Question 1

If you consider the income statement of a bank, the interest margin is:
a. The difference between interest income and operating costs
b. The difference between interest income and fees
c. The difference between interest income and interest expenses
d. The difference between interest expenses and interest income

Question 2
If you consider the income statement of a bank, the net operating profit is:
a. The difference between the operating profit and provisions
b. The difference between the operating income and provisions
c. The difference between operating income and operating costs and depreciation
d. The difference between the operating profit and other charges

Question 3
If you consider the income statement of a bank, the operating income is:
a. The sum of interest, fees and trading income
b. The sum of interest, fees and trading income, minus operating costs
c. The sum of net interest, net fees and net trading income
d. The difference between net interest and operating costs

Question 4
Inside the balance sheet of a bank, securities can be inserted in the following asset classes:
a. Financial assets for trading
b. Financial assets for trading and other financial assets
c. Fixed assets
d. Financial assets for trading and fixed assets

Question 5
Inside the balance sheet of a bank, the amount of regulatory capital is driven by:
a. The amount of total assets and of their risks
b. The amount of total asset and of their risks, minus the amount liabilities
c. The amount of total assets
d. The investment of shareholders

Question 6
A bank can be defined as “Universal” when it offers financial services to:
a. Corporates, FIG, Govies and HNWIs
b. Corporates, FIG, Govies, HNWIs and SMEs
c. Corporates, FIG, States, HNWIs, SMEs and individuals
d. Corporates, FIG, Govies, HNWIs, SMEs and individuals

Question 7
Universal banks are allowed to operate:
a. In EU since 1992 (thanks to the Banking Directive) and in Us since 1999 (thanks to
the removal of the Glass Steagall Act)
b. In EU since 1992 (thanks to the Banking Directive) and in Us since 1999 (thanks to
the Volcker Act)
c. In EU since 1999 (thanks to the Banking Directive) and in Us since 1992 (thanks to
the removal of the Glass Steagall Act)
d. In EU since 1992 (thanks to the Financial Services Directive) and in Us since 1999
(thanks to the Volcker Rule)

Question 8
Setting the taxonomy of Corporate and Investment Banking (CIB), we can affirm that:
a. CIB includes six business, whereas four represents the core of CIB
b. CIB includes Investment Banking and Corporate Banking
c. CIB includes seven business, whereas six represents the core of CIB
d. CIB includes four business

Question 9
The profit or EVA of a CIB deal is calculated as:
a. The difference between revenues and cost of regulatory capital
b. The sum between revenues and cost of regulatory capital
c. The difference between revenues and operating costs
d. The cost of regulatory capital minus operating costs

Question 10
The definition of capital market is the following:
a. To advise Corporates, FIG and Govies in raising money from the financial markets
b. To finance Corporates, FIG and Govies using securities
c. To support customers in raising money from investors
d. To finance Corporates, FIG and Govies issuing securities
Question 11
The profit model for primary capital market is based on:
a. Revenues from fees and cost of regulatory capital
b. Revenues from fees, capital gains, only if the bank underwrites, and cost of regulatory
capital only if the bank underwrites
c. Revenues from fees, capital gains, only if the bank underwrites, and cost of regulatory
capital only if the bank manages dealing
d. Revenues from net interest, capital gains, only if the bank underwrite, and cost of
regulatory capital only if the bank underwrites

Question 12
Which of the following definitions of SEO is correct?
a. SEO means a listed company will issue new securities in the stock exchange
b. SEO means a private company will issue new securities in the stock exchange
c. SEO means a private company goes public and issues new securities in the stock
exchange
d. SEO means a listed company will sell securities in the stock exchange

Question 13
Which activities a bank manages in the primary capital market?
a. Origination, advisory, financing and consulting
b. Origination, advisory, selling and underwriting
c. Origination, selling, dealing and underwriting
d. Advisory, origination, consulting and selling

Question 14
Which definition of brokerage is correct?
a. It’s a mandate the bank receives to issue new securities for the customer
b. It’s a mandate the bank receives to find a buyer for securities the customer has
c. It’s a mandate to buy and sell securities the customer has
d. It’s a mandate to finance a customer using securities

Question 15
The profit model of dealing is based on:
a. Fees, capital gain and cost of regulatory capital if the dealing is 100% successful
b. Fees, capital gain and cost of regulatory capital in any case
c. Capital gain and cost of regulatory capital if the dealing is not 100% successful
 d. Fees, capital gain and cost of regulatory capital if the dealing is not 100% successful

Question 16
The activity of market making offered to a customer by a bank consists of:
a. Giving continuously the pricing of a certain security and receiving a fee
b. Giving continuously the pricing of a certain security, to negotiate it and receiving a
fee with a capital gain
c. Buying and selling continuously a certain security, receiving a fee, having a capital
gain with cost of regulatory capital
d. Giving continuously the pricing of a certain security, to negotiate it and receiving a
fee with a capital gain and cost of regulatory capital

Question 17
The profit model of specialist is based on:
a. Capital gain and cost of regulatory capital
b. Fees and cost of regulatory capital
c. Capital gain and fees
d. Fees, capital gain and cost of regulatory capital

Question 18
Consider a bank acting as specialist on a certain security XY. If the bank is listing a price to
buy at 3,20 Euros, it means that:
a. Any investor can buy now any amount of the security XY from the bank at a fixed
price of 3,20 Euros
b. Any investor can sell now any amount of the security XY to the bank at a fixed price
of 3,20 Euros
c. Any investor can buy now any amount of the security XY from the bank at a price
lower than 3,20 Euros
d. Any investor can sell in the coming days any amount of the security XY to the bank at
a fixed price of 3,20 Euros

