Free GARP FRM-Part-2 Exam Questions

A fixed-income portfolio manager is conducting a performance analysis on anagency-MBS and the underlying pool of commercial mortgages. The managerobtains the following information:• The constant prepayment rate (CPR) of the commercial mortgages loan pool: 14.38%• Debt payments per year on the commercial mortgage loans: USD 730,000• Net operating income per year of the commercial mortgage property: USD 1,825,000The manager uses the following metrics as benchmarks for the commercial mortgage sector analysis:• Debt service coverage ratio (DSCR) of a benchmark obligor: 2.5• Single monthly mortality (SMM) rate of a benchmark security: 0.85%Which of the following statements is correct?

A risk manager is trying to estimate the default time for asset i based on the default copula correlation of asset i to n assets. Which of the following equations best defines the process that the risk manager should use to generate and map random samples to estimate the default time?

The advanced internal ratings-based (A-IRB) approach for credit risk will no longer be permissible to use under the Basel III reforms for each of the following except:

In an attempt to understand country risk, an analyst at Global Funds examines multiple sources of information to determine the truest measure of risk. She considers sovereign risk ratings, default risk spreads, and composite measures of risk. Which of the following sources relies on surveys of several hundred economists to measure sovereign risk?

A pension fund has $100,000 in assets and $90,000 in liabilities. Assume that theexpected return on the surplus is 5%, and the annual VaR of the surplus is 22% at the 99%confidence level.The initial surplus of the fund is equal to: