3I0-012

3I0-012 practice questions, page 14 of 30, with answer review and explanations.

Question 66

Which of the following scenarios offer an example of wrong way risk?

  1. A bank purchases credit protection on highly-rated tranches of US mortgage-backed securities from a US mortgage bank
  2. A bank sells protection on the iTraxx main index at a level of 25 bps and shortly afterwards the index crosses the 200 bps level
  3. A bank sells EUR put I USD call ATM options with an expiry date of 6 months and afterwards volatility moves up to substantially higher levels
  4. A bank enters into a receiver’s swap while interest rates are increasing

Question 67

Which of the following is typical of liquid assets held by banks under prudential requirements?

  1. prices increase during a systemic crisis
  2. return on investment is relatively high
  3. absence of active market makers
  4. wide bid/offer spreads

Question 68

What is the correct interpretation of a EUR 2,000,000.00 overnight VaR figure with a 97% confidence level?

  1. A loss of at least EUR 2,000,000.00 can be expected in 97 out of the next 100 days.
  2. A loss of at most EUR 2,000,000.00 can be expected in 3 out of the next 100 days.
  3. A loss of at least EUR 2,000,000.00 can be expected in 3 out of the next 100 days.
  4. A loss of at most EUR 2,000,000.00 can be expected in 6 out of the next 100 days.

Question 69

Hybex Electrics is a highly rated company with a considerable amount of fixed rate liabilities and would like to increase the percentage of floating rate debt. Which of the following is the best course of action?

  1. Hybex should become a payer of a fixed rate on a swap against receipt of LIBOR.
  2. Hybex should become a receiver of a floating rate on a swap against payment of a fixed rate
  3. Hybex should become a receiver of a fixed rate on a swap against payment of LIBOR D.
  4. Hybex should become a receiver of a floating rate on a swap against payment of LIBOR

Question 70

Which one of the following statements correctly describes the increased capital ratios that will come into effect under Basel III?

  1. minimum tier 1 capital of 4.5% and minimum total capital plus a conservation buffer of 10.5%
  2. minimum tier 1 capital of 6% and minimum total capital including conservation buffer of 8%
  3. minimum tier 1 capital of 4% and minimum total capital including conservation buffer of 10.5%
  4. minimum tier 1 capital of 6% and minimum total capital including conservation buffer of 10.5%