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: Apr 02, 2026

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Question 1

Which of the following is not a reason to accumulate loss data?

A : Past losses are almost always repeated in the future.

B : It focuses management attention on the magnitude and e ect of risk.

C : It provides data necessary for empirical analysis.

D : It contributes to the understanding of future expected losses.

Answer: A

Question 2

Using the Black-Scholes model, compute the value of a European call option using the following imputs:Underlying stock price: $100Exercise price: $90Risk-free interest rate: 5%Volatility: 20%Dividend yield: 0%Time to expiration: one yearThe Black-Scholes call option price is closest to:

A : $15.33.

B : $13.65.

C : $16.71.

D : $17.99.

Answer: C

Question 3

A senior analyst at a financial institution is giving a presentation to a group of junior analysts on the features of the power law and its uses. The senior analyst notes that the power law is particularly important in understanding the tails of distributions. Which of the following is correct regarding the power law?

A : The power law specifies the probability of observing a value greater than a given value.

B : Power law tails are only observed in normal distributions.

C : The power law models the slow decline in the probability of observing large values in thin-tailed distributions.

D : Power law tails are not present in the Student’s t distribution.

Answer: A

Question 4

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 5

A market risk analyst at a regional bank is calculating the annual VaR of portfolio of investment securities. The portfolio has a current market value of USD 3,700,000 with a daily variance of 0.0004. Assuming there are 250 trading days in a year and the daily portfolio returns are independent and follow the same normal distribution with a mean of zero, what is the estimate of the 1-year VaR at the 95% confidence level?

A : USD 1,924,720

B : USD 2,721,519

C : USD 38,494

D : USD 121,730

Answer: A

Page: 1 / 107

Total 533 Questions | Updated On: Apr 02, 2026

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