Preview Questions Financial Analyst | Role Specific Skill

Question 1: To fully capture the interest rate risk of a banking book, which advanced risk measure is more apt than simple duration, given nonlinear exposures to changing yield curves?

Which action should you take?

Choose only one option

OAS Duration

Convexity-Adjusted Duration

Key Rate Duration

PVBP (Price Value of a Basis Point)

Question 2: What does the term "stress testing" refer to in the context of risk assessment for banks?

Which action should you take?

Choose only one option

Analyzing the impact of changes in interest rates

Testing the bank's creditworthiness

Assessing the bank's ability to handle market volatility

Simulating the bank's operations under extreme adverse conditions

Question 3: When evaluating a fixed income investment, how do you determine its risk-adjusted return?

Which action should you take?

Choose only one option

I ignore duration and use only the coupon rate for analysis

I assume a constant return for all fixed income investments

I calculate its yield to maturity (YTM), duration, and apply a risk premium for interest rate changes

I rely on its credit rating and historical returns to determine its value

Question 4: Which of the following accounting techniques would be most applicable when analyzing the recognition of revenue for a financial service provider?

Which action should you take?

Choose only one option

Revenue recognition based on IFRS 15

Accrual accounting

Matching principle

Cash basis accounting

Question 5: To assess the creditworthiness of a bond issuer, which of the following would you use?

Which action should you take?

Choose only one option

Credit spread analysis

Duration analysis

Earnings before interest and taxes (EBIT)

Yield to maturity (YTM)

Question 6: In budgeting for capital expenditures, which approach is typically used in the BFSI sector to forecast future needs?

Which action should you take?

Choose only one option

Incremental budgeting, where each year's budget is adjusted based on last year's expenditure

Top-down budgeting, using historical capital expense data

Bottom-up budgeting, based on individual project estimates

Zero-based budgeting, where all expenses must be justified from scratch