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: Jan 13, 2026

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Question 1

Which of the following statements most accurately describes the effect of selling a loan without recourse?

A : The purchaser has the right to sell the loan back to the bank that originated the loan.

B : The loan is removed from the balance sheet of the bank that sells the loan.

C : The bank that sells the loan bears a specified percentage of the credit risk.

D : The bank that sells the loan retains a contingent liability.

Answer: B

Question 2

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 3

The Black-Scholes-Merton option pricing model is not appropriate for valuing options on corporate bonds because corporate bonds:

A : have credit risk.

B : have an upper price bound.

C : are not priced by arbitrage.

D : have constant price volatility.

Answer: B

Question 4

Which of the following statements about a stressed value at risk (VaR), required under Basel 2.5, is correct?

A : The stressed VaR replaces the “normal” VaR for the purpose of calculating capital for credit risks.

B : The stressed VaR must be calculated using a 99.9% confidence interval.

C : Basel 2.5 has established the year 2008 as the “stress” period. All banks use data from 2008 to calculate the stressed VaR.

D : Market risk capital under Basel 2.5 should be at least double that of market risk capital under Basel II due to the addition of the stressed VaR.

Answer: D

Question 5

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

Page: 1 / 101

Total 503 Questions | Updated On: Jan 13, 2026

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