SOLVED CAIIB COMBINED PAPER 36:
1. A bank has computed its
Tier I capital - Rs. 2000 Crores.
Tier-II Capital - Rs 1200 Crores.
RWAs for Credit Risk - Rs 15,000 Crores.
Capital charge for market risk - Rs 600 Crores.
Capital charge for operational risk - Rs 400 Crores.
What would be the bank's Tier-I CRAR?
a. 2.83
b. 3.83
c. 6.77
d. 7.66
Ans - d
Solution
RWAs for Credit Risk = Rs 15,000 Crores
RWAs for Market Risk = Rs 600/.09 = Rs 6,667 Crores
RWAs for Operational Risk = Rs 400/.09 = Rs 4,444 Crores
Total RWAs = Rs 26,111 Crores
Tier I Capital = Rs 2,000 Crores
Tier-I CRAR = (Eligible Tier I capital funds)*100/(Total RWAs) = 2000/26111 = 7.66%.
2. If Daily Volatility is 1.5%, what will be the monthly Volatility ?
a. 8.33
b. 8.22
c. 9.22
d. 9.33
Ans - b
Solution
= 1.5 X ∫30 = 1.5 X 5.48 = 8.22
3. From the operational risk management point of view banking business lines have been grouped in how many major heads?
a. 4
b. 3
c. 5
d. 2
Ans - b
4. Return on Zero-Risk investment would be ...... as compared to other opportunities available in the market.
a. High
b. Low
c. Equal
d. Either Low or High
Ans - b
5. Capital charge component of pricing accounts for
1. Cost of capital
2. Internal generation of capital
3. Loss provision
Which of the following is True?
a. All the statements are correct
b. Statements 1 and 2 are correct
c. Statements 2 and 3 are correct
d. Statements 3 and 1 are correct
Ans - d
6. An 8-year 8% semi-annual bond has a BPV of Rs 125. The yield on the bond has increased by 5 basis points. What is the profit or loss suffered due to increase in yield?
a. A profit of Rs 1000
b. A profit of Rs 625
c. A loss of Rs 1000
d. A loss of Rs 625
Ans - d
7. Daily volatility of a stock is 0.5%. What is its 10-day volatility?
a. 5%
b. 0.25%
c. 1.58%
d. None of these
Ans - c
Solution
Daily volatility * square root of t.
Here daily vol is 0.5% nd t is 10 then 0.5 * square root of 10 = 1.58%
8. When return on business is worked out by netting the risk in business, it is called as?
a. Return on investment
b. Risk netted return on equity
c. Risk adjusted return on investment
d. Risk based system
Ans - c
9. 8% Government of India security is quoted at RS 120/- The current yield on the security, will be ......
a. 12%
b. 9.6%
c. 6.7%
d. 8%
Ans - c
10. A debenture of face value of As. 100 carries a coupon of 15%. If the current yield is 12.5%. What is the current market price ?
a. Rs.100
b. Rs.120
c. Rs.150
d. Rs.125
Ans - b
11. A bank has computed its
Tier I capital -Rs. 1000 Crores.
Tier-II Capital -Rs 1200 Crores.
RWAs for Credit Risk -Rs 15,000 Crores.
Capital charge for market risk -Rs 600 Crores.
Capital charge for operational risk -Rs 400 Crores.
What would be the bank's total RWAs?
a. 18,889 Crores
b. 21,161 Crores
c. 26,111 Crores
d. 26,141 Crores
Ans - c
Solution :
RWAs for Credit Risk = Rs 15,000 Crores
RWAs for Market Risk = Rs 600/.09 = Rs 6,667 Crores
RWAs for Operational Risk = Rs 400/.09 = Rs 4,444 Crores
Total RWAs = 15000+6667+4444 = Rs 26,111 Crores
12. Which is not to be taken into account for pricing?
a. Operating Expenses
b. Loss Probabilities
c. Profit Probabilities
d. Capital Charges
Ans - c
Tier I capital - Rs. 2000 Crores.
