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GARP 2016-FRR Certification Exam is divided into two parts: Part I and Part II. Part I covers foundational knowledge in risk management, while Part II focuses on more advanced topics such as risk measurement, modeling, and regulatory frameworks. Candidates are required to pass both parts of the exam to earn the certification.

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GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q257-Q262):

NEW QUESTION # 257
Altman's Z-score incorporates all the following variables that are predictive of bankruptcy EXCEPT:

A. Return on equity
B. Equity to debt
C. Return on total assets
D. Sales to total assets

Answer: A

NEW QUESTION # 258
Suppose Delta Bank enters into a number of long-term commercial and retail loans at fixed rate prevailing at
the time the loans are originated. If the interest rates rise:

A. The bank will have to pay higher interest rates to its depositors and would have to pay higher rates on its
debt to the extent the debt interest rate was linked to floating indices, or to the extent the debt used to
fund the loans was of a shorter maturity than the loans.
B. The bank will have to pay lower interest rates to its depositors and would have to pay lower rates on its
debt to the extent the debt interest rate was linked to floating indices, or to the extent the debt used to
fund the loans was of a shorter maturity than the loans.
C. The bank will have to pay higher interest rates to its depositors and would have to pay lower rates on its
debt to the extent the debt interest rate was linked to floating indices, or to the extent the debt used to
fund the loans was of a shorter maturity than the loans.
D. The bank will have to pay lower interest rates to its depositors and would have to pay higher rates on its
debt to the extent the debt interest rate was linked to floating indices, or to the extent the debt used to
fund the loans was of a shorter maturity than the loans.

Answer: A

NEW QUESTION # 259
Which one of the following four options correctly identifies the core difference between bonds and loans?

A. These instruments cannot be used to estimate credit capital under provisions of the Basel II Accord.
B. These instruments have different pricing drivers.
C. These instruments receive a different legal treatment.
D. These instruments are subject to different credit counterparty regulations.

Answer: C

Explanation:
* Bonds and loans are fundamentally different in their legal structures and treatment. Bonds are typically issued in the public markets and are subject to securities laws and regulations, while loans are generally private agreements between a borrower and a lender.
* Both instruments can be used to estimate credit capital under Basel II provisions, so option C is incorrect.
* The pricing drivers for bonds and loans can overlap significantly, such as interest rates and credit risk, so option B is not the core difference.
* Both bonds and loans can be subject to credit counterparty regulations, making option D incorrect.
References:
How Finance Works: "The core difference between bonds and loans lies in their legal treatment and issuance processes."

NEW QUESTION # 260
All of the four following exotic options are path-independent options, EXCEPT:

A. Chooser options
B. Basket options
C. Asian options
D. Power options

Answer: C

Explanation:
Asian options are path-dependent options, which means their payoff depends on the average price of the underlying asset over a certain period, rather than just the price at maturity. This characteristic makes them path-dependent because the path taken by the asset's price during the life of the option affects the payoff, unlike path-independent options which only depend on the final price at maturity.

NEW QUESTION # 261
Why is stress testing a valuable part of credit risk assessment?

A. Because it optimizes the impact of default rates and asset values on credit migration
B. Because it quantifies adverse and unexpected outcomes on the credit portfolio and capital levels
C. Because it models common situations and prepares banks for routine credit conditions
D. Because it produces probabilistic expectations of the credit market and its future conditions

Answer: B

Explanation:
Comprehensive and Detailed In-Depth Explanation:
Stress testing evaluates a credit portfolio's resilience under adverse scenarios (e.g., economic downturns), quantifying impacts on defaults, losses, and capital adequacy. Option D is correct-Basel II's Pillar 2 mandates stress testing for unexpected outcomes. Option A (common situations) describes standard modeling, not stress testing. Option B (probabilistic expectations) aligns with VaR, not stress testing's focus on extremes. Option C (optimizing migration) is unrelated to stress testing's purpose.
Exact Extract from Official Source:
* BCBS, "Basel II: International Convergence of Capital Measurement and Capital Standards," June
2006, para. 434: "Stress testing is a critical tool for credit risk assessment, enabling banks to quantify the impact of adverse and unexpected scenarios on their credit portfolios and capital levels."
* GARP FRR Study Notes, Credit Risk Section: "Stress testing assesses the effect of severe, unexpected events on credit losses and capital, distinguishing it from routine risk modeling." Reference:BCBS, "Basel II," para.434; GARP FRR Study Notes, Credit Risk Section.

NEW QUESTION # 262
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Reliable 2016-FRR Test Guide, Reliable 2016-FRR Study Materials

100% Pass Quiz 2025 Authoritative GARP 2016-FRR: Reliable Financial Risk and Regulation (FRR) Series Test Guide

GARP Financial Risk and Regulation (FRR) Series Sample Questions (Q257-Q262):

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