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GARP 2016-FRR Exam - Topic 3 Question 19 Discussion

A credit analyst wants to determine a good pricing strategy to compensate for credit decisions that might have been made incorrectly. When analyzing her credit portfolio, the analyst focuses on the spreads in each loan to determine if they are sufficient to compensate the bank for all of the following costs and risks EXCEPT.
D) The opportunity cost of risk-adjusted marginal cost of capital.
A) The marginal cost of funds provided.
B) The overhead cost of maintaining the loan and the account.
C) The inherent risk of lending to this borrower while providing a return on the risk capital used to the support the loan.

GARP 2016-FRR Exam - Topic 3 Question 19 Discussion

Actual exam question for GARP's 2016-FRR exam
Question #: 19
Topic #: 3
[All 2016-FRR Questions]

A credit analyst wants to determine a good pricing strategy to compensate for credit decisions that might have been made incorrectly. When analyzing her credit portfolio, the analyst focuses on the spreads in each loan to determine if they are sufficient to compensate the bank for all of the following costs and risks EXCEPT.

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Suggested Answer: D

by Tayna at May 05, 2026, 07:09 PM

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Twanna
7 hours ago
Wait, are we sure about that? Seems like it could still matter.
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Nikita
5 days ago
Totally agree, that one doesn't fit with the others!
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Azzie
11 days ago
The opportunity cost of risk-adjusted marginal cost of capital isn't a direct cost.
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Stanton
16 days ago
I think the marginal cost of funds is always included in pricing strategies, but I’m a bit confused about how the opportunity cost fits in with the other options.
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Carry
2 months ago
I feel like the inherent risk of lending is crucial, but I can't recall if the opportunity cost is something we typically consider in this context.
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Bobbie
2 months ago
This question seems similar to one we practiced on spreads and costs. I think the overhead cost is definitely a factor, but I’m unsure about option D.
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Gracia
2 months ago
I remember studying about the costs associated with lending, but I'm not entirely sure about the opportunity cost of risk-adjusted marginal cost of capital.
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