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: Mar 21, 2026

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Question 1

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 2

Unconditional testing does not reflect the:

A : timing of the exceptions.

B : size of the portfolio.

C : number of exceptions.

D : confidence level chosen.

Answer: A

Question 3

Which of the following risks is specifically recognized by the incremental risk charge (IRC)?

A : Jump-to-default risk, as measured by 99% VaR, because a default could cause a significant loss for the bank.

B : Equity price risk, because a change in market prices could materially impact mark-to-market accounting for risk.

C : Expected shortfall risk, because it is important to understand the amount of loss potential in the tail.

D : Interest rate risk, as measured by 97.5% expected shortfall, because an increase in interest rates could cause a significant loss for the bank.

Answer: A

Question 4

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 5

A UK-based retail brokerage firm has recently experienced rapid growth through aseries of acquisitions and plans to improve its operational resilience in order tocomply with new requirements issued by national regulators. The CRO asks anoperational risk manager to assess best practices in this area and to suggestpotential actions that the firm should take to meet this objective. Which of thefollowing actions would be most appropriate for the manager to recommend in orderto comply with the regulatory guidelines concerning operational resilience forimportant business services?

A : remote backup capabilities so the platform can continue to function during an outage.

B : capital cushion against potentially extreme operational losses.

C : acquired firms into a single firm-wide process.

D : representatives to further enhance their productivity.

Answer: A

Page: 1 / 101

Total 503 Questions | Updated On: Mar 21, 2026

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