National Institute of

Bank Management

 sanjeev kumar

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 MODULE II : KEY RISKS AND THEIR MEASUREMENT - CREDIT RISK
 Chapter 2: Quiz

Started on Tuesday, 15 August 2023, 2:41 PM

 State Finished

Completed on Tuesday, 15 August 2023, 2:46 PM

Time taken 4 mins 26 secs

Question 1
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Question text
Which parameter would be most important when assessing a lower investment grade
borrower
Select one:
a. EAD
b. PD

c. LGD
d. Maturity
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The correct answer is: LGD

Question 2
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Which one of the following is not a parameter for facility rating
Select one:
a. Guarantees
b. Management
c. Collateral
d. Covenants
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The correct answer is: Management

Question 3
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Which parameter is usually given the highest weightage in judgemental scoring methods
practiced in banks in India
Select one:
a. Business risk

b. Industry risk
c. Management risk
d. Financial risk
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The correct answer is: Financial risk

Question 4
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Apart from discriminant analysis, which other statistical method can be used to arrive at
credit scoring of borrowers
Select one:

a. Regression analysis
b. Correlation analysis
c. Analysis of variance
d. Logistic regression analysis
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The correct answer is: Logistic regression analysis

Question 5
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As per Basel norms, how many standard grades must a bank have
Select one:

a. 3
b. 10
c. 5
d. 7
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The correct answer is: 7

Question 6
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The new Z score default prediction model for Indian firms is based on
Select one:
a. Four ratios
b. Five ratios
c. Three ratios
d. Six ratios
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The correct answer is: Five ratios

Question 7
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Which of the following ratios has the highest weightage in the Altmann's Z score model
Select one:
a. Net working capital to Total assets
b. Operating profit to Total assets
c. Sales to Total assets
d. Cash profit to Total assets
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The correct answer is: Operating profit to Total assets

Question 8
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If the Z value for a borrower is equal to zero, then the 1-year default rate would be
Select one:
a. 1%
b. 0%
c. 10%
d. 100%
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The correct answer is: 100%

Question 9
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Backtesting of a credit scoring model developed on a test population of retail borrowers
involves
Select one:
a. Compare the projections made with actual data for a set of samples from the same population
b. Compare the projections made with actual data for a set of samples from a different population
c. Compare the projections made with the entire set of data a different population
d. Compare the projections made with the entire set of data for the same population
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The correct answer is: Compare the projections made with actual data for a set of samples from
the same population

Question 10
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A credit scoring model used for retail loans in a bank can be backtested by
Select one:
a. External auditors
b. The bank itself
c. Reserve Bank
d. Rating agencies
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The correct answer is: The bank itself
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