Tier-II Capital - Rs 1200 Crores.
RWAs for Credit Risk - Rs 15,000 Crores.
Capital charge for market risk - Rs 600 Crores.
Capital charge for operational risk - Rs 400 Crores.
What would be the bank's Tier-I CRAR?
a. 2.83
b. 3.83
c. 6.77
d. 7.66
Ans - d
Solution
RWAs for Credit Risk = Rs 15,000 Crores
RWAs for Market Risk = Rs 600/.09 = Rs 6,667 Crores
RWAs for Operational Risk = Rs 400/.09 = Rs 4,444 Crores
Total RWAs = Rs 26,111 Crores
Tier I Capital = Rs 2,000 Crores
Tier-I CRAR = (Eligible Tier I capital funds)*100/(Total RWAs) = 2000/26111 = 7.66%.
2. If Daily Volatility is 1.5%, what will be the monthly Volatility ?
a. 8.33
b. 8.22
c. 9.22
d. 9.33
Ans - b
Solution
= 1.5 X ∫30 = 1.5 X 5.48 = 8.22
3. From the operational risk management point of view banking business lines have been grouped in how many major heads?
a. 4
b. 3
c. 5
d. 2
Ans - b
4. Return on Zero-Risk investment would be ...... as compared to other opportunities available in the market.
a. High
b. Low
c. Equal
d. Either Low or High
Ans - b
5. Capital charge component of pricing accounts for
1. Cost of capital
2. Internal generation of capital
3. Loss provision
Which of the following is True?
a. All the statements are correct
b. Statements 1 and 2 are correct
c. Statements 2 and 3 are correct
d. Statements 3 and 1 are correct
Ans - d
6. An 8-year 8% semi-annual bond has a BPV of Rs 125. The yield on the bond has increased by 5 basis points. What is the profit or loss suffered due to increase in yield?
a. A profit of Rs 1000
b. A profit of Rs 625
c. A loss of Rs 1000
d. A loss of Rs 625
Ans - d
7. Daily volatility of a stock is 0.5%. What is its 10-day volatility?
a. 5%
b. 0.25%
c. 1.58%
d. None of these
Ans - c
Solution
Daily volatility * square root of t.
Here daily vol is 0.5% nd t is 10 then 0.5 * square root of 10 = 1.58%
8. When return on business is worked out by netting the risk in business, it is called as?
a. Return on investment
b. Risk netted return on equity
c. Risk adjusted return on investment
d. Risk based system
Ans - c
9. 8% Government of India security is quoted at RS 120/- The current yield on the security, will be ......
a. 12%
b. 9.6%
c. 6.7%
d. 8%
Ans - c
10. A debenture of face value of As. 100 carries a coupon of 15%. If the current yield is 12.5%. What is the current market price ?
a. Rs.100
b. Rs.120
c. Rs.150
d. Rs.125
Ans - b
11. A bank has computed its
Tier I capital -Rs. 1000 Crores.
Tier-II Capital -Rs 1200 Crores.
RWAs for Credit Risk -Rs 15,000 Crores.
Capital charge for market risk -Rs 600 Crores.
Capital charge for operational risk -Rs 400 Crores.
What would be the bank's total RWAs?
a. 18,889 Crores
b. 21,161 Crores
c. 26,111 Crores
d. 26,141 Crores
Ans - c
Solution :
RWAs for Credit Risk = Rs 15,000 Crores
RWAs for Market Risk = Rs 600/.09 = Rs 6,667 Crores
RWAs for Operational Risk = Rs 400/.09 = Rs 4,444 Crores
Total RWAs = 15000+6667+4444 = Rs 26,111 Crores
12. Which is not to be taken into account for pricing?
a. Operating Expenses
b. Loss Probabilities
c. Profit Probabilities
d. Capital Charges
Ans - c