Free GARP FRM-Part-2 Exam Questions

Become GARP Certified with updated FRM-Part-2 exam questions and correct answers

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Total 503 Questions | Updated On: Jan 13, 2026

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Question 1

A treasurer at a US-based bank is reviewing the bank’s balance sheet and wants toevaluate the sensitivity of the bank’s net worth to a potential change in interestrates. The treasurer asks a manager to apply duration analysis to assess the impactof a 100-bps change in interest rates on the bank’s net worth. Which of the followingis a correct statement for the manager to make?

A : The percentage change in the value of an asset or liability resulting from a 100-bpschange in interest rates is directly proportional to its duration but is unaffected bythe corresponding percentage change in interest rates.

B : A prepayable mortgage loan has a higher duration than an identical non-prepayableloan and is typically more sensitive to overall interest rate changes.

C : The sensitivity of assets and liabilities to changes in interest rates is greater whenthe coupon is lower, the duration is higher, or the overall level of interest rates is lower.

D : Using USD 100 million of cash to pay a cash dividend will not affect the overallasset duration of the bank.

Answer: C

Question 2

Which of the following reasons is least likely a consideration for regulators when imposing fines on financial institutions against financial breaches and violations?

A : To cover the cost of litigation.

B : To deter other firms against manipulative bank practices.

C : To ensure that fines cover at least the benefits of breaches.

D : To signal to other firms to change their compliance practices.

Answer: A

Question 3

A regional bank wants to improve its operational resilience to help keep pace with emerging best practices in this area. A consultant hired by the bank recommends that it establish a set of impact tolerances to improve its resilience. Which of the following correctly describes a potential benefit to the bank of establishing an impact tolerance?

A : It will help the bank optimize its allocation of resources to its most important business services.

B : It will enhance the bank’s ability to identify and limit concentration risk.

C : It will accurately estimate the severity of a potential disruption to an operational process and the amount of downtime that would result.

D : It will prevent failures of critical operational processes and the systems that support these processes.

Answer: A

Question 4

Assuming a loan portfolio of L, a recovery rate of RR, and the percentage of losses on a portfolio less than V(T, X), which of the following formulas is used to estimate credit VaR?

A : L × (1 − RR) × V(T, X).

B : L × (1 − RR) / V(T, X).

C : L × (RR) × V(T, X).

D : V(T, X) / [L × (1 − RR)].

Answer: A

Question 5

All of the following items are generally considered advantages of non-parametric estimation methods except:

A : ability to accommodate skewed data.

B : availability of data.

C : little or no reliance on covariance matrices.

D : use of historical data.

Answer: D

Page: 1 / 101

Total 503 Questions | Updated On: Jan 13, 2026

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