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 05, 2026

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Question 1

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

Question 2

A Swiss chemical company is considering issuing bonds to finance its planned expansion. A risk analyst involved in the capital raising program at the company is studying the external agency rating process to gain a better understanding of the implications of agency ratings for the firm’s financing plans. Which of the following statements is correct?

A : Rating agencies produce point-in-time ratings, as these are designed to provide the best current estimate of future default probabilities.

B : Rating agencies provide outlooks to indicate the potential for a change in rating in the short-term, and use watchlists to indicate medium-term changes.

C : Empirically, changes in bond and stock prices tend to be greater in cases of ratings downgrades than ratings upgrades.

D : Agency ratings tend to produce identical default rates for companies in the same industry but located in different countries.

Answer: C

Question 3

One of the basic requirements of a risk control process that a risk and control selfassessment program (RCSA) fails in is the:

A : expert opinion of managers.

B : ongoing assessment of the e ectiveness of risk management activities.

C : independent veri cation of risk identi cation and measurement.

D : identi cation of expected losses.

Answer: C

Question 4

A put option on DCY stock matures six months from today and sells for $0.49. A call option on DCY stock with the same strike price sells for $4.52. Both the put and the call are European options. DCY stock is priced at $55 and the risk-free rate of interest is 4 percent.The strike price of the put and call options is closest to:

A : $53.

B : $52.

C : $50.

D : $51.

Answer: B

Question 5

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

Page: 1 / 107

Total 533 Questions | Updated On: Jan 05, 2026

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