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1. To quantify the aggregate average loss for the credit portfolio and its possible constituent subportfolios, a credit portfolio manager should use the following metric:
A) Factor sensitivity
B) Expected loss
C) Unexpected loss
D) Credit VaR
2. A bank owns a portfolio of bonds whose composition is shown below.
What is the modified duration of the portfolio?
A) 1.30
B) 8.5
C) 2.30
D) 0.5
3. The main building blocks of an operational risk framework include all of the following options EXCEPT:
A) Loss data collection
B) Scenario analysis
C) Compliance document preparation
D) Risk and control self-assessment
4. By lowering the spread on lower credit quality borrowers, the bank will typically achieve all of the following outcomes EXCEPT:
A) Higher losses in case of default
B) Rapid growth
C) Lower probability of default
D) Aggressively courting of new business
5. Normally, commercial banking can be viewed as a fixed income carry trade since
A) Short-term fixed-rate deposits are used to fund short-term floating rate loans.
B) Short-term fixed rate deposits are used to fund long-term floating rate loans.
C) Short-term floating-rate deposits are used to fund short-term floating rate loans.
D) Short-term floating-rate deposits are used to fund long-term fixed rate loans.
Solutions:
| Question # 1 Answer: B | Question # 2 Answer: A | Question # 3 Answer: C | Question # 4 Answer: C | Question # 5 Answer: D |
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