QUESTION 100
According to Basel II what constitutes Tier 1 capital?

QUESTION 101
Which one of the following four attributes would likely help a trader using exchange-traded options to establish a leveraged position?

QUESTION 102
Mega Bank holds a $250 million mortgage loan portfolio, which reprices every 5 years at LIBOR + 10%. The bank also has $150 million in deposits that reprices every month at LIBOR + 3%. What is the amount of Mega Bank’s rate sensitive liabilities?

QUESTION 103
Which of the following measure describes the symmetry of a statistical distribution?

QUESTION 104
An asset manager just bought a coupon paying bond with principal value $100,000 for $87,000 with a current yield of 4.7%. He assumes that if the yields change to 5.7% the price of the bond would be $84,500. Based on this assumption what is the modified duration of the bond?

QUESTION 105
The risk management department of VegaBank wants to set guidelines on commodity carry trades. Which of
the following strategies should she pursue to achieve a profitable commodity carry?
I. Buy short-term commodity futures and sell longer-dated position when the curve is in contango.
II. Buy short-term commodity futures and sell longer-dated position when the curve is in backwardation.
III. Buy long-term commodity futures and sell shorter-dated positions when the curve is in contango.
IV. Buy long-term commodity futures and sell shorter-dated positions when the curve is in backwardation.

QUESTION 106
Which of the following statements explains how securitization makes retail assets highly liquid and the balance sheet easier to manage?
I. The bank can raise capital by selling the securitized bonds.
II. Any need to diversify credit risk can be achieved by selling the bank’s own securitized bonds and buying other bonds that increase diversification.
III. The value of the securitization is linked to the credit rating of the bank and hence is easy to include in medium-term financial plans.
IV. Securitizations can be used to hedge credit risk by using limited market instruments.

QUESTION 107
Which of the following assets on the bank’s balance sheet has greatest endogenous liquidity risk?

QUESTION 108
Bank Muri has $4 million in cash and $5 million in loans coming due tomorrow with an expected default rate
of 1%. The proceeds will be deposited overnight. The bank owes $ 9 million on a securities purchase that
settles in two days and pays off $8 million in commercial paper in three days that is not expected to renew. On
day 2, $1 million in loans is coming in with an expected default rate of 1% and on day 3, $2 million in loans is
coming in with expected default rate of 2%. How much should the bank plan to raise in order to avoid liquidity
problems?

QUESTION 109
Which one of the following four physical commodities markets has the right combination of characteristics that generally allows short selling in the market, without making the short-selling transaction prohibitively expensive?

QUESTION 110
Which of the following statements about endogenous and exogenous types of liquidity are accurate?
I. Endogenous liquidity is the liquidity inherent in the bank’s assets themselves.
II. Exogenous liquidity is the liquidity provided by the bank’s liquidity structure to fund its assets and maturing
liabilities.
III. Exogenous liquidity is the non-contractual and contingent capital supplied by investors to support the bank
in times of liquidity stress.
IV. Endogenous liquidity is the same as funding liquidity.

QUESTION 111
Alpha Bank, a small bank,has a long position with larger BetaBank and has an identical short position with
another larger bank GammaBank. Each large bank requires a 20% initial collateral to support the trade. As
prices fluctuate in either direction, one large bank will require additional collateral from the small bank, while
the risk of loss to the other large bank will increase. By running the trades through a clearinghouse, the small
bank can achieve all of the following objectives EXCEPT:

QUESTION 112
Which one of the four following aspects of legal risk is NOT included in the Basel II Accord?

QUESTION 113
As Japan ___ its budget deficits and ___ its dependence on debt, the Japanese currency, JPY, would ___ in
value against other currencies.

QUESTION 114
Except for the credit quality of the Credit Default Swap protection seller, the following relationship correctly
approximates the yield on a risk-free instrument:

QUESTION 115
Which of the activities represent examples of market manipulation?