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 15, 2026

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Question 1

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 2

As a research analyst, you're analyzing the probability that the prices of dollar will go below 72 after theupcoming budget. Suppose that the prices of dollar are uniformly distributed with a floor at Rs. 70 and a ceiling atRs. 75 imposed by the government, then what is the probability that the prices of gold will be set below 72?

A : 0.625

B : 0.425

C : 0.4

D : 0.815

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 risk manager at a bank is explaining foreign exchange rate parity concepts to a group of newly hired analysts. The manager describes the assumptions, formulas, and implications of the covered interest rate parity and uncovered interest rate parity theorems. Which of the following statements is correct regarding these theorems?

A : Covered interest rate parity holds, among other reasons, because the amount of currency that will be obtained from investing in either the domestic or the foreign currency is certain.

B : Forward rates are found using the covered interest rate parity theorem by multiplying the spot rate by the ratio of 1 plus the risk-free interest rate in the base currency to 1 plus the risk-free interest rate in the quote currency raised to the time to maturity.

C : Forward points, when expressed as a percentage of the spot rate, can be used to determine the interest rate and inflation differential in uncovered interest rate parity.

D : Uncovered interest rate parity is a no-arbitrage theorem that incorporates each country’s inflation rate into the covered interest rate parity formula to predict future exchange rates.

Answer: A

Question 5

Call and put option values are most sensitive to changes in the volatility of the underlying when:

A : calls are deep out-of-the-money and puts are deep in-the-money.

B : both calls and puts are at-the-money.

C : both puts and calls are deep out-of-the-money.

D : both calls and puts are deep in-the-money.

Answer: B

Page: 1 / 107

Total 533 Questions | Updated On: Jan 15, 2026

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