1.

Consider an FI with the following off-balance-sheet items: A two-year loan commitment with a face value of $120 million, a standby letter of credit with a face value of $10 million and trade-related letters of credit with a face value of $70 million. All counterparties have a credit rating of BBB. What is the total capital amount the FI needs to hold against these exposures? (Assume data obtained from 2020 FI records)

A. $9.87 million

B. $5.04 million C. None of the listed options is correct

D. $7.52 million E.$8.4 million

2.

Assume the dollar market value of an FI's position is $200 000 with a modified duration of 4 years. The potential adverse move in the yield is 16.5 basis points. What is the VAR of the position if the FI is required to hold the position for 5 days (round to two decimals)?

A. $7,920.00

B. $1,320.00

C. $330.00

D. $3,233.00

E. None of the other listed options is correct.

3.

Which of the following statement is TRUE?

A. Prepayment occurs when the borrower refinance because of the increase of the interest rate.

B. None of the other listed options is correct.

C. Prepayment increases the number of payments of the amortized loan and the cash flow before the due date.

D. Prepayment occurs before the due dates for assumed loans.

E. In case of prepayment due to the changes of the interest rate, the lender will reinvest the higher rates.