Garp udemy selected 2016-frr Financial Risk And Regulation Questions Answers by Huda q274 vce pdf

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Exam Name:	Financial Risk and Regulation (FRR) Series
Exam Code:	2016-FRR Dumps
Vendor:	GARP	Certification:	Financial Risk and Regulation
Questions:	387 Q&A's	Shared By:	huda

Question 40

Options:

10%

Discussion

Question 41

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. Six months after Alpha Bank provides USD $1 million loan to the Delta Industrial Machinery Corporation, a new competitor enters the machinery industry, causing Delta to adjust its prices and mark down the value of its inventory. Hence, the probability of defaultincreases from 2% to 10% and the loss given default increases from 50% to 75%. If Alpha Bank can reprice the loan, what should the new rate be?

Options:

10%

13%

16.5%

20.5%

Discussion

Question 42

Which one of the following four statements on factors affecting the value of options is correct?

Options:

As volatility rises, options increase in value.

As time passes, options will increase in value.

As interest rates rise and option's rho is positive, option prices will decrease.

As the value of underlying security increases, the value of the put option increases.

Discussion

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Question 43

Which one of the following four statements correctly defines chooser options?

Options:

The owner of these options decides if the option is a call or put option only when a predetermined date is reached.

These options represent a variation of the plain vanilla option where the underlying asset is a basket of currencies.

These options pay an amount equal to the power of the value of the underlying asset above the strike price.

These options give the holder the right to exchange one asset for another.