Question 19
For a bank, the “Prop Trading” activity consists of:
a. Buying and selling securities to have capital gains, with a cost of regulatory capital
b. Buying and selling securities for customers and receiving a fee
c. Holding permanently shares of customers to have an influence in their governances
d. Buying and selling securities for customers and receiving a fee, with a cost of
regulatory capital
Question 20
For “Prop Trading” activity in a bank, the “Volcker Rule” states that:

a. The amount of prop trading cannot exceed the 3% of regulatory capital

b. The amount of prop trading cannot exceed the 3% of deposits
c. The fees from prop trading cannot exceed the 3% of deposits
d. The capital gain from prop trading cannot exceed the 3% of liabilities

Question 21
The Corporate Finance business can be defined as:
e. The advisory on the liability side of customers to support them to take strategic
decisions such as IPO, SEO or PP
f. The advisory on the liability side of customers to support them to take strategic
decisions such as growth, internationalization, diversification, privatization or
restructuring
g. The financing of customers to support them to take strategic decisions such as growth,
internationalization, diversification, privatization or restructuring
h. The advisory on the liability side of customers to support them to take strategic
decisions such as growth, internationalization, diversification, privatization or
restructuring

Question 22
The profit model of Corporate Finance is driven by:
a. Fees and, sometimes, capital gain with a consequent cost of regulatory capital
b. Fees only, even the cross-selling generates more revenues for other business of the
bank
c. Fees only, even the cross-selling could generates more revenues as interest margin
d. Fees, capital gain and cost of regulatory capital

Question 23
Which of the following deals are part of the Corporate Finance business:
a. M&A, carve-out, spin-off, break-up, restructuring
b. M&A, carve-out, spin-off, private placement, break-up
c. Carve-out, spin-off, M&A, SPV
d. SPV, spin-off, break-up, M&A
Question 24
A structured finance deal is based on the following three characteristics:
a. The presence of a SPV, the existence of an asset generating abundant cash flow, the
use of cash flow to repay the debt and the equity of the SPV
b. The presence on a SPV, the existence of an asset generating abundant cash flow, the
use of cash flows to repay the debt inserted in the SPV
c. The acquisition of a SPV, the existence of an asset generating abundant cash flow, the
use of cash flows to repay the debt inserted in the SPV
d. The presence of a SPV, the existence of an asset generating abundant profit, the use of
profit to repay the debt inserted in the SPV

Question 25
If you consider a securitization deal and a LBO deal, the liabilities of the SPV are:
a. Bonds in the LBO and loans in the securitization
b. Bonds and loans in the LBO and loans in the securitization
c. Bonds both in the LBO and in the securitization
d. Loans in the LBO and bonds in the securitization

Question 26
For a Corporate and Investment Bank, the goal of a LBO deal is:
a. To support a customer willing to buy a target company using mostly debt raised
through a SPV, which will be repaid by the target if the acquisition will be successful
b. To buy a target company using mostly debt raised through a SPV, which will be
repaid by the target if the acquisition will be successful
c. To support a customer willing to buy a target company using equity raised through a
SPV
d. To support a customer willing to sell a target company using mostly debt raised
through a SPV, which will be repaid by the target if the acquisition will be successful

Question 27
For a Corporate and Investment Bank, the goal of a securitization deal is:
a. To sell the assets of a customer, finding the buyer through a SPV
b. To buy the assets of a customer, using the money raised issuing debt by a SPV
c. To buy the assets of a customer, issuing bonds and whereas the bondholders become
the owners of the assets
d. To buy the assets of a customer, using the money raised issuing debt and equity by a
SPV
Question 28
Project Financing is a deal whereas the corporate and investment bank:
a. Supports the customer to set-up a SPV to buy an infrastructure, using mostly debt
b. Manages the set-up a SPV, raises equity and debt to buy an infrastructure
c. Advises a coalition of stakeholders to set-up a SPV which, using mostly equity, will
support the construction of an infrastructure
d. Advises a coalition of stakeholders to set-up a SPV which, using mostly debt, will
support the construction of an infrastructure

Question 29
The key reasons, which drives a bank to manage directly private equity are:
a. The lower impact on regulatory capital and the profit model, based on capital gain and
fess
b. The need to have a trophy asset in the balance-sheet or the social pressure to invest in
a company to save it
c. The need to have a trophy asset in the balance sheet, which can generate abundant
capital gains
d. The lower impact on regulatory capital, supported by the presence of an asset
management company

Question 30
The profit model of private equity managed by fund is based on:
a. Fees only
b. Fees, capital gain and the cost of regulatory capital for the amount of money managed
in the fund
c. Fees and the cost of regulatory capital for the amount of 2% invested by the asset
management company in the fund
d. Fees and the cost of regulatory capital for the amount of 8% invested by the asset
management company in the fund

Question 31
If we consider the risk management business, it is possible to affirm that:
a. Insurance contracts manage non-financial and financial risks, while derivatives
manage non-financial risks
b. Insurance contracts manage non-financial risks, while derivatives manage non-
financial risks
 c. Derivatives manage financial risks, while insurance contracts manage non-financial
risks and financial risks
d. Both insurance contracts and derivatives manage financial and non-financial risks

