Which one of the following four statements about preferred shares is INCORRECT?

• A.Preferred shares can be perpetual or have maturities far exceeding debt maturities.
• B.Preferred shares represent residual of a corporation after its other liabilities have been paid.
• C.Preferred shares are subordinated to debt.
• D.Preferred shares refer to a class of securities that is a cross between equity and debt.

Comment: *

Name: *

Email: *

Verification: *

Gamma Bank provides a $100,000 loan to Big Bath retail stores at 5% interest rate (paid annually). The loan is
collateralized with $55,000. The loan also has an annual expected default rate of 2%, and loss given default at
50%. In this case, what will the bank's exposure at default (EAD) be?

• A.$25,000
• B.$50,000
• C.$105,000
• D.$75,000

Comment: *

Name: *

Email: *

Verification: *

To estimate the price of gold forwards, an investment analyst focuses on the cost of holding physical gold
(bullion) and the cost of shorting the same. Given that physical gold spot price is $1,000, the annual risk-free
rate is 5%, and the gold lease rate equals 2% annually, the analyst's best estimate of the gold forward price to
equal

• A.$950
• B.$1100
• C.$1030
• D.$1070

Comment: *

Name: *

Email: *

Verification: *

BetaFin, a financial services firm, does not have retail branches, but has fixed income, equity, and asset
management divisions. Which one of the four following risk and control self-assessment (RCSA) methods fits
the firm's operational risk framework the best?

• A.RCSA workshop approach
• B.RCSA loss data approach
• C.RCSA questionnaire approach
• D.RCSA scenario analysis approach

Comment: *

Name: *

Email: *

Verification: *

Bank G has a 1-year VaR of USD 20 million at 99% confidence level while bank H has a 1-year VaR of USD
10 million at 95% confidence level. Which bank is in a more risky position as measured by VaR?

• A.Both banks are equally risky since the measurements are with the same confidence level.
• B.Since the confidence levels are not the same we cannot make any conclusions.
• C.Bank H is taking twice the risk of bank G as measured by VaR.
• D.Bank G is taking twice the risk of bank H as measured by VaR.

Comment: *

Name: *

Email: *

Verification: *