Which of the Following Statements Is True

question 37

Multiple Choice

Which of the following statements is true?

• A)Operational risk is not considered to be important in FI's and thus regulatory authorities assume that it is captured by an FI's general risk management framework.
• B)Operational risk is considered to be important and thus the Basel Committee requires FI's to provision against their operational risk exposures.
• C)Operational risk is considered to be important and thus the Basel Committee requires FI's to allocate capital against their operational risk exposures.
• D)Operational risk is considered to be important; however, regulators are aware that FI's have well-functioning operational risk defence mechanisms in place.

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Definitions:

Present Value

The immediate value of a future stream of income or lump sums of money, assessed with a specific interest rate in mind.

Nominal Rate

The interest rate stated on a financial instrument, without adjustment for the full effect of compounding or inflation.

Annuity

A financial product that pays out a fixed stream of payments to an individual, often used as part of retirement strategies.

Times Interest Earned

A metric assessing a firm's capability to fulfill its debt requirements using its earnings prior to interest and taxes.