Question 32
The profit model for a bank offering the management of financial risks is:
a. Fees only, as the bank acts as a broker to sell insurance contracts to customers
b. Always fee and capital gain with a cost of regulatory capital, only if the bank acts as a
counterpart of the customer, to issue the insurance contract or the derivative
c. Always fee and capital gain with a cost of regulatory capital, only if the bank acts as a
counterpart of the customer to issue the derivative
d. Always fee and capital gain with a cost of regulatory capital, only if the bank acts as a
broker to sell the derivative to the customer

Question 33
The profit model of corporate lending is:
a. Hard to be managed, as the interest margin and the fees are driven mostly by the
interest rates in the financial markets
b. Easy to be managed, as the interest margin and the fees generate abundant profit
c. Hard to be managed, as the interest margin is volatile and the fees are driven by the
interest rates in the financial markets
d. Hard to be managed, as there is always cost of regulatory capital and the interest
margin is volatile and mostly driven by the interest rates of the financial markets

Question 34
The FT League Tables for Investment Banks provide data on revenues which:
a. Split all revenues into M&A, Equity, Bond and Loans
b. Split revenues only by fee into M&A, Equity, Bond and Loans
c. Split revenues only by fee into M&A, Derivatives, Securities and Loans
d. Split revenues only by fees and costs into M&A, Bond, Equity and Loans

Question 35
Consider an IPO deal where the underwriting is 30%, the size of the deal 100 million euro,
the fees 3% and the capital gain on the underwritten amount is 10%. Moreover, the cost of
regulatory capital is 20%. The profit of the deal is:
a. 4,4 million
b. 6 million
c. 11,4 million
 d. 1,4 million

Question 36
Consider a 100% successful dealing on 100 million euro. If the capital gain is 15%, the fees
4% and the cost of regulatory capital is 20%, the profit of the deal is:
a. 11 million
b. 19 million
c. 17,4 million
d. 13,4 million

Question 37
Consider a 50% successful dealing on 100 million euro. If the capital gain is 15%, the fees
4% and the cost of regulatory capital is 20%, the profit of the deal is:
a. 9,9 million
b. 7,9 million
c. 10,7 million
d. 8,7 million

Question 38
Consider a private equity deal managed by fund. The amount invested is 100 million euro,
fees 20% and the cost of regulatory capital is 25%. The profit of the deal is:
a. 19,96 million
b. 20 million
c. 18 million
d. 12 million

Question 39
Consider a direct private equity investment. The amount invested is 100 million euro, the
capital gain 20% and the cost of regulatory capital is 25%. The profit of the deal is:
a. 25 million
b. 18 million
c. 20 million
d. 19,96 million

Question 40
If you consider the Regulatory Capital formula as defined by “Basel 1”, the assets that have
an impact on the regulatory capital, are:
a. Securities and loans
b. Only loans
c. Loans and bonds
d. Loans, bonds and equities

Question 41
If you consider the Regulatory Capital formula as defined by “Basel 1”, the weight (“w”)
takes as values:
a. 0%, 50% and 100%
b. 20%, 50%, 100% and 150%
c. 0%, 20%, 50% and 100%
d. 50% and 100%

Question 42
Let’s consider the definition of PD as regulated by “Basel 2”. If the bank has a 3 years zero
coupon on a 100 million euro deal, the default can happen:
a. In any moment before the year 3, if the customer does not pay something for more
than 90 days and the amount not paid is bigger than 5 million
b. In any moment after 90 days the end of the deal, if the amount not paid is bigger than
the 5% of the exposure
c. In any moment before and after the year 3, if the customer does not pay something for
more than 90 days and the amount not paid is bigger than 5 million
d. In any moment after 90 days the end of the deal, if the amount not paid is bigger than
5 million

Question 43
Let’s consider the definition of PD as regulated by “Basel 2”. If the bank has a 5 years
mortgage on a 100 million euro deal, with monthly installment, the default can happen:
a. In any moment before the year 5, if the customer does not pay something for more
than 90 days and the amount not paid is bigger than 5 million
b. In any moment after 90 days the end of the deal, if the amount not paid is bigger than
the 5% of the exposure
c. In any moment before the year 5, if the customer does not pay something for more
than 90 days and the amount not paid is bigger than the 5% of the exposure
d. In any moment after 90 days the end of the deal, if the amount not paid is bigger than
5 million
Question 44
Let’s consider a 100 million euro mortgage. If the default happens and the exposure at default
is 70% of the initial value of the loan, the market value of collateral is 40 million and the
recovery rate is 0,30, the LGD is:
a. 82,86%
b. 42,86%
c. 57,14%
d. 60,00%

Question 45
If you consider the Regulatory Capital formula as defined by “Basel 2”, it is possible to say:
a. The number of PDs of a bank is equal to the number of customers and the number of
LGDs is equal to the number of deals
b. The number of PDs of a bank is equal to the number of LGDs and they are both equal
to the number of deals
c. The number of PDs of a bank is equal to the number of deals and the number of LGDs
is equal to the number of customers
d. The number of PDs of a bank is equal to the number of LGDs and they are both equal
to the number of customers
Question 46
If you consider the breakdown of the portfolio regulated by Basel 2, it is possible to affirm
that:
i. Corporate covers companies with more than 50 million euro liabilities, SMEs
companies with liabilities ranging between 5 and 50 million euro, retail companies
with liabilities less than 5 million euro liabilities
j. Corporate covers companies with more than 50 million euro sales, SMEs companies
with sales ranging between 5 and 50 million euro, retail companies with sales less
than 5 million euro liabilities
k. Corporate covers companies with more than 50 million euro sales, SMEs companies
with sales ranging between 5 and 50 million euro, retail individuals with salaries less
than 5 million euro liabilities
l. Corporate covers companies with less than 50 million euro sales, SMEs companies
with sales ranging between 5 and 50 million euro, retail companies with sales less
than 5 million euro liabilities

