Free GARP FRM-Part-1 Exam Questions

Become GARP Certified with updated FRM-Part-1 exam questions and correct answers

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Total 533 Questions | Updated On: Jan 28, 2026

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Question 1

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

A : Business planning activities that exceed risk appetite should be maintained.

B : Consideration must be given to the downside risks of only risky business strategies.

C : Business strategy planning meetings require input from the risk management team.

D : A rm’s risk appetite re ects its ability to minimize risk.

Answer: C

Question 2

Portfolio A has total assets of $14 million and an expected return of 12.50 percent. Historical VAR of the portfolio at 5 percent probability level is $2,400,000. What is the portfolio's standard deviation?

A : 14.65%.

B : 15.75%.

C : 12.50%.

D : 17.97%.

Answer: D

Question 3

A senior analyst at a financial institution is giving a presentation to a group of junior analysts on the features of the power law and its uses. The senior analyst notes that the power law is particularly important in understanding the tails of distributions. Which of the following is correct regarding the power law?

A : The power law specifies the probability of observing a value greater than a given value.

B : Power law tails are only observed in normal distributions.

C : The power law models the slow decline in the probability of observing large values in thin-tailed distributions.

D : Power law tails are not present in the Student’s t distribution.

Answer: A

Question 4

A risk analyst at a growing bank is concerned about a loan exposure to a large manufacturing company which is losing significant market share in its industry. The analyst considers the use of different credit risk transfer mechanisms, including CDS, to manage this exposure. Which of the following statements correctly describes an appropriate benefit of using CDS in this situation?

A : CDS provide an agreement to periodically revalue the loan and transfer any net value change.

B : CDS allow the bank to offset its exposure to the company with loan exposures to other manufacturing companies.

C : CDS quantify the manufacturing company’s default risk and allow the bank to monitor changes in this risk on a real-time basis.

D : CDS require the manufacturing company to pay back the loan in full at an earlier point in time.

Answer: C

Question 5

All of the following are reasons that Nick Leeson engaged in aggressive speculative trading in the Barings Bank collapse except:

A : Barings’ lack of risk management oversight.

B : Barings’ risk management models were awed.

C : he was attempting to recover previous trading losses.

D : his authority over settlement operations allowed him to hide trading losses.

Answer: B

Page: 1 / 107

Total 533 Questions | Updated On: Jan 28, 2026

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