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: Apr 03, 2026

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Question 1

Bank Macatawa has a $150 million exposure to Holland Metals Co. The exposure is secured by $125 million of collateral consisting of AA+-rated bonds. Holland Metals Co. is unrated. The collateral risk weight is 20%. Bank Macatawa assumes an adjustment to the exposure of +15% to allow for possible increases in the exposure and allows for a −25% change in the value of the collateral. Risk-weighted assets for the exposure are closest to:

A : $93.75 million.

B : $172.50 million.

C : $118.13 million.

D : $78.75 million.

Answer: D

Question 2

Which of the following statements is most accurate regarding risks incurred by retail lenders?

A : Refinancing a mortgage when rates decrease is an example of asset valuation risk.

B : Reputation risk is more of a concern for the borrower rather than the lender.

C : Credit risk relates to the potential for a lender to default on their obligation.

D : Business risk relates to the day-to-day operational risks of the business.

Answer: A

Question 3

Due to lack of available investment opportunities in public markets, a pension fund decided to hire an investment consultant to assess the potential for investing in illiquid markets in the US. Which of the following characteristics of illiquid markets in the US should the consultant present to the pension managers?

A : During the 2008-2009 Financial Crisis, liquidity dried up in repo markets but not in commercial paper markets.

B : The traditional public, liquid markets of stocks and bonds are larger than the total wealth held in illiquid assets.

C : The share of illiquid assets in institutional portfolios has generally gone up in the past 2 decades.

D : Municipal bonds are usually more liquid than pinksheet over-the-counter equities.

Answer: C

Question 4

Using a reporting cake model, high-level data such as leading indicators and strategic plan progress will most likely be reported in which tier?

A : Tier 1.

B : Tier 3.

C : Tier 2.

D : Tier 4.

Answer: B

Question 5

Which of the following statements best describe a difference between the standardized approach and older operational risk capital approaches?

A : The AMA was more flexible in its application than the standardized approach.

B : The advanced measurement approach (AMA) was introduced as part of the Basel III revisions.

C : The standardized approach uses a model-based methodology, while the AMA was more flexible and principle-based.

D : The standardized approach accounts for internal loss experiences that were not factored into the AMA.

Answer: A

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Total 503 Questions | Updated On: Apr 03, 2026

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