Question 47
Let’s consider underwriting for 1 billion euro corporate bonds issued by BASF. This amount
has to be considered for Basel 2 portfolio:
a. Specialized lending
 b. FIG
c. Governmental entities
d. Corporates

Question 48
Let’s consider successful dealing on Allianz shares for 1 billion euro. The amount has to be
considered for Basel 2 portfolio:
a. Equity
b. FIG
c. Corporate
d. None of them

Question 49
Let’s consider direct private equity on Allianz shares for 1 billion euro. The amount has to be
considered for Basel 2 portfolio:
a. Equity
b. FIG
c. Specialized lending
d. None of them
Question 50
To calculate the PD, let’s consider the A rating class with the following deals: 1.000; 500;
2.000; 1.500; 800. If the default happens for the third deal and the EAD is 200, it means the
PD of the A rating class is:
a. 3,45%
b. 10%
c. 34,48%
d. 3,11%

Question 51
The range of variance for the PD and the LGD set by Basel 2 states that:
a. The PD can vary between 3% and 30% while the LGD between 0% and 100%
b. The PD can vary between 0,3% and 30% while the LGD between 0% and 100%
c. The PD can vary between 0,03% and 30% while the LGD between 0% and 100%
d. The PD can vary between 0,03% and 100% while the LGD between 0,03% and 30%

Question 52
If the PD of the AA+ rating class of a certain bank is 0,05%, it means that:
 a. The proportion between of the sum of the defaults and the sum of the EAD of the
AA+ customers is equal to 0,05%
b. The proportion between the sum if the EAD of the AA+ defaulted assets and the sum
of AA+ assets is equal to 0,05%
c. The proportion between the sum if the EAD of the AA+ defaulted assets and the sum
of AA+ defaulted assets is equal to 0,05%
d. The proportion between the sum if the EAD of the defaulted assets and the sum of
AA+ defaulted assets is equal to 0,05%

Question 53
Which of the following collaterals is not eligible considering Basel 2 rules:
a. A pledge on A- securities
b. A pledge on a hotel building belonging to an unrated company
c. A personal guarantee given by the CEO of AAA company
d. A personal guarantee given by an A+ investment bank

Question 54
Which of the following collaterals is eligible considering Basel 2 rules:
a. A pledge on securities rated A+ by Moody’s and BB+ by S&P
b. A pledge on a plant belonging to a B- company
c. A personal guarantee given by a BBB- investment bank
d. A personal guarantee issued as an insurance contract by a US unrated insurance
company

Question 55
The calculation of the RR for each collateral has to consider:
a. The forecast of the average time to recover the collateral, as well as an estimation of
the average costs and of the average rate of success
b. The average time to recover the collateral, as well as the average costs and the
average rate of success in the past
c. The proportion between the amount of cash recovered and the sum of the EAD in the
past
d. The proportion between the amount of cash recovered net costs and the sum of the
EAD in the past

Question 56
To calculate the EAD, let’s consider the BBB rating class with the following deals: 2.000;
1.500; 2.500; 500; 900. If the default happens for the first deal and the EAD is 800, it means
the EAD of the BBB rating class is:
a. 10,81%
b. 40,00%
c. 27,03%
d. 75,00%

Question 57
If we consider the use of collaterals for Basel 2, it is possible to affirm that:
a. While we can use personal guarantees in all the three approaches, financial and non-
financial collaterals can be used only in the advanced approach
b. While we can use personal guarantees in the foundation and in the advanced
approaches, financial and non-financial collaterals can be used only in the advanced
approach
c. While we can use personal guarantees only in the advanced approach, financial and
non-financial collaterals can be used only in the standard approach
d. While we can use personal guarantees in all the three approaches, financial and non-
financial collaterals can be used only in the IRB approaches.

Question 58
For Basel 2 rules, the value of “w” can vary:
a. Between 14,44% and 248%
b. Between 14,44% and 248% in the advanced approach while between 0% and 150%
for standard and foundation approach
c. Between 0% and 150% in the standard approach while between 14,44% and 248% in
IRB approaches
d. Between 20% and 150% in the standard approach while between 14,44% and 248% in
IRB approaches.

