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

The investment banking division of a large German bank recently engaged a new client whose business is in direct competition with an existing client of the commercial banking division of the bank. A manager in the commercial banking division is concerned about conflicts of interest that may arise from providing both clients with a high level of customer service. What is of greatest concern to the manager regarding this situation?

A : The investment banking division pressuring commercial bankers to confirm material nonpublic information

B : The investment banking division pressuring commercial bankers to open a banking relationship with the new client

C : The investment banking division pressuring the banks brokers to buy certain securities for clients

D : The investment banking division pressuring researchers to generate buy recommendations for the new client

Answer: A

Question 2

An analyst applying a reinforcement learning model has assigned a probability to exploitation of 65%. As she completes more trials, she can reasonably expect that the probability will increase above:

A : 65% for exploitation.

B : 50% for exploitation

C : 50% for exploration.

D : 35% for exploration.

Answer: A

Question 3

Which of the following statements regarding securitization is least accurate?

A : Securitization enabled the originate-to-distribute banking model.

B : Securitization enables an originating institution to transfer the default risk of the underlying pool of assets.

C : Securitization may allow institutional investors to indirectly hold assets that they are prevented from holding directly.

D : Securitization gives originating banks greater incentive to approve and monitor loans carefully.

Answer: D

Question 4

A risk manager at an investment bank is examining the forward and futures contracts the bank’s clients use as hedging instruments. The manager compares the way the two types of contracts are priced, how profits and losses are calculated, and how decisions to offset or deliver against the contracts are made. Which of the following statements is correct?

A : When the price of an asset is positively correlated with interest rates, the forward contract will typically have a higher price than the futures contract.

B : The daily profit and loss on forward and futures contracts differ, since futures contracts realize profits and losses each day while forward contracts realize them at maturity.

C : Prices on similar forward and futures contracts will be the same due to the no-arbitrage relationship between forwards and futures.

D : If interest rates are higher than the income generated by a financial asset, delivery of the asset against the futures contract will take place on the latest date possible.

Answer: B

Question 5

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

Page: 1 / 107

Total 533 Questions | Updated On: Jan 28, 2026

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