Question 1

An asset-sensitive bank will have a ___ cumulative gap and will benefit from ___ interestrates.

Options :

A : Positive; dropping

B : Positive; rising

C : Negative; dropping

D : Negative; rising

Answer: B

Question 2

Which one of the following four statements about preferred shares is INCORRECT?

Options :

A : Preferred shares refer to a class of securities that is a cross between equity and debt.

B : Preferred shares represent residual of a corporation after its other liabilities have beenpaid.

C : Preferred shares are subordinated to debt.

D : Preferred shares can be perpetual or have maturities far exceeding debt maturities.

Answer: B

Question 3

Gamma Bank is operating in a highly volatile interest rate environment and wants tostabilize its net income by shifting the sources of its earnings from interest rate sensitivesources to less interest rate sensitive sources. All of the following strategies can helpachieve this objective EXCEPT:

Options :

A : Charge bank fees for underwriting loans

B : Provide trust, asset management, and trading services to customers

C : Extend different types of credit

D : Originate more floating interest rate loans

Answer: D

Question 4

SigmaBank has many branches that offer the same products and services. Which one ofthe four following statement presents an advantage of using RCSA questionnaire approachin the SigmaBank's operational risk framework?

Options :

A : The questionnaires are usually sent to specific nominated parties for completion.

B : This approach ensures that there has been full participation in the scoring, rather than asingle view.

C : It provides a forum for an in-depth discussion of the operational risks in the firm.

D : The results can be collected electronically and the responses compared to identifythemes, trends and areas of potential control weakness or elevated risk.

Answer: D

Question 5

Which one of the four following statements about the Risk Adjusted Return on Capital(RAROC) is correct?RAROC is the ratio of:

Options :

A : Risk to the profitability of a trading portfolio or a business unit within the bank.

B : Value-at-risk to the profitability of a trading portfolio or a business unit.

C : Profitability to the expected return of a trading portfolio or bank business unit.

D : Profitability to the risk of a trading portfolio or bank business unit.

Answer: D