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

Call and put option values are most sensitive to changes in the volatility of the underlying when:

A : calls are deep out-of-the-money and puts are deep in-the-money.

B : both calls and puts are at-the-money.

C : both puts and calls are deep out-of-the-money.

D : both calls and puts are deep in-the-money.

Answer: B

Question 2

Regarding a xed-rate, level payment, and fully amortized mortgage loan, which of the following statements is false?

A : Each payment consists of an interest component and a principal component.

B : Payments are equal over the life of the loan.

C : Principal repayment falls as interest payments rise over the life of the loan.

D : Interest payments fall as principal payments rise over the life of the loan.

Answer: C

Question 3

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

Question 4

An analyst is estimating whether a fund's excess return for a quarter is related to interest rates and last quarter's excess return. The regression equation is found to have unconditional heteroskedasticity and serial correlation. Which of the following is most accurate? Parameter estimates will be:

A : accurate and statistical inference about the parameters will be valid.

B : inaccurate but statistical inference about the parameters will be valid.

C : inaccurate and statistical inference about the parameters will not be valid.

D : accurate but statistical inference about the parameters will not be valid.

Answer: C

Question 5

An operational risk manager is presenting to a group of risk analysts about different techniques to model operational risk. An analyst asks the manager about the appropriate use of the power law in estimating operational losses. Which of the following would be a correct statement for the manager to make about the use of the power law?

A : It is suitable for modeling the tail of the operational loss distribution, but not for modeling the body of the distribution.

B : It implies that operational losses tend to follow a normal distribution.

C : It is more effective in modeling some types of operational risk, such as losses from fraud, than others, such as losses from natural disasters.

D : It is generally used to estimate routine operational losses which occur at a relatively high frequency.

Answer: A

Page: 1 / 107

Total 533 Questions | Updated On: Jan 28, 2026

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