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Question 1 of 30
1. Question
The precise loan-to-payment ratio to be added when measuring the note’s collateral interest depends on the nature of the structured debt, as well as how this note blends into the portfolio of other notes for investors. The availability of a loan is therefore subject to which of the following?
Correct
Loan arrangement is subject to Loan approval, which can require certain requirements, including preparation of the necessary paperwork, which naturally contributes to the loan facility’s expenses.
Incorrect
Loan arrangement is subject to Loan approval, which can require certain requirements, including preparation of the necessary paperwork, which naturally contributes to the loan facility’s expenses.
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Question 2 of 30
2. Question
Borrowing capital to purchase organized devices is one of the most stupid things you might do. Besides the reality that it is likely to wind up being a lose – loss gamble, nothing can be achieved dramatically when utilizing a credit facility to finance the acquisition of derivative-based notes?
Correct
Using a credit facility to finance the acquisition of derivative notes will dramatically alter the risk profile of the lender and raise the amount of portfolio leverage.The general consequence of investing for investment purposes is, in theory, to magnify profits and losses of the underlying fund, depending on the actions of the sector.
Incorrect
Using a credit facility to finance the acquisition of derivative notes will dramatically alter the risk profile of the lender and raise the amount of portfolio leverage.The general consequence of investing for investment purposes is, in theory, to magnify profits and losses of the underlying fund, depending on the actions of the sector.
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Question 3 of 30
3. Question
Investors in structured financial instruments should consider the function of the ‘option variable’ that defines whether and to what degree the consumer of a structured capital-protected commodity profits from underlying price changes. Why is this significant?
Correct
This is critical because the choice component sets the future return beyond the capital protection level, and depending on the product type, it can provide not only one choice but a variety of options.
Incorrect
This is critical because the choice component sets the future return beyond the capital protection level, and depending on the product type, it can provide not only one choice but a variety of options.
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Question 4 of 30
4. Question
Since the scope for merging product components is almost infinite, no two organized goods involve the same :
Correct
The risk associated with the choice variable correlates to the risks associated with the option(s) it contains. As with any alternative, this part will expire without interest to the buyer, depending on the market value of the underlying.
Although the probability of merging product elements is almost infinite, no two standardized goods entail the same credit risk, market risk and liquidity risk.Incorrect
The risk associated with the choice variable correlates to the risks associated with the option(s) it contains. As with any alternative, this part will expire without interest to the buyer, depending on the market value of the underlying.
Although the probability of merging product elements is almost infinite, no two standardized goods entail the same credit risk, market risk and liquidity risk. -
Question 5 of 30
5. Question
If and when there is a secondary demand for it, an investor may liquidate a specified asset in his or her portfolio before maturity. Usually, the market manager arranges the secondary business. A secondary market is, in theory, not open in usual business conditions. Select the right subsequent statement from the given statements.
Correct
This is a limited environment for financial contract trades and one where accurate unbiased statistics on the fair value of the standardized commodity can be challenging to access.
Incorrect
This is a limited environment for financial contract trades and one where accurate unbiased statistics on the fair value of the standardized commodity can be challenging to access.
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Question 6 of 30
6. Question
Throughout reality, though fluctuations on the underlying market conditions influence the valuation of the instrument over its lifetime, certain variables such as adjustments can also impact this, except for:
Correct
It can also be influenced by certain variables such as shifts in interest rate rates, issuance currency features, and maturity periods. The valuation of a regulated commodity can be determined in reality by diverse and interrelated political, cultural, financial and other variables influencing the capital markets
Incorrect
It can also be influenced by certain variables such as shifts in interest rate rates, issuance currency features, and maturity periods. The valuation of a regulated commodity can be determined in reality by diverse and interrelated political, cultural, financial and other variables influencing the capital markets
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Question 7 of 30
7. Question
Investors can always take notice that trades on the secondary market can be subject to:
Correct
The fact that secondary market transactions that be subject to Dealing or commission charges and A bid / offer spread which characterizes any product should also be noted by investors.
