Free GARP FRM-Part-1 Exam Questions

Question 1

Jayce Arnold, a CFA candidate, is studying how the market yield environment a ects bond prices. She considers a $1,000 face value, option-free bond issued at par. Which of the following statements about the bond's dollar price behavior is most likely accurate when yields rise and fall by 200 basis points, respectively? Price will:

A : increase by $124, price will decrease by $149.

B : increase by $149, price will decrease by $124.

C : decrease by $124, price will increase by $149.

D : decrease by $149, price will increase by $124.

Answer: C

Question 2

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 3

Sue Johnson, FRM, has an elderly client with a very large asset base. The client intends to start divesting her fortune to various charities. Johnson is on the Board of a local charitable foundation. Johnson most appropriately:

A : should solicit the client herself, along with other Board members, to obtain a larger contribution.

B : can discuss her client's situation with the charitable foundation as long as she informs other local charities of her client's intentions.

C : must not discuss anything regarding her client and her client's intentions with the charitable foundation without permission.

D : can make this known to the charitable foundation so that they can solicit the client, since it is the client's wish to divest assets to charities in the future.

Answer: C

Question 4

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 5

Suppose you have a two-security portfolio containing bonds A and B. The book value of bond A is $20 and the market value is $35. The book value of bond B is $40 and the market value is $50. The duration of bond A is 4.7 and the duration of bond B is 5.9. Which of the following amounts is closest to the duration of the portfolio?

A : 5.3.

B : 5.6.

C : 5.4.

D : 5.5.

Answer: C