Question 1

Historical simulation and model based approach are the methods to calculate:

Accepted Answer

Historical simulation and model-based approaches are methods used to calculate Value at Risk (VaR), which measures the potential loss in value of a portfolio over a defined period for a given confidence interval.

Question 2

IF a securitization transaction meets FAS 125 sale or servicing criteria, the seller must recognize any gain or loss on the sale of the pool immediately and carry any retained interests in the assets sold ( including servicing rights/obligation and interest-only strips) at ____________.

Accepted Answer

According to FAS 125, when a securitization transaction qualifies as a sale, any retained interests, including servicing rights and interest-only strips, must be carried at fair value.

Question 3

Back-office operations are _____________ as offshore operations which establish business entities in tax-free export zones or offshore centers.

Accepted Answer

Back-office operations are not the same as offshore operations. Offshore operations involve setting up business entities in tax-free zones or offshore centers, which is a broader concept than just back-office functions.

Question 4

Hospitals document reserves as that portion of the accounts receivables that they hope to collect but have some doubt about its collectability. Rather than book these amounts as income, hospitals will "____________" These amounts until paid.

Accepted Answer

Hospitals document reserves as a portion of accounts receivables that they are uncertain about collecting. They use the term "reserve" to account for these amounts until they are paid, rather than booking them as income.

Question 5

Selectively increasing the price of a mortgages loan above the bank's established rate to certain customers ("overages") may have the effect of discriminating against those customers .This practice left undetected and not properly controlled may raise the possibility of:

Accepted Answer

Litigation or regulatory action (compliance Risk) is the correct answer because selectively increasing the price of a mortgages loan above the bank's established rate to certain customers ("overages") may have the effect of discriminating against those customers. This practice left undetected and not properly controlled may raise the possibility of litigation or regulatory action.

Question 6

Which of the following should be the next step after the structuring process in order to complete the securitization process?

Accepted Answer

The answer of Which of the following should be the...

Question 7

Which one of the following is common misinterpretation during the calculation of VaR

Accepted Answer

All the options describe common misinterpretations of VaR, including assumptions about portfolio management, reliance on historical data, and misunderstanding the potential magnitude of losses.

Question 8

Initially, back-office operation were created as captives of parent companies and treated as cost centers from cost centers to profit centers due to:

Accepted Answer

The shift from cost centers to profit centers is due to the emergence of third-party facilities and corporations converting captive operations into profit centers by taking on external clients.

Question 9

The process of purchasing all or any part of anew issue of municipal securities form the issuer and offering such securities for sale to investors is called:

Accepted Answer

Underwriting is the process where an underwriter purchases new issues of municipal securities from the issuer and then sells them to investors.

Question 10

The primary mechanism for estimating potential losses is mathematical methodology, value at risk ("VaR") which estimates the exposure to market risk:

Accepted Answer

VaR estimates the potential loss in value of a portfolio over a defined time period for a given confidence interval or level of risk.

Question 11

An intelligent risks management platform approaches risk from the:

Accepted Answer

The answer of An intelligent risks management platform approaches risk...

Question 12

Regulation D, an SEC rule governing the limited offer and sale of securities without registration under the securities Act of 1933, regulates private placement exemptions. Regulation D supports all of the following EXCEPT:

Accepted Answer

All the statements A, B, and C accurately describe the benefits and allowances under Regulation D, so none of them are exceptions.

Question 13

EFRAG is the abbreviation of:

Accepted Answer

The answer of EFRAG is the abbreviation of:
...

Question 14

Recent turmoil in the financial markets illustrate the volatility of the secondary market for subprime loans and the significant liquidity risk incurred when originating a large volume of loans intended for:

Accepted Answer

The secondary market for subprime loans involves securitizing and selling these loans, which can be volatile and pose liquidity risks when a large volume is originated.

Question 15

Strategic Risk if not properly controlled, understood or measured may result in:

Accepted Answer

Strategic Risk if not properly controlled, understood or measured may result in High Earnings volatility and Significant capital pressures.

Question 16

To the extent that the hedged relationship ceases to be effective, the hedging instrument's gains/losses should be transferred from the reserve and recognized in:

Accepted Answer

The answer of To the extent that the hedged relationship...

Question 17

Some organizations will strive to simply with the law; others will use the Act as an opportunity to further promote treasury best practices. Specific areas of opportunity include all of the following EXCEPT:

Accepted Answer

All the options listed (A, B, C) are areas of opportunity for organizations to promote treasury best practices, so none of them are exceptions.

Question 18

Risk assessment may be:

Accepted Answer

Risk assessment can be both quantitative and qualitative, as it often involves numerical data analysis as well as subjective judgment.

Question 19

To limit strategic risk management should ensure proper balance between the:

Accepted Answer

Strategic risk management involves aligning the company's risk appetite with its resources and controls to ensure risks are managed effectively.

Question 20

Under the principles of bank accounting, loans reported as non-performing have not yet been charged off as _____________.

Accepted Answer

Non-performing loans are loans on which the borrower is not making interest payments or repaying any principal. They are not yet charged off as losses, but they are not generating income.

Exam 1: Certified Financial Services Auditor