Question 59
Let’s consider a bank using standard approach. If the bank underwrites 500 million euro A-
bonds issued by Generali, it means the RWA is:
a. 500 million euro
b. 250 million euro
c. 0
d. 100 million euro
Question 60
Let’s consider a bank using standard approach. If the bank give 500 million euro loans to an
unrated company and the bank buys a CDS from a AAA investment bank, the regulatory
capital impact is:
a. 100 million euro
b. 8 million euro
c. 40 million euro
d. 0

Question 61
Let’s consider a bank using standard approach. If the bank give 1 billion euro loans to an
unrated company and the bank buys a CDS from a AAA State Agency, the regulatory capital
saving thanks to the personal guarantee is:
a. 104 million euro
b. 120 million euro
c. 54 million euro
d. 80 million euro

Question 62
You have to consider the balance sheet of a bank, where 100 million euro are on cash, 200
million euro are invested in loans to unrated corporates and 300 million euro are invested in
BBB Gov Bonds. The regulatory capital required is:
a. 28 million euro
b. 40 million euro
c. 36 million euro
d. 600 million euro

Question 63
You have to consider the balance sheet of a bank whereas 200 million euro are A+ corporates
bonds (yield 1,5%), 200 million euro are defaulted loans to FIG (yield 0,5%) and 200 million
euro are loans to supranational institutions (yield 1%). If the cost on liabilities is 2 million
euro and operating cost 1 million, it means:
a. The margin of the bank is 3 million while the regulatory capital is 35,2 million euro
b. The margin of the bank is 3 million while the regulatory capital is 32 million euro
c. The margin of the bank is 4 million euro while the regulatory capital is 32 million
euro
d. The margin of the bank is 3 million while the regulatory capital is 40 million euro
Question 64
Let’s consider a bank using the standard approach. The balance sheet has four different
assets: loans to a AAA investment bank; A+ Gov bonds; defaulted loans to AA corporate;
unrated shares of corporate, guaranteed by a AAA insurance company. The four weights are:
a. 20%; 100%; 150%; 0%
b. 20%; 20%; 150%; 20%
c. 0%; 20%; 150%; 20%
d. 20%; 20%; 150%; 0%

Question 65
If you consider the formula for the foundation approach to calculate “w”, the fixed values are
the following:
a. 45% for LGD, which becomes 75% for equity only; 75% for EAD which becomes
90% for equity only; 2,5 years for maturity
b. 45% for LGD, which becomes 90% for equity only; 75% for EAD which becomes
90% for equity only; 2,5 years for maturity
c. 45% for LGD, which becomes 75% for equity only; 75% for EAD which becomes
90% for equity only; 3,5 years for maturity
d. 75% for LGD, which becomes 90% for equity only; 75% for EAD which becomes
90% for equity only; 2,5 years for maturity

Question 66
Let’s consider a bank using the advanced approach and where the risk free rate is 2,50% and
the cost of equity is 16%. If the bank gives a 1 billion euro loan to a A+ company (with
PD=0,50% and w=69,61%) with EAD=75% and the market value of collateral is 1,2 billion
with a 0,4 recovery rate, it means the pricing of the loan is:
a. 3,62%
b. 3,58%
c. 3,13%
d. 3,78%

Question 67
Let’s consider a bank using the foundation approach and where the risk free rate is 2,50% and
the cost of equity is 25%. If the bank gives a 1 billion euro loan to a A+ company (with
PD=0,50% and w=69,61%) with EAD=75% and the market value of collateral is 1,2 billion
with a 0,4 recovery rate, it means the pricing of the loan is:
a. 4,13%
b. 4,08%
c. 3,58%
 d. 4,28%

Question 68
Let’s consider a bank using the foundation approach and where the risk free rate is 1,50% and
the cost of equity is 14%. If the bank gives a 1 billion euro loan to a BBB- company (with
PD=1,50% and w=105,59%) with EAD=75% and the bank applies a positive delta of 0,50%,
it means the pricing of the loan is:
a. 3,38%
b. 2,88%
c. 3,58%
d. 3,88%

Question 69
Let’s consider a bank using the foundation approach where the risk free rate is 1,50% and the
cost of equity is 14%. If the bank gives a 1 billion euro loan to a BBB- company (with
PD=1,50% and w=105,59%) with EAD=75% and the bank buys a AAA CDS, it means the
pricing of the loan is:
a. 3,38%
b. 1,68%
c. 2,18%
d. 1,74%

Question 70
Which of the following definitions of “expected” or “target” price in the pricing equation is
correct?
a. (Interest rate risk free) + (cost of equity * 8% * w) – (delta interest rate)
b. (Interest rate risk free) + (cost of equity * 8% * w) * (delta interest rate)
c. (Interest rate risk free) + (cost of equity * 8%) + (delta interest rate)
d. (Interest rate risk free) + (cost of equity * 8% * w) + (delta interest rate)

Question 71
Consider a SEO deal where the underwriting is 40%, the size of the deal 200 million euro, the
fees 2% and the capital gain on the underwritten amount is 5%. Moreover, the cost of
regulatory capital is 18%. The profit of the deal is:
e. 9,152 million
f. 6,848 million
g. 5,12 million
h. 4,448 million
Question 72
Consider a 70% successful dealing on 200 million euro. If the capital gain is 10%, the fees
3% and the cost of regulatory capital is 15%, the profit of the deal is:
e. 18,32 million
f. 17,6 million
g. 24,32 million
h. 16,52 million

Question 73
Consider a successful dealing on 500 million euro. If the capital gain is 15%, the fees 5% and
the cost of regulatory capital is 22%, the profit of the deal is:
e. 135 million
f. 126,2 million
g. 100 million
h. 91,2 million

Question 74
Consider a private equity deal managed by fund. The amount invested is 500 million euro,
fees 25% and the cost of regulatory capital is 18%. The profit of the deal is:
e. 124,856 million
f. 125 million
g. 124,586 million
h. 117,8 million

Question 75
Consider a direct private equity investment. The amount invested is 500 million euro, the
capital gain 15% and the cost of regulatory capital is 20%. The profit of the deal is:
e. 74,84 million
f. 92 million
g. 67 million
h. 75 million

