Preview Questions Financial Analyst | Role Specific Skill

Question 1: How does a high public debt-to-GDP ratio affect BFSI institutions?

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Increases lending risks

Raises interest rates

Reduces economic growth

All of the above

Question 2: Which of the following is a key component of the CreditRisk+ model developed by Credit Suisse for credit risk management in financial reporting?

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It applies a Normal distribution to estimate loss given default

It uses a binomial probability distribution

It utilizes a Markov chain to simulate credit rating transitions

It relies on a Poisson distribution to model the number of defaults

Question 3: What type of analysis should be used to evaluate a company's financial stability before adding it to a growth-oriented portfolio?

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Discounted cash flow (DCF) analysis

Technical analysis

Price-to-sales ratio analysis

Value-at-risk (VaR) analysis

Question 4: How should an analyst model the capital adequacy ratio (CAR) in a financial model for a bank?

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By calculating the ratio as equity divided by risk-weighted assets

By including both regulatory capital and leverage ratios

By forecasting total assets and dividing by equity

By adjusting the ratio based on historical trends

Question 5: When projecting future credit card charge-offs, which advanced modeling technique effectively accounts for macroeconomic stress scenarios, customer-level credit attributes, and potential structural breaks due to regulatory interventions?

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Simple fixed-percentage stress add-on to historical charge-offs

Linear regression on historical charge-off rates without controls

ARIMA with seasonal adjustments but no macro factors

Survival analysis model with borrower-level attributes and scenario-conditioned macro assumptions

Question 6: How does the Debt-to-Equity (D/E) ratio affect the credit risk assessment of a financial institution in its financial reporting?

Which action should you take?

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A lower D/E ratio indicates higher credit risk

The D/E ratio has no impact on credit risk assessment

A higher D/E ratio indicates lower financial leverage

A higher D/E ratio suggests greater financial leverage and potentially higher credit risk