Free GARP FRM-Part-1 Exam Questions

Which of the following statements regarding securitization is least accurate?

A risk manager at Firm SPC is testing a portfolio for heteroskedasticity using the White test. The portfolio is modeled as follows: The residuals are computed as follows: Which of the following correctly depicts the second step in the White test for the portfolio?

As a fund manager, Bryan Cole, CFA, is responsible for assessing the risk and return parameters of the portfolios he oversees. Cole is currently considering a portfolio consisting of only two stocks. The first stock, Remba Co., has an expected return of 12 percent and a standard deviation of 16 percent. The second stock, Labs, Inc., has an expected return of 18 percent and a standard deviation of 25 percent. The correlation of returns between the two securities is 0.25.Cole has the option of including a third stock in the portfolio. The third stock, Wimset, Inc., has an expected return of 8% and a standard deviation of 10 percent. If Cole constructed an equally weighted portfolio consisting of all three stocks, the portfolio's expected return would be closest to:

A $2 million balanced portfolio is comprised of 40 percent stocks and 60 percent intermediate bonds. For the next year, the expected return on the stock component is 9 percent and the expected return on the bond component is 6 percent. The standard deviation of the stock component is 18 percent and the standard deviation of the bond component is 8 percent. What is the annual VAR for the portfolio at a 1 percent probability level if the correlation between the stock and the bond component is 0.25?

Regarding the relationship between a rm's risk appetite and its business strategy, which of the following statements is true?