Online Access Free 8010 Exam Questions

A key problem with return on equity as a measure of comparative performance is:

• A.that return on equity measures do not account for interest and taxes
• B.that return on equity ignores the effect of leverage on returns to shareholders
• C.that return on equity are not adjusted for cash flows being different from accounting earnings
• D.that return on equity is not adjusted for risk

Credit exposure for derivatives is measured using

• A.Current replacement value
• B.Notional value of the derivative
• C.Standard normal distribution
• D.Forward looking exposure profile of the derivative

A risk management function is best organized as:

• A.a part of the trading desks and other risk taking teams
• B.integrated with the risk taking functions as risk management should be a pervasive activity carried out at all levels of theorganization.
• C.report independently of the risk taking functions
• D.reporting directly to the traders, as to be closest to the point at which risks are being taken

Which of the following objectives are targeted by rating agencies when assigning ratings:
I. Ratings accuracy
II. Ratings stability
III. High accuracy ratio (AR)
IV. Ranked ratings

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

A financial institution is considering shedding a business unit to reduce its economic capital requirements.
Which of the following is an appropriate measure of theresulting reduction in capital requirements?

• A.Marginal capital for the business unit in consideration
• B.Incremental capital for the business unit in consideration
• C.Proportionate capital for the business unit in consideration
• D.Percentage of total gross income contributed by the business unit in question