Free GARP FRM-Part-1 Exam Questions

Question 1

Sue Johnson, FRM, has an elderly client with a very large asset base. The client intends to start divesting her fortune to various charities. Johnson is on the Board of a local charitable foundation. Johnson most appropriately:

A : should solicit the client herself, along with other Board members, to obtain a larger contribution.

B : can discuss her client's situation with the charitable foundation as long as she informs other local charities of her client's intentions.

C : must not discuss anything regarding her client and her client's intentions with the charitable foundation without permission.

D : can make this known to the charitable foundation so that they can solicit the client, since it is the client's wish to divest assets to charities in the future.

Answer: C

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

Sue Johnson, FRM, has an elderly client with a very large asset base. The client intends to start divesting her fortune to various charities. Johnson is on the Board of a local charitable foundation. Johnson most appropriately:

A : should solicit the client herself, along with other Board members, to obtain a larger contribution.

B : can discuss her client's situation with the charitable foundation as long as she informs other local charities of her client's intentions.

C : must not discuss anything regarding her client and her client's intentions with the charitable foundation without permission.

D : can make this known to the charitable foundation so that they can solicit the client, since it is the client's wish to divest assets to charities in the future.

Answer: C

Question 4

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 5

Bonds rated B have a 25% chance of default in five years. Bonds rated CCC have a 40% chance of default in five years. A portfolio consists of 30% B and 70% CCC-rated bonds. If a randomly selected bond defaults in a five-year period, what is the probability that it was a Brated bond?

A : 0.250.

B : 0.429.

C : 0.625.

D : 0.211.

Answer: D