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: Sep 15, 2024

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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

A risk analyst uses the bootstrap method to assess the market risk of a global equity portfolio that experienced significant volatility in the recent past. The analyst applies independent and identically distributed (IID) bootstrapping to the extracted standardized residuals of the fitted model, and these bootstrapped standardized residuals are then used to generate time paths of future asset returns. In the final step, the simulated data is used to estimate the VaR of the global equity portfolio over a 1-month horizon. Which of the following will the analyst find to be correct when applying the IID bootstrap method?

A : The VaR estimates will be reliable because the IID bootstrap fully captures interdependencies in the observed asset return data.

B : The VaR estimates will be reliable because they are based on random values generated from an assumed distribution that is not affected by external events or time.

C : The VaR estimates will not be reliable because they are derived from the most current observations of the period that is characterized by higher volatility.

D : The VaR estimates will not be reliable because the IID bootstrap allows the possibility of future losses that are larger than those that have been realized in the past.

Answer: C

Question 3

A risk manager at a bank is measuring the sensitivity of a bond portfolio to non-parallel shifts in spot rates. The portfolio currently holds a 4-year zero coupon bond and a 7-year zero coupon bond with the following sensitivities to these respective spot rates:Spot rate AND Change in portfolio value for 1-bp increase in spot rate (AUD)4-year -189.277-year -302.45To model the non-parallel movement of the spot rate curve, the manager treats the 2-year, 5-year, and 10-year spot rates as key rates. Given this information, what is the portfolio’s key rate 01 (KR01) for a 1-bp increase in the 5-year rate?

A : AUD 184.06

B : AUD 226.99

C : AUD 307.66

D : AUD 491.72

Answer: C

Question 4

A $2 million balanced portfolio is comprised of 40 percent stocks and 60 percent intermediate bonds. For the next year, the expected return on the stock component is 9 percent and the expected return on the bond component is 6 percent. The standard deviation of the stock component is 18 percent and the standard deviation of the bond component is 8 percent. What is the annual VAR for the portfolio at a 1 percent probability level if the correlation between the stock and the bond component is 0.25?

A : $149,500.

B : $303,360.

C : $152,250.

D : $126,768.

Answer: B

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

Page: 1 / 107

Total 533 Questions | Updated On: Sep 15, 2024

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