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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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