FRM第三套题目.doc

u 单选题.1. Which of the following statements regarding subprime mortgages are true?A I. Borrowers with previous bankruptcies can be included in subprime mortgage pools. II. Tranches with lower than expected credit ratings can improve their ratings by increasing the size of the senior tranche. III. Credit ratings are designed to rate through-the-cycle. IV. Hybrid defaults are largest in the period before the firsr interest rate reset. A. I and III. B. Ill and IV. C. II and IV D. I and IV2. Which of the following will lead to a higher probability of rescheduling sovereign debt? A I. A higher import ratio. II. A lower variance of export revenue. III. A lower growth in domestic money supply. IV A lower debt-service ratio. A. I only.B. I and IV C. II and III. D. I, II, and IV3. The table below gives information on a $200 million loan portfolio of the Third Premier Bank regarding its allocations to the six obligors and associated risk weightings. (Risk weightings were assigned based on each exposure. The split of the total loanallocations among various obligors had no impact on credit ratings) The bank uses the standardized approach for maintaining capital of at least 8% of total risk-weighted assets. Obligors Allocations% RiskWeighting% France sovereign debt (OECD) 30 0 Thailand sovereign debt (Non-OECD) 20 25 AAA rated corporate debt 25 30 AA rared corporate debt l5 60 Corporate debt-no external rating 3 100 Past due loan 7 150Which of the following statements are correct? D I. Under Basel I, OECD sovereign exposures are considered least risky (with 0% risk weighting) compared to non-OECD sovereign exposures and corporate debt, but Basel eliminates this distinction as the risk weights are assigned on a case-by-case basis. II. Under Basel II, the risk weightings focus on credit risk only whereas under Basel I, risk weightings are based on credit, market, and operational risks. III. Capital requirements for the bank can be estimated using the IRB method if we are given additional information on probability of default only. IV Actual calculations for computing the capital requirements (using any method of estimation) are quite complex,but as a rough approximation based on the given information the minimum capital requirements as per the standardized approach, under Basel II, are$5.6 million. AI and II BII and III CIII and IV DI and IV4. The 3-month futures contract of a certain index is priced at $1,020. Its underlying is valued at $l,010 and pays a continuous dividend rate of l%. If the current risk-free rate is 2.75%, the arbitrage profit opportunity is closest to: B A. $7.50. B $5.57. C $10.00. D $1.75.5. Which of the following is true regarding the special purpose entity (SPE) corporate structure and the SPE trust structure? B A. When the SPE is set up as a trust, the claims are issued directly against the master trust. B When the SPE is set up as a corporation, the claims are issued directly against the assets of the SPE. C For both the corporation and trust structure, claims are issued directly against the assets of the SPE. D For both the corporation and trust, claims are issued indirectly against the assets of the SPE.6. During the recent credit crisis, ptoblems encountered in using VAR and/or stress testing included which of the following statements? C I. Using high-yield debt securities as proxies for super-senior CDOs. II. The difficulty in getting management throughout an organization to recognize the need for forward-looking stress testing scenarios. III. VAR is not as accurate when the measured assets have low or no liquidity. IV. The reluctance of counterparties to agree to the valuations. A. I and II. B. I and IV C II and III. D. III and IV7. Which of the following items are important considerations in the due diligence process for selecting a fund of hedge funds manager? D I. The managers use of a proprietary hedge fund manager database. II, Compensation structure for key investment professionals. III. Capacity constraints on assets under management. IV Fund redemption provisions. A. I and II only. B. III and IV only. C. II, III, and IV only. D. I, II, III, and IV8. Greg Hoffman, a Level I FRM candidate, works as an independent securities research consultant and is known for unbiased, objective research and recommendations. Hoffman has been hired by managers of Hill Manufacturing Inc. (HMI) to write a research report on their company, Hoffman performs a thorough analysis of the firms financials, the industry in which it operates, and the overall market and economy. After conducting his due diligence, Hoffman writes a report on HMI with a strong Buy recommendation. Hoffman posts the report for purchase on a website he created to support his consulting business but does not stare either on the website or in the report that HMI paid for the research. Several of Hoffmans regular clients purchase the report and subsequently purchase shares in HMI which rapidly increase in price by over 20%. According to the GARP Code of Conduct, Hoffman has: D A. violated Standard l.2 related to independence and objectivity