Incorrect
The fact that secondary market transactions that be subject to Dealing or commission charges and A bid / offer spread which characterizes any product should also be noted by investors.
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Question 8 of 30
8. Question
Pricing models represent the convexity of the relation between price and yield. What role better defines them?
Correct
We have more precision and represent the asymmetry of market fluctuations in opposite directions for interest rate adjustments. In longer term maturities and low interest-rate conditions the effect of convexity is more prominent.
Incorrect
We have more precision and represent the asymmetry of market fluctuations in opposite directions for interest rate adjustments. In longer term maturities and low interest-rate conditions the effect of convexity is more prominent.
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Question 9 of 30
9. Question
Borrowing a leaf from borrowing in the property sector is a way of coping with the demand question. The definition is termed as:
Correct
Borrowing a leaf from betting on the property sector is a way of coping with the demand question. The term is known as cash-on-cash because as every successful hedge fund investor understands that cash-on-cash returns are a more reliable indicator of investment success than ordinary returns.
Incorrect
Borrowing a leaf from betting on the property sector is a way of coping with the demand question. The term is known as cash-on-cash because as every successful hedge fund investor understands that cash-on-cash returns are a more reliable indicator of investment success than ordinary returns.
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Question 10 of 30
10. Question
The Cash-on-Cash Return Algorithm is:
Correct
Cash-on-cash return = Actual price appreciation in year 2/Owner’s equity at year 1 end
American financial researchers looking for a answer to this price problem have come up with an methodology that measures cash-on-cash returns by integrating the details on home equity possession from the Federal Reserve’s Movement of Funds surveys with the conventional home price appreciation measure.Incorrect
Cash-on-cash return = Actual price appreciation in year 2/Owner’s equity at year 1 end
American financial researchers looking for a answer to this price problem have come up with an methodology that measures cash-on-cash returns by integrating the details on home equity possession from the Federal Reserve’s Movement of Funds surveys with the conventional home price appreciation measure. -
Question 11 of 30
11. Question
One of London’s high street banks provides standardized methods, focused on what it terms a complex threshold mechanism (DTM). What argument explains it incorrectly?
Correct
Such bonds were designed to optimize exposure to the underlying assets thereby ensuring capital security at the note’s maturity. In its context, DTM has a duality of price dependency, since rather than being related solely to the underlying portfolio, the value of the notes is measured in respect to the level of an index.
Incorrect
Such bonds were designed to optimize exposure to the underlying assets thereby ensuring capital security at the note’s maturity. In its context, DTM has a duality of price dependency, since rather than being related solely to the underlying portfolio, the value of the notes is measured in respect to the level of an index.
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Question 12 of 30
12. Question
The Hedge Fund Research Global Index (HFRX) is a performance-linked standardized commodity, combined with an algorithm that targets regulated HFRX access. What is the classification that does not contain notional exposures?
Correct
The index contains notional exposures to: HFRX, Deposits of the same maturity as the bond, and Loan units that require the leverage to be added.
The weightings in the index of these three components are calculated monthly by means of a complex threshold process.Incorrect
The index contains notional exposures to: HFRX, Deposits of the same maturity as the bond, and Loan units that require the leverage to be added.
The weightings in the index of these three components are calculated monthly by means of a complex threshold process. -
Question 13 of 30
13. Question
Illiquid portfolios, such as certain options from over – the-counter (OTC) can not be transferable. Investors are also best served to balance their investments against danger not for:
Correct
Investors are well advised to risk-weigh their investments for: credit volatility, Volatility in liquidity and market volatility. Both that scale new heights in the months and years ahead, reaching rates which are currently unknown to investors. The definition of risk-weighted assets needs to be common to investors.
