Easy Frm Part 2 Practice Questions

141 free easy-difficulty Frm Part 2 questions, drawn live from KomFi's calibrated bank. Build the foundation first: these test the core mechanics every harder question assumes.

1. According to the structural Merton model, the equity of a levered firm can be viewed as which type of derivati
2. What is the primary reason why risk-neutral probabilities of default (PD) extracted from credit spreads are ge
3. If the exposure is $100,000 and the LGD is 50%, what is the implied Probability of Default (PD)?
4. For a highly rated AAA corporate bond, the EL is typically very low because:
5. If a firm's leverage increases (Assets V stay same, Debt F increases), how does the Merton model predict the P
6. If an investor owns a bond and buys a CDS on that same bond from a highly rated bank, they have primarily elim
7. In a CDS valuation model, what does the 'Survival Probability' S(t) represent?
8. In a standard single-name credit default swap (CDS) contract, which of the following best describes the primar
9. In a structural model, the 'default risk premium' is represented by the gap between:
10. What is the implied CCF?
11. Structural models generally require which set of primary inputs to estimate a firm's default probability?
12. Under IFRS 9 accounting, 'Stage 1' assets require a provision based on:
13. Under the 'Black-Cox' extension of the Merton model, default can occur whenever asset value hits a barrier. Th
14. What does the term 'RPV01' (Risky PV01) represent in the context of credit default swap valuation?
15. Which component of a credit default swap represents the expected present value of the contingent payment made
16. Which of the following describes 'physical settlement' in a CDS contract?
17. Which of the following events is generally considered a 'credit event' that would trigger the protection leg o
18. Which parameter in the EL formula is most likely to be affected by the presence of high-quality physical colla
19. What is 'Wrong-Way Risk' in the context of counterparty credit risk?
20. A bank enters into a long USD / short TRY (Turkish Lira) forward contract with a Turkish commercial bank. If t
21. Which bank is likely using a more 'Point-in-Time' (PIT) focused rating system?
22. An institutional desk buys Credit Default Swap (CDS) protect… — Which structural flaw is most prominent in thi
23. An institutional validation unit reports that a newly develo… — What is the corresponding Accuracy Ratio (AR)
24. If a bank utilizes a 'Through-the-Cycle' (TTC) approach, what will likely be observed in the realized default
25. If a transition matrix is 'Through-the-Cycle' (TTC), what is the expected behavior of the ratings when the eco
26. In a 'Point-in-Time' (PIT) rating system, what happens to the transition matrix during an economic expansion?
27. Specific Wrong-Way Risk is most likely to be found in which of the following transactions?
28. Under the Markov assumption, if M is a one-year transition matrix, how is the two-year transition matrix calcu
29. What is the mathematical requirement for the sum of all probabilities in any single row of a transition matrix
30. What is the result of multiplying a row vector representing the current portfolio distribution (by rating) by

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