but not Standard 2.2 related to disclosure of conflicts. B. violated Standard 2.2 related to disclosure of conflicts, but not Standard l.2 related to independence and objectivity. C. not violated either Standard l,2 related to independence and objectivity or Srandard 2.2 related to disclosure of conflicts.D. violated both Standard l.2 related to independence and objectivity and standard 2.2 related to disclosure of conflicts.9. Which of the following achievable swap positions could be used to transform a floating-rate asset into a fixed-rate asset? D A. Receive the floating-rate leg and receive the fixed-rate leg of a plain vanilla interest-rate swap. B. Pay the fixed-rate leg and receive the floating-rate leg of a plain vanillainterest-rate swap. C. Pay the floating-rate leg and pay the fixed-rate leg of a plain vanilla interest-rateswap. D. Pay the floating-rate leg and receive the fixed-rate leg of a plain vanilla interest-rate swap.10. An analyst estimates a stock has a 40% chance of earning 10%, a 40% chance of earning 12.5%, and a 20% chance of earning 30%, What is the stocks standard deviation of expected returns? CA. 5.00%B. 5.75% C. 7.58%D. 9.99%11. Equity options tend to exhibit a volatility “smirk” where low strike price options have a higher implied volatility than high strike price options. An explanation that has not been used for the smirk pattern is: A A. heteroskedasticity in the underlying. B. a higher proportion of debt in the capital structure as equity prices fall. C. less firm leverage as equity prices rise. D. the threat of another market crash.12. Which of the following statements are true regarding the use of Monte Carlo simulation to value counterparty risk for various market instruments? B I. Use a normal distribution to estimate interest rates in developed economies when rates are high . II. Use a model that allows for jumps to estimate exchange rates for emerging market currency. III. Use a lognormal distribution to estimate very liquid commodity prices. IV Use a model that allows for jumps to estimate very liquid equities. A. I and II. B. II and III. C. III and IV only. D. I, III, and IV13. A hedger calculates the covariance between the spot and the futures prices to be0.05, the spot standard deviation to be 0.3, and the futures standard deviation to be 0.2. What is the optimal hedge ratio for this position? D A. 0.075. B. 0.033. C. 0.250. D. 1.250.14. It is clear that the Financial Services Authority (FSA) did not adequately discharge its risk management duties with respect to Northern Rock, one of the largest banks in the United Kingdom. Which of the following reasons least likely explains the risk mangement failure on the part of the FSA in its supervision and monitoring of Northern Rock? C A. The need to implement the significant requirements of Basel. B. The need for the FSA heads of departments to cover staffing, gaps due to manager turnover. C. The fact that there were inconsistent risk assessments of Northerm Rock with the FSA supervisory teams. D. The fact that Northern Rock was monitored for a significant amount of time by supervisors with expertise in insurance.15. On May l, the Newmont Hedge Fund purchased a long position in a highly liquid technology sector stock mutual fund after technical indicators suggested a profit opportunity. On May 4, Newmont reversed its position after the technology mutual fund had appreciated 75 basis points in price. Newmont held a money market position until May 21 at which time it purchased a long position in a highly liquid health care stock mutual fund. The position was reversed back into cash two days later. Which type of hedge fund strategy is Newmont most likely using? B A. Event-driven strategy: B. Equity market timing strategy C. Equity market neutral strategy D. Volatiliry arbitrage strategy16. Which of the following would be considered examples of style drift in a hedge fund? D I. A merger arbitrage hedge fund manager reduces the leverage used in her fund to virtually zero. II. A market-neutral hedge fund manager hedges marker exposure by using long index put options rather than short S&P 500 futures contracts. III. A hedge fund manager that exploits overnight price discrepancies in mutual funds by trading among funds on a daily basis is ordered to hold positions for at least 30 days by regulators.IV A dedicated short manager takes a net long position in her fund due to a sustained bull market A. IV only B. I and III only. C. II and IV. D. I, III, and IV17. For an option-free bond, what are the effects of the convexity adjustment on the magnitude (absolute value) of the approximate bond price change in response to an increase in yield and in response to a decrease in yield, respectively? A Decrease in yield Increase in yield A. Increase in magnitude Decrease in magnitude B. Increase in magnitude Increase in magnitude C. Decrease in magnitude Decrease in magnitude D. Decrease in magnitude Increase in magnitude18. Which of the following statements about the univariate, multivariate, and standard normal distributions is least likely