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 15, 2026

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Question 1

Following the Credit Suisse crisis in 2023, regulators and market participants werecaught off guard by the full write-down of CoCos. What was the immediate market impact andreaction to the unexpected write-down of Credit Suisse's Additional Tier 1 (AT1) bonds, and howdoes it compare to the market reaction to the Bear Stearns rescue in 2008?

A : value conservation in the decision-making process of the respective rescues.

B : consternation due to the perceived violation of the creditor hierarchy, in contrast to Bear

C : resolution provided, akin to the response to Bear Stearns' bailout.

D : market enthusiasm, as investors favored regulatory interventions that preserved their investments.

Answer: B

Question 2

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:

A : $10,000

B : $1,000

C : $5,000

D : $20,000

Answer: A

Question 3

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

Question 4

Which of the following statements regarding risk management programs with service providers to manage outsourcing risk is correct?

A : The program should contain more detail if there are only a few outsourced activities to established service providers.

B : The program should focus on business continuity and contingency plans.

C : The program should contain adequate oversight and controls over all activities that impact the financial institution.

D : The program should require risk assessments to be updated as a result of updated risk mitigation techniques on a sufficiently regular basis.

Answer: B

Question 5

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

Page: 1 / 101

Total 503 Questions | Updated On: Apr 15, 2026

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