Free GARP FRM-Part-2 Exam Questions

Question 1

The treasurer of a regional bank is concerned that the bank may not be properlycompensated for the services it provides to its depositors and asks a manager toassess a price for these services. The manager applies cost-plus pricing for alldepository services and uses the following data for pricing the automated tellermachine (ATM) service:• Operating expense per ATM visit: USD 0.25• Estimated overhead cost allocated per ATM visit: USD 0.35• Profit required per ATM visit: USD 0.05• The bank’s target return on capital: 15%What is the correct amount for the bank to charge per ATM visit according to the cost-plus pricing model?

A : D USD 0.74

B : B USD 0.65

C : A USD 0.30

D : C USD 0.70

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 bank employee has been manipulating suspense (transitory) accounts for a prolonged time, and this event was determined to be a significant operational incident. Which of the following time intervals in terms of the operational incident date is most likely to be the longest?

A : Date of reporting to date of accounting.

B : Date of occurrence to date of discovery.

C : Date of discovery to date of reporting.

D : Date of occurrence to date of reporting.

Answer: D

Question 4

Which of the following statements about expected shortfall estimates and coherent risk measures are true?

A : Expected shortfall estimates quantiles for the tail region and coherent risk measures estimate quantiles for the non-tail region only.

B : Expected shortfall and coherent risk measures estimate quantiles for the entire loss distribution.

C : Expected shortfall estimates quantiles for the entire distribution and coherent risk measures estimate quantiles for the tail region only

D : Expected shortfall and coherent risk measures estimate quantiles for the tail region.