correct? C A. A univariate distribution describes a single randon variable. B. A multivariate distribution specifies the probabilities for a group of related random variables. C. The standard normal random variable, denoted Z, has mean equal to 1 and variance equal to l. D. The need to specify correlations is a distinguishing feature of the multivariate normal distribution in contrast to the univariate normal distribution.19. Which of the following statements about the role of the model risk manager is most correct? The role of the model risk manager is: D A. never likely to indude the reverse engineering of prices regardless of the riskmanagers beliefs regarding the efficient market hypothesis. B. less likely to include the reverse engineering of prices if the risk manager doesnot believe in the efficient market hypothesis. C. more likely to include the reverse engineering of prices if the risk manager doesbelieve in the efficient market hypothesis. D. more likely to include the reverse engineering of prices if the risk manager doesnot believe in the efficient market hypothesis.20. The recent financial credit crisis was caused by several parties including investors,credit rating agencies,financial institutions, regulators, and other government entities.However, characteristics regarding the recent financial turmoil have been witnessed in past crises. Whicch of the following are common characteristics of credit crises? C I. A run-up in preceding stock prices. II. Less macroeconomic leverage. III. A reduction of bank equity capital. IV A subsequent increase in real growth. V. Increased housing prices. VI. Increased currency risk. A. I, II, V, and VI. B. I, III, IV, and V, C. I, III, V, and VI, D. III, IV, V, and VI.21. Which of the following statements regarding hypothesis testing are false? D I. A Type I error is rejecting the null hypothesis when it is true. II. Reject the null hypothesis if p-value srgnificance level. III. The critical z-value for a one-tailed test of significance at the 0.05 level will be either +1.96 or -1.96. IV. The test statistic for hypotheses concerning equality of variances is computed as A. I and II. B. I and III. C. II and III. D. III and IV22. Which of the following statements incorrectly describe(s) the Taylor Series approximation? B I. The first and second derivatives of a function for the relationship between a financial derivative and its underlying asset estimate the delta and rate of change of delta, respectively, II. The Taylor Series provides good approximation estimates of price changes in callable bonds or mortgage-backed securities. III. The Taylor Series provides a good approximation for changes in a well-behaved quadratic function. A. I and II. B. II only. C III only DII and III.23. A $25 million bond portfolio consists of $10 million worth of bonds with a maturity of 3 years and a duration of 2.2 years, $8 million worth of bonds with a maturity of 25 years and a duration of 12 years, and $7 million worth of bonds with a maturity of 30 years and a duration of 13 years. The structure of this portfolio would be best described as a: B A. bullet. B. barbell. C. strangle. D. ladder. 24. Which of the following choices best describe the order of payment from cash flow in a mortgage-backed security? D A. Junior tranche, senior tranche, mezzanine tranche. B. Mezzanine tranche, equity tranche, senior tranche. C. Senior tranche, equity tranche,junior tranche. D. Senior tranche, mezzanine tranche, equity tranche.25. Which of the following statements about a cash collateralized debt obligarions(CDO) special purpose vehicle (SPV) is true? C A. In a synthetic CDO, the SPV invests in the actual securities that are used to generate payment to the tranches. B. In a cash CDO,the SPV invests in the actual securities that are used to generate payment to the tranches. C. In a synchetic CDO, the SPV does not invest in the actual securities that are used ro generate payment to the tranches. Instead, they invest only in a risk-freebond. D. In a cash CDO, the SPV does not invest in the actual securities that are used to generate payment to the tranches. Instead they invest in a defauk swap and a risk-free bond.26. Although our knowledge of bank risks shifts over time as new risks become classified and subject to measurement with increasing granularity, our current knowledge of risk is: B A. greater for asset/liability risk than for market risk. B. greater for market risk than for credit risk. C. grearer for operational risk than for assed/liability risk. D. greater for business risk than for operational risk.27. Which of the following best describes the relationship between leverage,margin calls, position size, and liquidity as presented in the Long-Term Capital Management case? A A. Leverage allows a firm to establish large positions that can generate large margin calls and force liquidations that can exacerbate declining market prices. B. Leverage can help offset the risk of being unable to meet large margin callsgenerated from large positions,thereby increasing a firms liquidity. C. Margin calls create