Incorrect
Investors are well advised to risk-weigh their investments for: credit volatility, Volatility in liquidity and market volatility. Both that scale new heights in the months and years ahead, reaching rates which are currently unknown to investors. The definition of risk-weighted assets needs to be common to investors.
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Question 14 of 30
14. Question
With respect to the stability of the counterparty, how do we realize the exposure we expect and commercialize it when it comes to evaluating credit risk?
Correct
They will be mindful of the exposure they expect and monetize it by measuring the risk-adjusted capital yield on credit and charging an additional premium to offset the expected default risk, particularly though the ranking of the issuer of the structured commodity is the investment grade.
Incorrect
They will be mindful of the exposure they expect and monetize it by measuring the risk-adjusted capital yield on credit and charging an additional premium to offset the expected default risk, particularly though the ranking of the issuer of the structured commodity is the investment grade.
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Question 15 of 30
15. Question
Non-investment-grade credit can represent certain firms that have found restructuring their balance sheets more difficult because of:
Correct
Non-investment-grade credit that represent companies who have found it tougher to restructure their balance sheets owing to Inadequate Profits, and Limited cash flow tends to have significant capital needs.
Incorrect
Non-investment-grade credit that represent companies who have found it tougher to restructure their balance sheets owing to Inadequate Profits, and Limited cash flow tends to have significant capital needs.
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Question 16 of 30
16. Question
The idea that the banks and creditors are investing this questionable debt poses major EAD questions. Hence, a good approach would take complete account of which of the given options?
Correct
A suitable approach would take full account of the magnitude of the credit risk assumed and the anticipated default level of the counterparty or counterparty.
Incorrect
A suitable approach would take full account of the magnitude of the credit risk assumed and the anticipated default level of the counterparty or counterparty.
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Question 17 of 30
17. Question
The average default rate is described as a proportion of previously creditworthy firms who have been insolvent in a specified year. The figure is:
Correct
The average default rate is described as a proportion of previously creditworthy firms who have been insolvent in a specified year. That figure reflects the amount of defaulted companies to the overall number of firms listed at the start of the year as qualifying for loans. Default rates should be determined according to threshold set by independent credit rating agencies.
Incorrect
The average default rate is described as a proportion of previously creditworthy firms who have been insolvent in a specified year. That figure reflects the amount of defaulted companies to the overall number of firms listed at the start of the year as qualifying for loans. Default rates should be determined according to threshold set by independent credit rating agencies.
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Question 18 of 30
18. Question
While EAD concentrates on on-balance sheet transactions, it can also involve off-balance sheet (OBS). Derivative lending is an ever-present issue in evaluating sums taken from the credit line at the moment of default. Several studies suggest substantial similarities occur between the three of the options mentioned.Which of the below associations are not relevant to investors adding standardized items into their portfolio?
Correct
Some reports show important associations between EAD and residual maturity of the loan, EAD and credit card ranking of the applicant, EAD and derivative instrument exposure. All three correlations are essential for investors whose portfolio includes standardized goods.
Incorrect
Some reports show important associations between EAD and residual maturity of the loan, EAD and credit card ranking of the applicant, EAD and derivative instrument exposure.
All three correlations are essential for investors whose portfolio includes standardized goods. -
Question 19 of 30
19. Question
In fact, the longer a loan’s residual maturity the greater the chance that:
Correct
Moreover, the longer a loan’s residual duration, the greater the risk that the credit rating of the borrower may deteriorate, its future access to alternative sources of funding may decrease, and its ongoing exposure to securities the, often beyond repair, impair the balance sheet.
Incorrect
Moreover, the longer a loan’s residual duration, the greater the risk that the credit rating of the borrower may deteriorate, its future access to alternative sources of funding may decrease, and its ongoing exposure to securities the, often beyond repair, impair the balance sheet.
