Free GARP FRM-Part-2 Exam Questions

In an attempt to understand country risk, an analyst at Global Funds examines multiple sources of information to determine the truest measure of risk. She considers sovereign risk ratings, default risk spreads, and composite measures of risk. Which of the following sources relies on surveys of several hundred economists to measure sovereign risk?

The CRO at a bank wants to strengthen the bank’s capability to defend itself against emerging cyber-threats. To help achieve this goal, the CRO is assessing the current range of practices regarding the sharing of cybersecurity information between different types of institutions, as well as the potential benefits from sharing information. Which of the following statements would be most appropriate for the CRO to make?

At inception, the tranches in a synthetic CDO are priced to earn a spread that is:

A manager from the structured credit risk desk at a bank is presenting to a group ofnewly hired risk analysts on calculating cash flows in a securitization structure. Themanager illustrates the procedure with the existing collateral pool of loans and thecorresponding liabilities, all with a maturity of 5 years, using the following information:Initial number of loans in the collateral pool 100Principal amount of each loan EUR 1,000,000Total coupon interest to be paid annually on all junior and senior bonds EUR 6,300,000Maximum annual amount flowing from the excess spread into the overcollateralization account EUR 1,500,000Swap rate per year for all maturities 3.5%Recovery rate in the event of a loan default 45%The manager makes additional observations as follows:• The loans in the collateral pool pay a fixed spread of 2.2% over the swap curve.• There were no defaults in year 1.• The value of the overcollateralization account at the end of year 1 was EUR 0.What is the value of the overcollateralization account at the end of year 2 if there are 8 defaults in year 2?

A risk analyst is evaluating an investment portfolio using the Fama-French threefactormodel. The analyst regresses thirty years of weekly portfolio returns againstthe three factors of the model. The analyst obtains the following regression results:Alpha 0.10Market coefficient 0.52SMB coefficient 0.18HML coefficient -0.70Assuming all estimated coefficients are statistically significant, which of the following is correct?