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: Feb 19, 2026

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Question 1

The Bureau of Labor Statistics has just reported an unexpected short-term increase in high-priced luxury automobiles. What is the most likely anticipated impact on a mean-reverting model of interest rates?

A : The economic information is long-lived with a low mean reversion parameter.

B : The economic information is long-lived with a high mean reversion parameter.

C : The economic information is short-lived with a high mean reversion parameter.

D : The economic information is short-lived with a low mean reversion parameter.

Answer: C

Question 2

Kris Gaines, Treasurer at Palm Air Bank and Trust, is considering ways to meet a funding gap created by greater than expected loan demand. Palm Air is a medium sized bank located in Florida. The funding gap is approximately $850,000. Gaines is choosing between several nondepository funding types. The funds are needed immediately. Which type of funding is most appropriate in this situation?

A : Federal funds borrowing.

B : Negotiable certificates of deposit (CDs).

C : Commercial paper.

D : Eurodollar deposits.

Answer: A

Question 3

The CRO of a regional bank expresses concern in a meeting of the risk team thatthe bank’s internal risk models are not adequately assessing potential randomextreme losses. A risk analyst asks if implementing a model based on extremevalue theory (EVT) would address the CRO’s concern. Which of the following iscorrect when applying EVT and examining distributions of losses exceeding a threshold value?

A : C To apply EVT, the underlying loss distribution must be either normal or lognormal.

B : value converges to a generalized Pareto distribution.

C : causes the reliability of the parameter estimates to increase.

D : to infinity, then the GEV essentially becomes a normal distribution.

Answer: B

Question 4

Which of the following statements regarding risk assessment is most accurate?

A : Risk and control self-assessments (RCSAs) are a good mixture of qualitative and quantitative aspects.

B : The main purpose of risk assessment is to prioritize risk management and risk mitigation responses.

C : When backtesting the results of risk assessment against past incident experience, there is a tendency to underestimate the impact of an operational risk event.

D : When backtesting the results of risk assessment against past incident experience, there is a tendency to overestimate the likelihood of an operational risk event.

Answer: B

Question 5

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

Page: 1 / 101

Total 503 Questions | Updated On: Feb 19, 2026

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