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Question 20 of 30
20. Question
3 Although mere credit losses in derivatives have so far been low, it should not be overlooked that counterparties exchanging derivatives in the early years were typically of high quality. Competition at this enterprise means:
Correct
Competition in this sector ensures that profits are increasingly being raising, and counterparties ‘creditworthiness is dropping, contributing to enhanced loss risk. None of which is particularly applicable to retail and private investors because the standardized instruments they buy are focused on derivative contracts.
Incorrect
Competition in this sector ensures that profits are increasingly being raising, and counterparties ‘creditworthiness is dropping, contributing to enhanced loss risk. None of which is particularly applicable to retail and private investors because the standardized instruments they buy are focused on derivative contracts.
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Question 21 of 30
21. Question
Instruments such as credit derivatives have the purpose of promoting exchange and credit risk transfer. Select the correct subsequent statement.
Correct
The purpose of instruments such as credit derivatives is to encourage credit risk trading and transition From credit originators, To investors willing to assume credit exposure. For starters, insurance firms are seen as essential risk-takers by business organizations.
Incorrect
The purpose of instruments such as credit derivatives is to encourage credit risk trading and transition From credit originators, To investors willing to assume credit exposure. For starters, insurance firms are seen as essential risk-takers by business organizations.
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Question 22 of 30
22. Question
A variety of significant issues about risk control have appeared in the credit derivatives sector. Those may not refer to:
Correct
These are related to the ability of late-day credit risk players to absorb the shock of major bankruptcies, the effect of such bankruptcies on insurers’ solvency and other writers of credit derivatives, the transparency of risks incurred by naive market players, as credit institutions increasingly transfer their risks to other market players.
Incorrect
These are related to the ability of late-day credit risk players to absorb the shock of major bankruptcies, the effect of such bankruptcies on insurers’ solvency and other writers of credit derivatives, the transparency of risks incurred by naive market players, as credit institutions increasingly transfer their risks to other market players.
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Question 23 of 30
23. Question
The risk of a defaulting financial institution is not calculated by bank-specific, national, and macroeconomic factors, in relation to which feature of the institution?
Correct
The possibility of a defaulting financial institution is calculated by bank-specific, national, and macroeconomic parameters relevant to the institution’s: capital base, productivity, credit risk, market risk, and macroeconomic factors. Taken together, these assist in assessing the creation of the default average likelihood over time.
Incorrect
The possibility of a defaulting financial institution is calculated by bank-specific, national, and macroeconomic parameters relevant to the institution’s: capital base, productivity, credit risk, market risk, and macroeconomic factors. Taken together, these assist in assessing the creation of the default average likelihood over time.
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Question 24 of 30
24. Question
What are the correct reasons for general credit volatility?
Correct
The factors for general credit uncertainty are as follows: the economic climate varies from gloomy to brilliant, and vice versa, and business productivity has a cyclical impact that increases and decreases depending on demand.
Incorrect
The factors for general credit uncertainty are as follows: the economic climate varies from gloomy to brilliant, and vice versa, and business productivity has a cyclical impact that increases and decreases depending on demand.
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Question 25 of 30
25. Question
The spread of bonds establishes the relation between corporate bond yield and market volatility. A true distribution of the bonds is obtained from:
Correct
A true allocation of bonds is derived from credit risk-free bond market rates, measured on the basis of the actual interest rate. The price differential, which translates into a differential in value, is the corporate bond yield spread, which calculates the additional premium paid by buyers to acknowledge credit risk, in addition to the market risk associated with the interest rate.
Incorrect
A true allocation of bonds is derived from credit risk-free bond market rates, measured on the basis of the actual interest rate. The price differential, which translates into a differential in value, is the corporate bond yield spread, which calculates the additional premium paid by buyers to acknowledge credit risk, in addition to the market risk associated with the interest rate.
