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: Feb 10, 2026

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Question 1

Which of the following liquidity de nitions is most likely associated with funding liquidity?

A : The length of time it will take an asset to regain its price after the price has fallen temporarily.

B : The loss that would be sustained by a trader who sells an asset and then immediately buys it back.

C : The number of units of an asset a trader can buy or sell at the current market quote (bid and ask prices).

D : The risk that investors may not be able to roll over short-term debt to nance the purchase of an asset.

Answer: D

Question 2

In the context of stress testing principles for banks, which of the following statements is correct regarding wrong-way risk? Wrong-way risk emerges when: there are changes in basis between the opening and closing of a futures

A : market conditions.

B : a company purchases an option on its own stock. the probability of default of counterparties increases as a result of general

C : a decline in an asset value may dry up its liquidity.

D : position.

Answer: A

Question 3

A risk manager at Firm SPC is testing a portfolio for heteroskedasticity using the White test. The portfolio is modeled as follows: The residuals are computed as follows: Which of the following correctly depicts the second step in the White test for the portfolio?

A :

B :

C :

D :

Answer: D

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

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

Page: 1 / 107

Total 533 Questions | Updated On: Feb 10, 2026

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