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netted return on equity c. Risk adjusted return on investment d. Risk based system
Ans - c .............................................. 16.Net Interest income is a. Interest earned
on advances b. Interest earned on investments c. Total interest earned on advances
and investment d. Difference between interest earned and interest paid Ans d ..............................................
6. 6. 17.Interest rate risk is a type of a. Credit risk b. Market risk c. Operational risk
d. All the above Ans - b .............................................. 18.Return on Zero-Risk
investment would be ______ as compared to other opportunities available in the
market. a. High b. Low c. Equal d. Either Low or High Ans b .............................................. 19.Downside potential has 2 components. These
are _____. a. Potential Losses and Profit Potential b. Potential Losses and
probability of occurrence c. Profit Potential and probability of occurrence d. None
of the above Ans - b .............................................. 20.Which type of risk arises
When banks have more earnings assets than paying liabilities ? a. Liquidity b.
Operational
7. 7. c. Interest rate d. Market Ans - c .............................................. 21.Investment in
Post Office time deposit is ________. a. Low-risk investment b. Medium-risk
investment c. High-risk investment d. Zero-risk investment Ans d .............................................. 22.Daily volatility of a stock is 0.5%. What is its
10-day volatility? a. 5% b. 0.25% c. 1.58% d. None of these Ans c .............................................. 23.Capital charge component of pricing accounts
for ____. 1. Cost of capital 2. Internal generation of capital 3. Loss provision
Which of the following is True? a. All the statements are correct b. Statements 1
and 2 are correct
8. 8. c. Statements 2 and 3 are correct d. Statements 3 and 1 are correct Ans d .............................................. 24.A bank expects fall in price of a security if it
sells it in the market. What is the risk that the bank is facing? a. Market risk b.
Operational risk c. Asset liquidation risk d. Market liquidity risk Ans c .............................................. 25.An 8-year 8% semi-annual bond has a BPV of
Rs 125. The yield on the bond has increased by 5 basis points. What is the profit
or loss suffered due to increase in yield? a. A profit of Rs 1000 b. A profit of Rs
625 c. A loss of Rs 1000 d. A loss of Rs 625 Ans - d ..............................................
26.1 day VaR of a portfolio is Rs 500.000 with 95% confidence level. In a period
of six months (125 working days) how many times the loss on the portfolio may
exceed Rs 500.000? a. 4 days b. 5 days c. 6 days
9. 9. d. 7 days Ans - c .............................................. 27.Risk can be mitigated through
____. a. Crystilization b. Diversification c. Portfolio risk d. b & c Ans b .............................................. 28.Banking books does not include which of the
following? a. All deposit and loans b. All borrowings c. Capital d. All of these Ans
- c .............................................. 29.Which is not to be taken into account for risk
pricing? a. Operating Expenses b. Loss Probabilities c. Profit Probabilities d.
Capital Charges Ans - c .............................................. 30.What kind of risk on
settlements is covered by 'Herstatt Risk' for which BCBS was formed?
10. 10. a. Exchange rate risk b. Time difference risk c. Interest rate risk d. None Ans b .............................................. 31.Financial Risk is defined as _____. a.
Uncertainties resulting in adverse variation of profitability or outright losses b.
