## 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?

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

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

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

b. 8.22

c. 9.22

d. 9.33

**Ans - b**

**Solution**

**= 1.5 X ∫30 = 1.5 X 5.48 = 8.22**

3.

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

b. 3

c. 5

d. 2

**Ans - b**

4.

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

b. Low

c. Equal

d. Either Low or High

**Ans - b**

5.

5.

**Capital charge component of pricing accounts for**

**1. Cost of capital**

2. Internal generation of capital

3. Loss provision

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

b. Statements 1 and 2 are correct

c. Statements 2 and 3 are correct

d. Statements 3 and 1 are correct

**Ans - d**

6.

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

b. A profit of Rs 625

c. A loss of Rs 1000

d. A loss of Rs 625

**Ans - d**

7.

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

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%

Here daily vol is 0.5% nd t is 10 then 0.5 * square root of 10 = 1.58%

8.

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

b. Risk netted return on equity

c. Risk adjusted return on investment

d. Risk based system

**Ans - c**

9.

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%

b. 9.6%

c. 6.7%

d. 8%

**Ans - c**

10.

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

b. Rs.120

c. Rs.150

d. Rs.125

**Ans - b**

11.

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?

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

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

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.

12.

**Which is not to be taken into account for pricing?**

**a. Operating Expenses**

b. Loss Probabilities

c. Profit Probabilities

d. Capital Charges

b. Loss Probabilities

c. Profit Probabilities

d. Capital Charges

**Ans - c**