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 04, 2026

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Question 1

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 2

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

Question 3

Which of the following measures is most likely an example of a dynamic financial correlation measure?

A : Pairs trading.

B : Copula correlations for collateralized debt obligations (CDOs).

C : Binomial default correlation model.

D : Value at risk (VaR).

Answer: A

Question 4

Which of the following features is least likely a benefit of collateralization?

A : Reduces capital requirements.

B : Reduces credit exposure.

C : Reduces market, operational, and liquidity risk.

D : Allows for more competitive pricing of counterparty risk.

Answer: C

Question 5

A credit analyst is evaluating the liquidity of a small regional bank while preparing a report for a credit committee meeting. With quarterly financial statements, the analyst calculates some relevant liquidity indicators over the past three years. Which of the following trends over this period should the analyst be most concerned about in the credit risk report?

A : The bank’s capacity ratio has been increasing.

B : The bank’s average net federal funds and repurchase agreements position has been increasing.

C : The bank’s loan commitments ratio has been decreasing.

D : The bank’s pledged securities ratio has been decreasing.

Answer: A

Page: 1 / 101

Total 503 Questions | Updated On: Jan 04, 2026

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