Updated: Sep 02, 2025
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1. A portfolio manager is interested in computing risk measures for his bond investment portfolio. Which of the following measures the sensitivity of duration to interest rates?
A) Modified duration.
B) Yield curve
C) Credit spread.
D) Convexity.
2. Present value of a basis point (PVBP) is one of the ways to quantify the risk of a bond, and it measures:
A) The change in value of a bond when yields increase by 0.01%.
B) The percentage change in bond price when the yields change by 1%.
C) The percentage change in bond price when yields change by 1 basis point.
D) The present value of the future cash flows of a bond calculated at a yield equal to 1%.
3. Beta Insurance Company is only allowed to invest in investment grade bonds. To maximize the interest income, Beta Insurance Company should invest in bonds with which of the following ratings?
A) AA
B) AAA
C) A
D) B
4. Unico Bank, concerned with managing the risk of its trading strategies, wants to implement the trading strategy that exposes the bank to the lowest market risk. Which one of the following four strategies should Unico take to limit its risk exposure?
A) A matched book strategy that allows the trading desk to match all customer positions immediately with an equal and opposite position by trading internally or with another bank.
B) A covering strategy that manages positions in the product by executing covering deals or hedging deal at the discretion of the trading des.
C) A passive hedging strategy that allows the traders to price transactions with customers and other banks, at the relevant bid price on the market.
D) A market-maker strategy that allows the traders to quote a buy and sell price to customers and other banks and to trade at the relevant price on the sell side of the market.
5. Which one of the following four statements about planning for the operational risk framework is INCORRECT?
A) Planning for the operational risk framework suggests that short-term planning and focus on immediate benefits is strongly preferred to the long-term planning approach.
B) Once the elements of an operational risk framework are up and running, they need to be monitored to ensure they maintain their integrity and do not deteriorate over time.
C) Planning for the operational risk framework involves setting clear goals, realistic milestones and achievable deliverables that add value.
D) An operational risk framework is a complex and evolving challenge, and to keep its development under control it is important to apply strong project management skills to the design and implementation of each new element.
Solutions:
Question # 1 Answer: D | Question # 2 Answer: A | Question # 3 Answer: C | Question # 4 Answer: A | Question # 5 Answer: A |
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