Question 1

Regarding the relationship between a rm's risk appetite and its business strategy, which of the following statements is true?

Options :

A : Business planning activities that exceed risk appetite should be maintained.

B : Consideration must be given to the downside risks of only risky business strategies.

C : Business strategy planning meetings require input from the risk management team.

D : A rm’s risk appetite re ects its ability to minimize risk.

Answer: C

Question 2

It is April 15, and a trader is entered into a short position in two soybean meal futures contracts. The contracts expire on August 15, and call for the delivery of 100 tons of soybean meal each. Further, because this is a futures position, it requires the posting of a $3,000 initial margin and a $1,500 maintenance margin per contract. For simplicity, however, assume that the account is marked to market on a monthly basis. Assume the following represent the contract delivery prices (in dollars per ton) that prevail on each settlement date:April 15 (initiation) 173.00May 15 179.75June 15 189.00July 15 182.50August 15 (delivery) 174.25What is the equity value of the margin account on the May 15 settlement date, including any additional equity that is required to meet a margin call?

Options :

A : $$7,350.

B : $4,650.

C : $2,300.

D : $1,350.

Answer: B

Question 3

Sue Johnson, FRM, has an elderly client with a very large asset base. The client intends to start divesting her fortune to various charities. Johnson is on the Board of a local charitable foundation. Johnson most appropriately:

Options :

A : should solicit the client herself, along with other Board members, to obtain a larger contribution.

B : can discuss her client-s situation with the charitable foundation as long as she informs other local charities of her client-s intentions.

C : must not discuss anything regarding her client and her client-s intentions with the charitable foundation without permission.

D : can make this known to the charitable foundation so that they can solicit the client, since it is the client-s wish to divest assets to charities in the future.

Answer: C

Question 4

An analyst applying a reinforcement learning model has assigned a probability to exploitation of 65%. As she completes more trials, she can reasonably expect that the probability will increase above:

Options :

A : 65% for exploitation.

B : 50% for exploitation

C : 50% for exploration.

D : 35% for exploration.

Answer: A

Question 5

A risk manager at a bank is measuring the sensitivity of a bond portfolio to non-parallel shifts in spot rates. The portfolio currently holds a 4-year zero coupon bond and a 7-year zero coupon bond with the following sensitivities to these respective spot rates:Spot rate AND Change in portfolio value for 1-bp increase in spot rate (AUD)4-year -189.277-year -302.45To model the non-parallel movement of the spot rate curve, the manager treats the 2-year, 5-year, and 10-year spot rates as key rates. Given this information, what is the portfolio’s key rate 01 (KR01) for a 1-bp increase in the 5-year rate?

Options :

A : AUD 184.06

B : AUD 226.99

C : AUD 307.66

D : AUD 491.72

Answer: C