Free GARP FRM-Part-2 Exam Questions

Question 1

Within the context of the three lines of defense model, risk champions (or risk specialists) are most likely to be included in which lines?

A : Line 3 only.

B : Line 2 only.

C : Line 1 only.

D : Lines 1 or 2.

Answer: C

Question 2

A portfolio has an equal amount invested in two positions, X and Y. The expected excess return of X is 9% and that of Y is 12%. Their marginal VaRs are 0.06 and 0.075, respectively. To move toward the optimal portfolio, the manager will probably:

A : do nothing because the information is insufficient.

B : increase the allocation in Y and/or lower that in X.

C : increase the allocation in X and/or lower that in Y.

D : not change the portfolio because it is already optimal.

Answer: B

Question 3

The four-quadrant approach categorizes information security risks as:

A : internal versus external and in house versus third party.

B : internal versus external and intentional versus unintentional.

C : intentional versus unintentional and digital versus physical.

D : intentional versus unintentional and theft versus corruption.

Answer: B

Question 4

A portfolio has an equal amount invested in two positions, X and Y. The expected excess return of X is 9% and that of Y is 12%. Their marginal VaRs are 0.06 and 0.075, respectively. To move toward the optimal portfolio, the manager will probably:

A : do nothing because the information is insufficient.

B : increase the allocation in Y and/or lower that in X.

C : increase the allocation in X and/or lower that in Y.

D : not change the portfolio because it is already optimal.

Answer: B

Question 5

Which of the following trading instruments would have the most beneficial effect on netting?

A : Equity options.

B : Futures.

C : Options with up-front premiums.

D : FX options.

Answer: B