Free GARP FRM-Part-2 Exam Questions

Become GARP Certified with updated FRM-Part-2 exam questions and correct answers

Page: 1 / 101

Total 503 Questions | Updated On: Apr 15, 2026

Add To Cart

Question 1

Two financial institutions are facing different funding issues. Bank A, a mid-size regional bank is concerned that it has a shortfall in legal reserves for the day and is seeking an alternative to address this shortfall. Bank B, a small community bank, on the other hand, has recently experienced a much greater than anticipated shortfall in long term certificates of deposit (CD) renewals due to fierce local competition for retail deposits. Bank B has traditionally used stable CDs to fund its home mortgage portfolio. What is the most appropriate funding response of each of these two institutions considering timing and the availability of non-deposit funds?

A : Bank A should issue debentures and Bank B should fund itself through the CP market.

B : Bank A should borrow from the wholesale deposit market and Bank B should fund itself through the Eurocurrency deposit market.

C : Bank A should fund itself through the commercial paper (CP) market and Bank B should borrow from the Federal funds market.

D : Bank A should borrow from the Federal funds market and Bank B should borrow from the Federal Home Loan Banks.

Answer: D

Question 2

An investor records its investments on its internal systems and reconciles them with the investment listing on the brokerage statement each month. This reconciliation is best described as a:

A : directive control.

B : corrective control.

C : preventative control.

D : detective control.

Answer: D

Question 3

A risk manager at MAB Funds estimates that the fund’s one-week value at risk (VaR) is $1 million using a 95% probability. The fund can, therefore, be expected to lose:

A : no more than $1 million in a week 5% of the time.

B : no more than $1 million in a week 95% of the time.

C : an average of $1 million in a week 5% of the time.

D : an average of $1 million in a week 95% of the time.

Answer: B

Question 4

Which of the following statements describes the best approach for liquidity transfer pricing?

A : The matched-maturity marginal approach is preferred because it quantifies liquidity risk premiums across all maturities.

B : The separate average cost of funds approach is preferred to accurately account for business units with large trading activities.

C : The pooled average cost of funds approach is more appropriate for banks with numerous business units.

D : Zero cost of funds approach is preferred in cases in which swap rates are unknown and undeterminable.

Answer: A

Question 5

What is the impact on the bond price-yield curve if, all other factors held constant, the maturity of a zero-coupon bond increases? The pricing curve becomes:

A : more concave.

B : less concave.

C : less convex.

D : more convex.

Answer: D

Page: 1 / 101

Total 503 Questions | Updated On: Apr 15, 2026

Add To Cart