Free GARP FRM-Part-2 Exam Questions

A treasurer at a US-based bank is reviewing the bank’s balance sheet and wants toevaluate the sensitivity of the bank’s net worth to a potential change in interestrates. The treasurer asks a manager to apply duration analysis to assess the impactof a 100-bps change in interest rates on the bank’s net worth. Which of the followingis a correct statement for the manager to make?

Bank TGF has three uncollateralized transactions with JL Co. The transactions have values to the bank of: +$12 million, −$4 million, and −$3 million. If the bank mitigates its credit risk through netting, the impact of this technique will result in an exposure reduction of:

The CRO of a regional mortgage lender has asked an enterprise risk manager todevelop a set of policies and procedures for the firm’s operational risk reporting. Themanager considers appropriate policies for the governance of the firm’s riskreporting framework and also assesses how the firm should structure its risk reportsfor different stakeholder groups and organizational functions. Which of the followingwould be most appropriate for the manager to recommend?

The advanced internal ratings-based (A-IRB) approach for credit risk will no longer be permissible to use under the Basel III reforms for each of the following except:

A bank treasurer is seeking to identify the most appropriate investment maturitystrategy to apply considering the status of its balance sheet and the economicconditions it is currently facing. The treasurer gathers the following information:• The bank faces a high interest rate environment with a flat yield curve.• The bank’s asset mix includes a high proportion of US Treasury bondspurchased years ago when interest rates were significantly lower.• The bank has a high proportion of revenues from loans and anticipates arecord high level of profitability this year.Which of the following strategies would be the most appropriate for the bank to takein order to maintain its current level of total income?