Free GARP FRM-Part-1 Exam Questions

Question 1

The board of directors of a growing asset management company is conducting a review of the firm’s approach to risk management. The board concludes that the firm should establish an ERM framework. Which of the following represents a key benefit that the firm will likely attain after establishing an ERM framework?

A : Allowing the company to determine and make use of a higher risk appetite

B : Finding the optimal reporting methodology for each risk function

C : Taking advantage of the new opportunities that create value on a standalone basis

D : Improving the top-down communication and coordination in the company

Answer: D

Question 2

An analyst is currently considering a portfolio consisting of two stocks. The first stock, Remba Co., has an expected return of 12% and a standard deviation of 16%. The second stock, Labs, Inc., has an expected return of 18% and a standard deviation of 25%. The correlation of returns between the two securities is 0.25.If the analyst forms a portfolio with 30% in Remba and 70% in Labs, what is the portfolio's expected return?

A : 21.5%.

B : 15.0%.

C : 16.2%.

D : 17.3%.

Answer: C

Question 3

The board of directors of a growing asset management company is conducting a review of the firm’s approach to risk management. The board concludes that the firm should establish an ERM framework. Which of the following represents a key benefit that the firm will likely attain after establishing an ERM framework?

A : Allowing the company to determine and make use of a higher risk appetite

B : Finding the optimal reporting methodology for each risk function

C : Taking advantage of the new opportunities that create value on a standalone basis

D : Improving the top-down communication and coordination in the company

Answer: D

Question 4

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 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