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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 assets?

• A.$200 million
• B.$100 million
• C.$250 million
• D.$150 million

Which of the following statements describes a bank's reasons to set risk limits?
I. To control and minimize a bank's current risk exposure.
II. To predict future risks.
III. To allocate risks to business units.
IV.
To keep risk within tolerance levels.

• A.I, III, and IV
• B.I and II
• C.III and IV
• D.I, II, and III

A credit analyst wants to determine if her bank is taking too much credit risk. Which one of the following four strategies will typically provide the most convenient approach to quantify the credit risk exposure for the bank?

• A.Simplifying individual credit exposures so that they can be combined into a simplified expression of portfolio risk for the bank
• B.Using stress testing techniques to forecast underlying macroeconomic factors and bank's idiosyncratic risks
• C.Analyzing distribution of bank's credit losses and mapping credit risks at various statistical levels
• D.Assessing aggregate exposure at default at various time points and at various confidence levels

Which of the following statements are reasons for mathematical valuation and risk assessment models to be misleading or inaccurate?
I. There could be missing factors in models.
II. The data used as input for the model could be bad or wrong.
III. Model results could be misinterpreted.
IV.
There could be errors in the derivation of the model.

• A.I, III, and IV
• B.I, II, III IV
• C.III and IV
• D.I, II, and III

The exercise for an American type option prior to expiration day is virtually certain in the following case:

• A.In the event of a low dividend for an in-the-money put option
• B.In the event of a low dividend for an in-the-money call option
• C.In the event of a high dividend for an in-the-money call option
• D.In the event of a high dividend for an in-the-money put option