Question 1

Non-performing loans are loans:

Accepted Answer

A)  given out to corporations with low credit ratings. 
B)  that require re-evaluating of credit terms after every six months. 
C)  characterised by some type of default-from non-payment to delays in payment of interest and/or principal. 
D)  None of the listed options are correct. 
A)  given out to corporations with low credit ratings. 
B)  that require re-evaluating of credit terms after every six months. 
C)  characterised by some type of default-from non-payment to delays in payment of interest and/or principal. 
D)  None of the listed options are correct.

Question 2

Consider the following data of a prospective borrower.   What is this company's Z score?

Accepted Answer

A)  2.70 
B)  2.80 
C)  2.90 
D)  3.00 
A)  2.70 
B)  2.80 
C)  2.90 
D)  3.00

Question 3

Which of the following statements is true?

Accepted Answer

A)  Cumulative default probability is the probability that a borrower will default over a specified multi-year period. 
B)  Cumulative default probability is the probability that a borrower will default in any given year. 
C)  Marginal default probability is the probability that a cluster of borrowers will default over a specified multi-year period. 
D)  None of the listed options are correct. 
A)  Cumulative default probability is the probability that a borrower will default over a specified multi-year period. 
B)  Cumulative default probability is the probability that a borrower will default in any given year. 
C)  Marginal default probability is the probability that a cluster of borrowers will default over a specified multi-year period. 
D)  None of the listed options are correct.

Question 4

The current required yields on one- and two-year government bonds are i1 = 12 per cent and i2 = 13 per cent. What are the market's expectations of the one-year forward rate, f1 (round to two decimals)?

Accepted Answer

A)  13.50 per cent 
B)  14.00 per cent 
C)  14.50 per cent 
D)  15.00 per cent 
A)  13.50 per cent 
B)  14.00 per cent 
C)  14.50 per cent 
D)  15.00 per cent

Question 5

Using term structure derivation of credit risk on a one-year loan, it is possible to simply calculate the risk premium on the loan by deducting the market rate for a one-year zero-coupon government bond from the market rate for a one-year zero-coupon corporate bond of a credit rating equivalent to that of the prospective borrower.

Accepted Answer

A) True 
 B)False

Non-performing loans are loans:

Consider the following data of a prospective borrower. What is this company's Z score?

Which of the following statements is true?

The current required yields on one- and two-year government bonds are i₁ = 12 per cent and i₂ = 13 per cent. What are the market's expectations of the one-year forward rate, f₁ (round to two decimals)?

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

The Financial Services Industry: Other Financial Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Repricing Model

Interest Rate Risk Measurement: the Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Sovereign Risk

Foreign Exchange Risk

Liquidity Risk

Liability and Liquidity Management

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters

Exam 10: Credit Risk I: Individual Loan Risk

Non-performing loans are loans:

Consider the following data of a prospective borrower. What is this company's Z score?

Which of the following statements is true?

The current required yields on one- and two-year government bonds are i1 = 12 per cent and i2 = 13 per cent. What are the market's expectations of the one-year forward rate, f1 (round to two decimals)?

Why Are Financial Institutions Special

The Financial Services Industry: Depository Institutions

The Financial Services Industry: Other Financial Institutions

Risk of Financial Institutions

Interest Rate Risk Measurement: The Repricing Model

Interest Rate Risk Measurement: the Duration Model

Managing Interest Rate Risk Using Off Balance Sheet Instruments

Credit Risk I: Individual Loan Risk

Market Risk

Credit Risk II: Loan Portfolio and Concentration Risk

Sovereign Risk

Foreign Exchange Risk

Liquidity Risk

Liability and Liquidity Management

Off-Balance-Sheet Activities

Technology and Other Operational Risk

Capital Management and Adequacy

Filters

The current required yields on one- and two-year government bonds are i₁ = 12 per cent and i₂ = 13 per cent. What are the market's expectations of the one-year forward rate, f₁ (round to two decimals)?