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Question 26 of 30
26. Question
Debt refinancing will need to be undertaken, depending on where that occurs, in the wake of rising interest levels and declining credit scores. This is a condition on the verge of anarchy, because:
Correct
That is a scenario on the verge of anarchy, and if a business is unable to raise enough cash to fulfill its commitments, then the problems are a toxic spiral that will propagate through the economy like an oil slick. As they face greater collateral risk, in an open and clear system bondholders expect a higher valuation as insurance for the danger of default they face.
Incorrect
That is a scenario on the verge of anarchy, and if a business is unable to raise enough cash to fulfill its commitments, then the problems are a toxic spiral that will propagate through the economy like an oil slick. As they face greater collateral risk, in an open and clear system bondholders expect a higher valuation as insurance for the danger of default they face.
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Question 27 of 30
27. Question
Based on realistic findings gathered from credit risk analyses, the internal ratings-based methodology (IRB) incorporates credit exposure into a mechanism that determines a borrowing company’s probability of being unable to repay its debt. The consequence of whether or not the company will satisfy its commitments is calculated by the combination of:
Correct
The result of whether or not the corporation is worthy of meeting its commitments is measured by the market value calculation of its assets taken relative to its capitalization and the estimated amount of its debt, calculated using an accrual process.
Incorrect
The result of whether or not the corporation is worthy of meeting its commitments is measured by the market value calculation of its assets taken relative to its capitalization and the estimated amount of its debt, calculated using an accrual process.
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Question 28 of 30
28. Question
Ownership firms are more susceptible to the drying up of business liquidity, culminating in a possible short-term failure to conduct financial transactions. Choose the correct requirements.
Correct
Ownership companies are more susceptible to drying up market liquidity, resulting in a possible short-term failure to conduct financial transactions at the targeted time, form of mechanism and scale of transaction. Of example, the need for liquidity may involve, in the particular case of credit risk transfer, a substantial reduction in exposure by security sellers after any business news, intermediaries changing hedges after a major market change, and rushed securitization issuers finding a funding source.
Incorrect
Ownership companies are more susceptible to drying up market liquidity, resulting in a possible short-term failure to conduct financial transactions at the targeted time, form of mechanism and scale of transaction. Of example, the need for liquidity may involve, in the particular case of credit risk transfer, a substantial reduction in exposure by security sellers after any business news, intermediaries changing hedges after a major market change, and rushed securitization issuers finding a funding source.
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Question 29 of 30
29. Question
Classical economics books say that market liquidity is, in the more general case, associated with the simplicity of which financial securities may be exchanged. With regard to the best recognized (and transparent) debt instruments, market liquidity is based on one of the following. Choose the right one.
Correct
The competitiveness of the business relies on industry tightness, scope and durability.Both three lead to timely implementation of instructions. A market is tight because there are restricted buying and sales orders on file, or fresh orders can not be performed without causing big price changes. Lack of openness raises this risk, expecting unforeseen losses when customers do not come forward. A demand is wide when orders put in it exceed a level adequate to conduct very significant quantities without exerting noticeable effects on rates. If demand fluctuations are robust. New orders that seek to counter current imbalances are drawn by surplus demand or excess supply.
Incorrect
The competitiveness of the business relies on industry tightness, scope and durability.Both three lead to timely implementation of instructions. A market is tight because there are restricted buying and sales orders on file, or fresh orders can not be performed without causing big price changes. Lack of openness raises this risk, expecting unforeseen losses when customers do not come forward. A demand is wide when orders put in it exceed a level adequate to conduct very significant quantities without exerting noticeable effects on rates. If demand fluctuations are robust. New orders that seek to counter current imbalances are drawn by surplus demand or excess supply.
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Question 30 of 30
30. Question
In a market with a central electric trading order book, tightness can be measured by:
Correct
In a market with a central electronic trading order book, tightness may be measured by the bid / ask spread in bank quotes and the overall buy or selling amount of OTC.
Incorrect
In a market with a central electronic trading order book, tightness may be measured by the bid / ask spread in bank quotes and the overall buy or selling amount of OTC.