Free GARP FRM-Part-2 Exam Questions

Question 1

The CRO at a bank wants to strengthen the bank’s capability to defend itself against emerging cyber-threats. To help achieve this goal, the CRO is assessing the current range of practices regarding the sharing of cybersecurity information between different types of institutions, as well as the potential benefits from sharing information. Which of the following statements would be most appropriate for the CRO to make?

A : Existing peer-sharing mechanisms among banks focus on the exchange of information related to cyber-security incidents, but such information is generally not shared from banks to regulators.

B : The scope and depth of information-sharing practices among banks may significantly vary between financial markets, depending on the level of trust among participating banks.

C : Information-sharing among different national regulators has evolved significantly over the past several years and is now a widespread practice at a large majority of jurisdictions.

D : The sharing of cybersecurity information among banks is less frequently observed and generally considered to be less effective than other cyber-security information-sharing practices.

Answer: B

Question 2

A risk analyst is evaluating an investment portfolio using the Fama-French threefactormodel. The analyst regresses thirty years of weekly portfolio returns againstthe three factors of the model. The analyst obtains the following regression results:Alpha 0.10Market coefficient 0.52SMB coefficient 0.18HML coefficient -0.70Assuming all estimated coefficients are statistically significant, which of the following is correct?

A : indicates that the portfolio moves together with large-cap stocks.

B : indicates that the portfolio moves together with growth stocks.

C : indicates that the portfolio moves together with growth stocks.

Answer: C

Question 3

A risk analyst is evaluating an investment portfolio using the Fama-French threefactormodel. The analyst regresses thirty years of weekly portfolio returns againstthe three factors of the model. The analyst obtains the following regression results:Alpha 0.10Market coefficient 0.52SMB coefficient 0.18HML coefficient -0.70Assuming all estimated coefficients are statistically significant, which of the following is correct?

A : indicates that the portfolio moves together with large-cap stocks.

B : indicates that the portfolio moves together with growth stocks.

C : indicates that the portfolio moves together with growth stocks.

Answer: C

Question 4

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?

A : CGD[QB(t),QC(t)] = M2[N−1(QB(t)), N−1(QC(t)) ; ρ].

B : −1(G1(u1)),…,Fn

C : Mn(•) = Qi(τi).

D : −1(Q1(t)),…,Nn

Answer: A

Question 5

Assume that a credit rating of A has a default probability of 0.07%, and a credit rating of AA has a default probability of 0.04%. If a bank is seeking a target rating of A, it will want to ensure that its economic capital will cover unexpected losses at a confidence level of:

A : 96.00%.

B : 93.00%.

C : 99.93%.

D : 99.96%.

Answer: C