Question 76
Consider a successful brokerage deal on 500 million euro. If the fee is 5% and the cost of
regulatory capital is 20%, the profit of the deal is:
e. 17 million
f. 24,6 million
g. 33 million
h. 25 million

Question 77
Let’s consider a 500 million euro mortgage. If the default happens and the exposure at default
is 60% of the initial value of the loan, the market value of collateral is 70 million and the
recovery rate is 0,20, the LGD is:
e. 95,33%
f. 100,46%
g. 76,66%
h. 20,00%

Question 78
To calculate the PD, let’s consider the AA rating class with the following deals: 2.000; 1.500;
2.800; 3.500; 500. If the default happens for the second deal and the EAD is 400, it means the
PD of the AA rating class is:
e. 3,88%
f. 26,67%
g. 3,98%
h. 4,55%

Question 79
To calculate the EAD, let’s consider the A rating class with the following deals: 3.000; 2.500;
1.500; 700; 1.900. If the default happens for the fifth deal and the EAD is 200, it means the
EAD of the A rating class is:
e. 10,35%
f. 10,53%
g. 2,08%
h. 19,79%

Question 80
Let’s consider a bank using standard approach. If the bank underwrites 800 million euro A+
Treasury Bonds, it means the regulatory capital is:
 e. 160 million euro
f. 12,8 million euro
g. 0
h. 32 million euro

Question 81
Let’s consider a bank using standard approach. If the bank give 800 million euro loans to an
unrated company and the bank buys a CDS from a A+ investment bank, the regulatory capital
impact is:
e. 160 million euro
f. 64 million euro
g. 12,8 million euro
h. 32 million

Question 82
You have to consider the balance sheet of a bank with the following assets: cash 20 billion,
150 billion AAA Corporate Securities, 180 billion A+ Corporate Loans, 50 billion defaulted
Corporate Loans, 100 billion BBB+ Treasury Bonds. If the bank applies the standard
approach, it means that:
a. The total asset is 500 billion and the RWA is 210 billion
b. The total asset is 500 billion and the RWA is 290 billion
c. The total asset is 480 billion and the RWA is 290 billion
d. The total asset is 290 billion and the RWA is 500 billion

Question 83
You have to consider the balance sheet of a bank with the following assets: cash 20 billion,
150 billion AAA Corporate Securities, 180 billion A+ Corporate Loans, 50 billion defaulted
Corporate Loans, 100 billion BBB+ Treasury Bonds. If the bank applies the standard
approach, it means the required regulatory capital has to be:
a. 23,2 billion
b. 23,2 million
c. 2,32 billion
d. 40 billion

Question 84
Let’s consider a bank using the advanced approach and where the risk free rate is 2,05% and
the cost of equity is 12%. If the bank gives a 1 billion euro loan to a AA company (with
PD=0,07% and w=29,65%), with LGD=90%, if the bank doesn’t apply any delta, it means
the pricing of the loan is:
 e. 2,28%
f. 2,05%
g. 2,37%
h. 2,40%

Question 85
Let’s consider a bank using the advanced approach and where the risk free rate is 1,95% and
the cost of equity is 18%. If the bank gives a 1 billion euro loan to a BBB company (with
PD=1,50% and w=105,59%) with EAD=75% and the market value of collateral is 1,4 billion
with a 0,3 recovery rate, it means the pricing of the loan, applying a +0,10% delta pricing,
becomes:
e. 4,26%
f. 4,06%
g. 4,16%
h. 4,65%

1. When is it best to sell a company?

a. When it is overvalued by the market
b. When it is undervalued by the market
c. It is impossible to say a priori
d. None of the previous answers

2. Which of the following is true

a. Assets = Net financial Debt - Equity
b. Assets = Net financial position + Equity
c. Assets + Net financial Debt = Equity
d. Assets + Equity = Net Financial Position

3. In a managerial perspective:
a. It is better to maximize Net Operating Working Capital
b. it is better to minimize Net Operating Working Capital
c. Net Operating Working Capital is an asset that does not set up any cost for the
company
d. none of the previous answers

4. Net Working Capital:

a. is an investment with explicit return and without explicit cost
b. is an investment without explicit return and without explicit cost
c. is an investment without explicit return and with explicit cost
d. is an investment with explicit return and explicit cost

5. Net Working Capital:

a. the difference between current assets and current liabilities
b. the difference between long term financial debts and cash
c. the sum of short and long-term financial debts, net of funds
d. the leverage of the company

6. Can a company with a net loss (i.e. a negative net income after tax) have a market value
larger than the Equity?
 a. Yes
b. No
c. It is not possible to say a priori
d. None of the previous answers

7. Net Working Capital in a Supermarket company is:

a. Generally negative
b. Always positive
c. Always equal to zero
d. None of the previous answers

8. Net Working Capital in a Pharma company is:

a. Generally negative
b. Always positive
c. Always equal to zero
d. Equal to equity

9. Net Financial Position in a Telecommunication Industry is:

a. Generally positive and long term
b. Generally positive and short term
c. Negative
d. None of the previous answers
10. Net Financial Position in a Airline company is:
a. Generally positive and long term
b. Generally positive and short term
c. Negative
d. None of the previous answers

11. Net Working Capital in a Winery company is:

a. Generally negative
b. Always positive
c. Always equal to zero
d. Equal to equity

12. Fixed Assets in a Digital company are mainly represented by:

a. Tangible Assets
b. Inventories
c. Intangible Assets
d. Cash

13. Fixed Assets in an Electricity Distribution company are mainly represented by:
a. Tangible Assets
b. Inventories
c. Intangible Assets
d. Cash

14. When is it best to buy a company?

a. When it is overvalued by the market
b. When it is undervalued by the market
c. It is impossible to say a priori
d. None of the previous answers

15. Net Financial Position in a Pharma company is:

a. Generally positive and long term
b. Generally positive and short term
c. Generally Negative
 d. None of the previous answers

16. Net Financial Position is:

a. Short Term Financial Liabilities - Cash
b. Short Term Financial Liabilities + Long Term Financial Liabilities
c. Cash – Long Term Liabilities
d. Short and Long term Financial liabilities – cash

17. Net Working Capital in an e-commerce company is:

a. Generally negative
b. Always positive
c. Always equal to zero
d. None of the previous answers

18. Net Financial Position in a Sport company is:

a. Generally positive
b. Positive and always short term
c. Generally Negative
d. None of the previous answers

19. Net Working Capital in a Luxury company is:

a. Generally positive
b. Always negative
c. Always equal to the net financial position
d. None of the previous answers

20. Net Working Capital in a Private Education company is:

a. Always positive
b. Always equal to fixed assets
c. Generally negative
None of the previous answers

21. FCFO is calculated as follows (note that NWC = Net Working Capital, CAPEX = Capital
Expenditures):
a. EBIT (1-t) – NWC Investments - CAPEX + Depreciation
b. EBIT (1-t) – NWC Investments + CAPEX + Depreciation
c. EBIT (1-t) + NWC - CAPEX - Depreciation.
d. None of the previous answers

22. What is the difference between FCFO and FCFE?

a. FCFO is aimed at repaying the suppliers and the shareholders
b. FCFO is aimed at repaying the shareholders and the debtholders
c. FCFO is aimed at repaying the debtholders and the suppliers
d. FCFO is aimed at repaying the customers

23. What does the rate g measure in the context of company valuation?
a. The perpetual growth of earnings
b. The perpetual growth of the NOPAT
c. The analytical growth of the EBITDA
d. The perpetual growth of the Cash Flow generated by the company

24. How can we estimate the risk free rate for the cost of capital of a firm?
a. With the actual yield of a short-term treasury note.
b. With the actual implied return of the equity capital market.
c. With the actual yield of long-term treasury note.
d. With the actual implied return of the corporate bond capital market
25. An increase in the CAPEX would:
a. Generate an increase in the FCFO and an increase in the FCFE
b. Generate a decrease in the FCFO but an increase in the FCFE
c. Generate an increase in the FCFO and a decrease in the FCFE
d. Generate a decrease in the FCFO and a decrease in the FCFE

26. The dividends’ distribution:

a. Does not entail any variation in the FCFO, but generate a decrease in the FCFE
b. Does not entail any variation in the FCFE, but generate a decrease in the FCFO
c. Does not entail any variation either at the FCFO level or at the FCFE level
d. None of the previous answers

27. About WACC:

a. The higher the WACC, the lower the EV, the higher the risk borne by the company
b. The lower the WACC, the lower the EV, the lower the risk borne by the company
c. it represents the relationship between dividends and shareholders’ funds
d. can be obtained thank to Sharpe’s Ratio

28. Risk free rate can be estimated with:

a. The return on equity indices
b. the return on securities considered risk-free, such as 10-year government bonds
c. the ratio between covariance between the yield of the asset and the market and the
variance of the market
d. the beta coefficient

29. Free Cash Flows from Operations are equals to potential self-financing if:
a. capital expenditure and net investments in working capital are zero
b. the company is not investing in fixed assets and working capital
c. the company generates cash flows that are lower compared to the sector
d. working capital increases

30. Beta is:

a. the coefficient that measures the behavior of a stock with respect to the market, or
the change that a stock historically assumes with respect to changes in the market
b. the relationship between the variance of market returns and the covariance between
asset returns and the returns of the market portfolio
c. an indicator of country risk
d. the coefficient that measures the behavior of a the market returns with respect to the
stock movements

31. When is It better to use a Comparable based methodology?

a. In Investment Valuation
b. In Valuing Stock options
c. In Valuing management performances
d. In M&A deals

32. EV (Enterprise Value) definition is equal to:

a. Book Value + Total Financial Debts
b. Equity Value + Total Financial Debts
c. Equity Value + Net Financial Position
d. Book Value + Net Financial Position

33. What is the rationale in the market multiples’ approach?

a. This methodology is aimed at assessing the potential market value of the company
b. This methodology is aimed at assessing the potential intrinsic value of the company
 c. This methodology is aimed at assessing the potential liquidation value of the
company
d. This methodology is aimed at assessing the real liquidation value of the company

34. FCFO is calculated as follows (note that NWC = Net Working Capital, CAPEX = Capital
Expenditures):
a. EBITDA - Taxes – NWC Investments - CAPEX
b. EBIT (1-t) – NWC Investments + CAPEX + Depreciation
c. EBIT (1-t) + NWC Investments - CAPEX - Depreciation.
d. None of the previous answers

35. EV (Enterprise Value) definition is equal to:

a. Book Value + Total Financial Debts - Cash
b. Equity Value + Total Financial Debts
c. Equity Value + Total Financial Debts - Cash
d. Book Value + Net Financial Position

