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: Mar 08, 2026

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Question 1

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

Question 2

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

Question 3

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 4

The CRO of a bank is evaluating the bank’s practices for the management of risk data. The CRO notes that in characterizing various dimensions of the bank’s data, the Basel Committee has suggested several principles to promote strong and effective risk data aggregation capabilities. Which statement correctly describes a recommendation that the bank should follow in accordance with the Basel Committee’s principles for effective risk data aggregation and risk reporting?

A : The completeness principle recommends that a financial institution capture data on its entire scope of material risk exposures.

B : The integrity principle recommends that data aggregation be completely automated without any manual intervention.

C : The adaptability principle recommends that a bank frequently update its risk reporting systems to incorporate changes in best practices.

D : The governance principle recommends that the risk data be reconciled with management’s rough approximations of risk exposure prior to aggregating the data.

Answer: A

Question 5

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?

A :

B :

C :

D :

Answer: D

Page: 1 / 107

Total 533 Questions | Updated On: Mar 08, 2026

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