1. Which factors affect the probable consequences likely if a risk does occur? Risk timing. Risk scope. 2.

An effective risk management plan will need to address which of the following issues? Risk avoidance / Risk monitoring / Contingency planning.

3. ne ob!ective of risk management is to reduce the volatility of a company"s cash flows. True. #. When considering the risk of foreign investment higher risk could from e$change rate risk and political risk while lower risk might from international diversification. True. %. &he firm"s business risk is largely determined by the financial characteristic of its industry. False. A bank suffers loss due to adverse market movement of a security. &he security was however held beyond the defeasance period. What is the type of the risk that the bank has suffered? Operational risk. perational risk does not arise from() Defaults by own customers. A bank e$pects fall in price of a security if it sells it in the market. What is the risk that the bank is facing? sset li!uidation risk. ,ystemic risk is the risk due to() Failure of entire banking system. .aily volatility of a stock is 1/. What is its 10 days volatility appro$imately? "#. arise result

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11.

A bank funds its assets from a pool of composite liabilities. Apart 1rom credit and operational risks2 it faces() $asis risk. A branch sanctions 3s.1 crore loan to a borrower2 which of the &he risk the branch is taking? %i!uidity risk/interest rate risk/credit risk/operational risk. 1inancial risk is defined as() &ncertainties' resulting in adverse variation of profitability or outrig(t losses. 4ield curve risk is known as() Risk owing to altering of yields across maturities and its impact on )**. 5ap method is basically used for() +easuring banks interest rate risk e,posure. 6n a given time band a negative or liability sensitive gap occurs When() Rate sensitive liabilities e,ceed rate sensitive assets. With a negative gap2 an increase in market interest rates could 7ause a() Decline in net interest income. true or false? Risk associated wit( portfolio is always less t(an t(e weig(ted average of risks of individual items in portfolio. ,ystemic risk can be diversified. &he statement is() False. 8a3 is() -otential worst case loss at a specific confidence level over a certain period of time. 7redit risk assessment of the borrower unit is for() ssessing t(e repayment capacity.

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21

22. 23.

6nterest rate risk is a type of() Credit risk. 8a3 means() .alue at risk