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: Mar 25, 2026

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Question 1

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 2

The predictions that are generated from an underfitted model will likely have:

A : high bias and low variance.

B : high bias and high variance.

C : low bias and low variance.

D : low bias and high variance.

Answer: A

Question 3

An analyst is regressing fund returns against the return on the Wilshire 5000 to determine whether beta is equal to 1.0. The analyst is trying to determine whether the number of observations should be increased. Which of the following is a reason why the test will have higher power if the number of observations is increased? The:

A : standard error of the regression will be lower.

B : constant of the regression will be closer to zero.

C : estimate of beta will be farther away from 1.0.

D : mean squared error of the regression will be lower.

Answer: A

Question 4

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 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: Mar 25, 2026

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