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FRM FRM Quiz am THE CONCEPT OF RISK, erstellt von f.yafai am 26/10/2013.

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THE CONCEPT OF RISK

Frage 1 von 19

1

If different business and financial markets are known to be correlated:

Wähle eine der folgenden:

  • Value at Risk (VaR) is the best mechanism to reduce risk

  • Such risks should be avoided by the treasury management committee

  • Enterprise wide risk is the addition of individual risks

  • The treasurer should not manage risks in isolation

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Frage 2 von 19

1

A risk may be 'accepted and reduced' through

Wähle eine der folgenden:

  • Internal controls

  • Monitoring

  • Insurance

  • Derivatives

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Frage 3 von 19

1

In a Risk Management Framework, what activity is most likely to follow Risk Evaluation?

Wähle eine der folgenden:

  • Risk Identification

  • Risk Reporting

  • Risk Response

  • Risk Assessment

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Frage 4 von 19

1

You are a treasurer of a listed volume house builder. Which of the following benchmarking information is most likely to be DIFFICULT to obtain?

Wähle eine der folgenden:

  • Average six moth LIBOR

  • Industry norm for interest cost as a proportion of input costs

  • Budgeted interest as a proportion of EBITDA for your company

  • Average interest cover of three main listed competitors

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Frage 5 von 19

1

A company expects a $10 million receipt in one month's ( 30 days ) time and will invest these funds for three months (91 days) until they are required in the business.
By taking out an FRA, which of the following BEST describes the 'risk response' that Company A has taken to the $ interest rate risk?

Wähle eine der folgenden:

  • Avoid

  • Accept and retain (monitor)

  • Accept and reduce ( internal controls)

  • Accept and transfer (hedge)

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Frage 6 von 19

1

In a typical risk management framework, which of the following tasks would be the most likely to be carried out at the Risk Assessment stage?

Wähle eine der folgenden:

  • Assess when to control, avoid or transfer risk

  • Classify risk by source

  • Carry out detailed scenario analysis

  • Prioritise risks

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Frage 7 von 19

1

In a probability/impact matrix, the severity of consequence is LEAST likely to be measured in terms of:

Wähle eine der folgenden:

  • Earnings per share

  • Net debt: EBITDA

  • Probability of occurrence

  • Value at Risk

  • Absolute loss per even

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Frage 8 von 19

1

In a typical risk management framework, which of the following activities would be most likely to include a VaR calculation?

Wähle eine der folgenden:

  • Risk Identification

  • Risk Assessment

  • Risk Evaluation

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Frage 9 von 19

1

Which of the following time horizons are LEAST appropriate when assessing the frequency of a risk even in a Probability/Impact Matrix

Wähle eine der folgenden:

  • Days, for FX exposure in financial service business

  • Minuties, for risk of delay in batch processing

  • Hours, for EPS measurement for a service industry

  • Weeks, for commodity prices relevant to a manufacturer

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Frage 10 von 19

1

Treasury policy is most likely to prohibit:

Wähle eine der folgenden:

  • Maintaining a forward contract after the corresponding exposure has expired

  • Choosing not to hedge a known future foreign currency cash inflow or outflow

  • Choosing to delay hedging a material highly probable future transaction

  • Purchasing option contracts to hedge known future income streams

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Frage 11 von 19

1

An investment portfolio of USD shares has a value of USD 100 million and daily value standard deviation of EUR 250,000. The current exchange rate is EUR/USD 1.48, What is the best estimate of the daily Value at Risk at a 95 confidence level in EUR? Before you start on this type of question:
Make a note of the currency for the amount of VaR.
Make a note of the given standard deviation. Is it in the same currency as the amount of the VaR? If yes, you can ignore any forex rate details.

Wähle eine der folgenden:

  • 41,000

  • 61,000

  • 279,000

  • 280,000

  • 410,000

  • 610,000

Erklärung

Frage 12 von 19

1

A US company holds USD 10 million of EUR dominated assets. The EUR/USD 30 day standard deviation is 1.6%, the EUR/USD spot rate is 1.6000, and the z score at 95% confidence is 1.65. what is the best estimate of the 95% 30 day value at risk on the EUR denominated assets?

Wähle eine der folgenden:

  • $95,000

  • $155000

  • $165000

  • $265000

  • $420000

Erklärung

Frage 13 von 19

1

A US company holds USD 10 million of EUR dominated assets. The EUR/USD 30 day standard deviation is 1.6%, the EUR/USD spot rate is 1.6000, and the z score at 95% confidence is 1.65. what is the best estimate of the 95% 30 day value at risk on the EUR denominated assets?

Wähle eine der folgenden:

  • $95,000

  • $155000

  • $165000

  • $265000

  • $420000

Erklärung

Frage 14 von 19

1

What is the daily VaR at 95% confidence level for a USD 5 million exposure against GBP if the standard deviation for the daily change in USD/GBP is 0.5000%

Wähle eine der folgenden:

  • USD 2,375

  • USD 4,125

  • USD 5,825

  • USD 23,750

  • USD 41,250

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Frage 15 von 19

1

An asset has a current value of 25 with a one-month standard deviation of 3. Its value follows a normal distribution. The best estimate of the probability of the investment being worth between 22 and 28 in one month's time is:

Wähle eine der folgenden:

  • 16%

  • 32%

  • 34%

  • 66%

  • 68%

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Frage 16 von 19

1

Red expects to convert USD 50 million into EUR in 6 months. Current rates are:
EUR/USD spot rate 1.1598
EUR/USD 6 months forward rate 1.1669
If the 6 month EUR/USD standard deviation is 6% what is the best estimate of the EUR value at risk on this receipt, in EUR, at a 99% confidence level?

Wähle eine der folgenden:

  • 4 million

  • 5 million

  • 6 million

  • 7 million

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Frage 17 von 19

1

The two dimensions of a risk occurrence are

Wähle eine der folgenden:

  • uncertainty and VaR

  • Probability and Impact

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Frage 18 von 19

1

Is it true that:

Wähle eine der folgenden:

  • Deterministic models predict future outcomes precisely

  • VaR CANNOT take account of asset correlations

  • Debt/EBITDA is NOT used to measure risk

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Frage 19 von 19

1

EUR/GBP spot is currently 0.7000, has a 30 day standard deviation of 8%, and can be assumed to be normally distributed. At a confidence level of 95%, EUR 7 million due to be received in 30 days will be worth at least GBP million:

Wähle eine der folgenden:

  • 4.0

  • 4.3

  • 4.9

  • 5.7

  • 6.1

  • 7.0

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