risk:
* Counterparty Risk:
* The clearinghouse acts as an intermediary between buyers and sellers, ensuring that each party fulfills its contractual obligations. This reduces the risk that one party will default.
* Liquidity Risk:
* By centralizing and standardizing transactions, the clearinghouse enhances market liquidity, making it easier to buy and sell without causing significant price changes.
* Operational Risk:
* The clearinghouse standardizes and streamlines the clearing and settlement processes, reducing the risk of errors and delays.
* Credit Risk:
* The clearinghouse requires margin deposits and marks positions to market daily, minimizing credit risk.
Thus, the primary purpose of a clearinghouse is to reduce counterparty and liquidity risk.
ReferencesSource: How Finance Works


NEW QUESTION # 350
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. $30.04
  • B. $40.08
  • C. $20.04
  • D. $10.08

Answer: C


NEW QUESTION # 351
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