36. When is It better to use an Additional Risk Premium in Corporate Valuation?

a. In the DCF methodology
b. In the Market Multiple methodology
c. In the Transaction Multiple methodology
d. None of the previous answers

37. When is It better to use an Additional Risk Premium in the DCF methodology?
a. In case of multinational company
b. In case of mature business with sustainable cash flows
c. In case of distressed company
d. None of the previous answers

38. The Additional Risk Premium in the DCF methodology could be:
a. Between 15% and 20%
b. Between 10% and 15%
c. Between 5% and 10%
d. Between 0 and 5%

39. The Terminal Value in the DCF methodology is:

a. Generally higher than the Analytical estimation
b. Basically lower than the Analytical estimation
c. Always lower than the Analytical estimation
d. Generally equal to the Analytical Estimation

40. When is It better to use an Additional Risk Premium in the DCF methodology?
a. In case of company operating in an Emerging Market
b. In case of mature business with sustainable cash flows
c. In case of internationalized business
d. None of the previous answers

41. When is the EV/revenues a good multiple to calculate the EV of a company?

a. When the company has high margins
b. When the company has a g>0
c. When the level of cash flow is either uncertain or unstable
d. None of the previous answers

42. When does the capital structure reach its optimal level?
a. When the D/E is equal to 1, and thus the company is financed by a 50% of debt and a
50% of equity.
 b. When the capital structure of a firm is set at a level equal to the average of the
industry.
c. Never.
d. When the WACC reaches its minimum.

43. How can we estimate the risk free rate for the cost of capital of a firm?
a. With the actual yield of a short-term treasury note.
b. With the actual implied return of the corporate bond capital market.
c. With the actual implied return of the equity capital market.
d. With the actual yield of long-term treasury note.

44. The beta unlevered:

a. Is always lower than the beta levered.
b. Is always higher than the levered.
c. Can be equal to the beta levered in case the NFP/E is zero.
d. None of the previous answers

45. Company Alpha has a beta levered equal to 0.5 while Company Gamma has a beta levered
equal to 1.5. Both companies are active in the same sector and have a similar business
model. What can we state about the riskiness of the two companies?
a. We cannot say anything according to the betas of the two companies.
b. Company Gamma is probably more indebted than Company Alpha and thus
Company Gamma is riskier.
c. Company Gamma is more sensitive to an increase of market returns and for this
reason is less risky.
d. Company Gamma is less sensitive to an increase of market returns and for this
reason is more risky.

46. Which of the following Multiples on Book Value could be considered an outlier in calculating
the industry multiple average?
a. 1
b. 0,2
c. 0,3
d. 0,4

47. If a company is wholly financed by equity capital:

a. Beta Unlevered is larger than Beta Levered
b. Beta Unlevered is equal to Beta Levered
c. Beta Unlevered is lower than Beta Levered
d. None of the previous answers

48. EV/EBITDA is a perfect multiple to valuate:

a. A Start Up company
b. A manufacturing luxury company
c. An e-commerce still not profitable company
d. None of the previous answers

49. EV/SALES is a perfect multiple to valuate:

a. A financial institution
b. A manufacturing luxury company
c. A supermarket
d. A private equity fund

50. Which of the following is an equity-side multiple?

a. Price/Earning
b. Enterprise Value/Asset
 c. Enterprise Value/EBIT
d. EV/EBITDA

51. Which of the following is an asset-side multiple?

a. Price/Earning
b. Enterprise Value/Asset
c. Enterprise Value/Cash earnings
d. P/BV

52. Which of the following is an asset-side multiple?

a. Price/Earning
b. Enterprise Value/Ebitda
c. ROI
d. IRR

53. Which of the following is a good multiple to valuate a Financial Institutions?

a. Price/Book Balue
b. Enterprise Value/Sales
c. Enterprise Value/EBIT
d. EV/EBITDA

54. Let’s consider that the Market Capitalization is 100, Tot. Financial Liabilities are 40, Cash is
20, Acc/Payables are 15. Which is the Enterprise Value of the company:
a. 140
b. 135
c. 120
d. 80

55. Which of the following is a good multiple to valuate a Real Estate Holding Company?
a. Price/Book Balue
b. Enterprise Value/Sales
c. Enterprise Value/EBIT
d. EV/EBITDA

56. EV/SALES is a perfect multiple to valuate:

a. A financial institution
b. A manufacturing luxury company
c. A Retailer
d. A private equity fund

57. Can a company with a net profit have a market value larger than the intrinsic value?
a. Yes
b. No
c. It is not possible to say a priori
d. No, off course

58. How can we estimate the Market Risk Premium for the cost of capital of a firm?
a. With the financial community opinion.
b. With the actual yield of a US Large Stock
c. With the actual implied return of the Corporate Bond capital market.
d. With the Prof. Fernandez source of information.

59. Let’s consider that the Enterprise Value is 100, Tot. Financial Liabilities are 50, Cash is 10,
Acc/Receivables are 20. Which is the Equity Value of the company:
a. 140
b. 150
 c. 80
d. 60

60. Company George has a beta levered equal to 2.5 while Company Armani has a beta levered
equal to 0.7. Both companies are active in the same sector and have a similar business
model. What can we state about the riskiness of the two companies?
a. We cannot say anything according to the betas of the two companies.
b. Company George is probably more indebted than Company Armani and thus
Company George is riskier.
c. Company Armani is more sensitive to an increase of market returns and for this
reason is more risky.
d. Company Armani is less sensitive to an increase of market returns and for this reason
is more risky.