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Long Quiz FRA

Type : Graded Quiz

Attempts : 1/1

Questions : 15

Time : 50m
Due Date : Nov 21, 11:00 PM

Your Score : 30/40

Instructions

Attempt History

Attempt #1
Marks: 30
Oct 24, 1:24 AM

Q No: 1 Correct Answer

Marks: 3/3
When you want to purchase a house, which of the following statements is true?

A high credit risk will give you the lowest interest rate

A high credit risk will give you more money to use

A low credit risk will give you a higher interest rate

A low credit risk will give you the lowest interest rate You Selected
Q No: 2 Correct Answer

Marks: 3/3
All the following are required for credit loan except

Collateral

Child information You Selected

Personal information

Income information

Q No: 3 Incorrect Answer

Marks: 0/3

Which of the following is not a source of financial risk?

marketing mix Correct Option

exchange rates

credit terms

interest rates You Selected

Q No: 4 Correct Answer

Marks: 3/3

Define PD as the (expected) probability of default and LGD as the loss given default. Take
EAD, exposure at default, as fixed and ignore it. At a portfolio level, expected credit losses
are driven by:
 PD only

expected LGD only

PD and expected LGD only You Selected

neither of these

Q No: 5 Correct Answer

Marks: 3/3

The risk from default is made up of:

1. the probability that the firm will default.

2. the amount or value that is involved.
3. the amount or value that can be recovered.
4. the nature of the contract entered into. 

Which of these statements is/are correct?

1&2

1&3

1, 3 & 4

All of them You Selected

Q No: 6 Incorrect Answer

Marks: 0/2

What is meant by ‘concentration risk’ in the context of credit risk management?

 The risk that a large number of counterparties default at the same time.

The risk that a large number of counterparties share common risk Correct Option
characteristics.

There is a strong positive correlation in the historical behavior of credit sensitive assets
in a portfolio.

All of them You Selected

Q No: 7 Correct Answer

Marks: 2/2

If one accepts a ____ as a ____, the result will be ____ than expected ____. Which of the
following is correct?

poor credit good credit higher losses You Selected

poor credit poor credit higher profits

good credit good credit lower profits

poor credit poor credit higher losses

Q No: 8 Correct Answer

Marks: 2/2

In the context of credit risk management, what is meant by risk pricing?

 It is an increase in the price to reflect expected credit losses.

It is an increase in the interest rate charged by banks to their customers to cover

expected credit losses.

It is an evaluation of the price to charge a customer taking trade credit to reflect the
probability of default.

All of A, B and C. You Selected

Q No: 9 Correct Answer

Marks: 2/2

Altman’s Z Score Model (1968) specifies z as

Z (Public) = 1.2X(1) + 1.4X(2) + 3.3 X(3) + 0.6 X(4) + 1.0 X(5)

Where if the company is healthy if z > ?

2.99 You Selected

1.99

Q No: 10 Incorrect Answer

Marks: 0/2

A data analyst fits a linear regression model to explain how CIBIL score predicts the outcome
of a loan approval process: whether the loan is approved or rejected. He uses the following
classification rule: If the estimated value of y (the response variable) is more than 0.5, the
corresponding loan is classified as 1; else, zero. Which of the following is true about the
model?

The classification rule is not sensitive to presence of outliers

The estimated value is not bounded between 0 and 1 Correct Option

Both (a) and (b) are true

Both (a) and (b) are false You Selected

Q No: 11 Correct Answer

Marks: 3/3

Suppose the coefficients of a logistic regression model with two independent variables are as
follows: b0 = -6, b1 = 0,  b2 = 1. b1 corresponds to x1 and b2 corresponds to x2. Assume that
you use a threshold of 0.5 for classification. Which of the following represents the correct
classification boundary?

y = 1 if x1 > 6

y = 1 if x2 > 6 You Selected

y = 1 if x1 < 6

y = 1 if x2 < 6

Q No: 12 Correct Answer

Marks: 3/3

The ideal debt-to-income ratio to achieve a top credit scores is:

 
 30%

90%

0% You Selected

10%

Q No: 13 Correct Answer

Marks: 3/3

Which of the following is usually a good generic credit score? 

400

600

500

700 You Selected

Q No: 14 Correct Answer

Marks: 3/3

Which of the following actions helps a consumer raise a low score or maintain a high one? 

 
 Make all loan payments on time

Keep credit card balances under 25% of the credit limit

Avoid opening several credit card accounts at the same time

All of these You Selected

Q No: 15 Incorrect Answer

Marks: 0/3

 Which of the following IS NOT one of the three major credit bureaus?

Experian

Fair Isaacs Correct Option

Equifax

TransUnion You Selected

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