prescribed. a. only foundation b. only advanced c. both d. none of these Ans c .............................................. 126.How capital charge is calculated under basic
indicator approach for operational risk? a. capital charge equals internally
generated measure based on internal and external loss data b. 15% of average
gross income over 3 years c. sum of capital charges across business lines d. none
of these Ans - b .............................................. 127.Credit spread risk occurs at
______ level. a. transaction b. portfolio c. none of these d. both a and b Ans - a
41. 41. .............................................. 128.Banks of which countries were permitted an
extended period to be in confirmation to 1988 Basel Accord which were enforced
a law by G-10 countries in 1992? a. American b. England c. Japan d. India Ans - c
.............................................. 129.What are the parameters on which assets of a
bank are classified? a. counterparty b. collateral c. maturity d. all of these Ans d .............................................. 130.Failure of the whole banking system is known
as ______ risk. a. strategic b. systemic c. bank d. operational Ans b .............................................. 131.Counterparty risk is viewed as a ______ risk
rather than credit risk. a. credit
42. 42. b. financial c. funding d. time Ans - b .............................................. 132.Rating
migration is a method to _______. a. assess standard of rating b. forecast
probability of default c. quantify rating d. all of these Ans a .............................................. 133.______ model (for evaluating credit risk)
focuses on estimating the volatility in the value of assets caused by variations in
the quality of assets. a. Altman's Z Score b. CreditMetrics c. CreditRisk++ d. none
of these Ans - b .............................................. 134.Which of the following
statement(s) is / are not true regarding types of CD (credit derivatives)? 1. CDS
captures only credit risk. 2. TRS captures only market risk. 3. CLN is a securitised
form of a CDS.
43. 43. 4. Unlike CDS and TRS, CLN allow the risk to be distributed to a much
broader market of investors. 5. CSO transfers credit spread risk from the credit
spread (protection buyer) to an investor (protection seller), in return for an upfront
or periodic payment of premium. a. 1 b. 2 c. 1, 3 and 4 d. 5 Ans b .............................................. 135.Rewards of proper management of operational
risks are ____. a. Lesser risk capital b. Cost reductions in operations c.
Competitive edge Which of the following is true? a. All of them b. None of them
c. a and c d. a and b Ans - a .............................................. 136.Communication
Risk is a type of _____. a. Interest Rate Risk b. Market Risk c. Credit Risk
44. 44. d. Operational Risk Ans - d .............................................. 137.Back testing is
done to ____. a. Test a model b. Compare model results and actual performance c.
Record performance d. None of the above Ans - b ..............................................
138.Which of the following is not included in (risk) pricing ? a. Cost of
Deploying funds b. Operating Expenses c. Profit Probabilities d. Capital Charge
Ans - c .............................................. 139.Credit Risk can't be mitigated by _____.
a. Accepting Collaterals b. Credit Derivatives c. Entering into Forward Contracts
d. Diversification of Advances Ans - c .............................................. 140.Which of
the following statements is correct?
45. 45. a. Higher the risk in a business, higher would be return expectation b. Higher
the risk in a business, higher would be capital requirement c. Higher the risk in a
Based (IRB) b. Export Credit Agency (ECA) c. Risk Weighted Assets d. External
Credit Assessment Ans - d ..............................................
50. 50. 156.Which capital is called supplementary capital? a. Tier-I b. Tier-II c. TierIII d. none of these Ans - b .............................................. 157.Pillar III Market
Discipline does not consist of ____. a. Enhance disclosures b. Core disclosures
and Supplementary disclosures c. Review Market ups and down d. Timely at least
semi annual disclosures Ans - c .............................................. 158.From the
operational risk management point of view banking business lines have been
grouped in how many major heads? a. 4 b. 8 c. 5 d. 2 Ans b .............................................. 159.Which of following documents does not
contain Zero risk ? a. Investments in shares b. Investment in bonds and debentures
51. 51. c. Investment in term deposit d. Investment in government bonds Ans a .............................................. 160.Which of the following statements is correct?
a. Higher the risk-higher would be risk premium b. Higher the risk-lower would
be risk premium c. Lower the risk-higher would be risk premium d. None of the
statements is correct Ans - a .............................................. 161.Redeemable
Cumulative Preference shares comes under _____. a. Tier I Capital b. Tier II
Capital c. Tier III Capital d. None of the above Ans c .............................................. 162.Risk of Reduction in Mark-to-Market value of
equities is ______. a. Interest Rate Risk b. Market Risk c. Credit Risk d.
Operational Risk Ans - b ..............................................
52. 52. 163.Which of the following risks is not included in capital requirement under
Basel II? a. liquidity risk b. interest risk (of banking book) c. strategic and
business risks d. all of these Ans - d ..............................................
53.