GARP Exam 2016-FRR Topic 2 Question 1 Discussion

Actual exam question for GARP's 2016-FRR exam

Question #: 1
Topic #: 2

[All 2016-FRR Questions]

Which one of the following four statements about economic capital of a bank is correct?

AEconomic capital measures how the economy is doing compared to the bank.

BEconomic capital reflects the possible losses that could occur based on the bank's own estimates of the risks it is taking.

CEconomic capital is determined by rules imposed by an external authority.

DEconomic capital is the present value of the earnings generated by the bank in the future.

Show Suggested Answer

Suggested Answer: B

by An at May 02, 2025, 06:55 AM

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Denny

Wow, this is a tough one. I'm going to have to go with my gut and say B. But who knows, maybe the bank's accountants are just making this stuff up as they go along.

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Sharan

1 days ago

Haha, good one C! I think you've confused economic capital with something else entirely. Option B is the way to go, trust me.

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Quiana

2 days ago

I'm going with D. Economic capital is just the bank's future earnings, right? Easy money!

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Kanisha

7 days ago

Hmm, I'm torn between B and C. Isn't economic capital also about meeting regulatory requirements? Either way, this question is making my brain hurt.

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Rosalia

8 days ago

Option B seems to be the correct answer. Economic capital is all about the bank's own risk assessments, not the economy as a whole.

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Ariel

11 days ago

I think the correct statement is B) Economic capital reflects the possible losses that could occur based on the bank's own estimates of the risks it is taking.

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