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 04, 2026

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Question 1

If portfolio assets are perfectly correlated, portfolio VaR will equal:

A : component VaR.

B : undiversified VaR.

C : marginal VaR.

D : diversified VaR.

Answer: B

Question 2

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 3

The CRO at a bank wants to strengthen the bank’s capability to defend itself against emerging cyber-threats. To help achieve this goal, the CRO is assessing the current range of practices regarding the sharing of cybersecurity information between different types of institutions, as well as the potential benefits from sharing information. Which of the following statements would be most appropriate for the CRO to make?

A : Existing peer-sharing mechanisms among banks focus on the exchange of information related to cyber-security incidents, but such information is generally not shared from banks to regulators.

B : The scope and depth of information-sharing practices among banks may significantly vary between financial markets, depending on the level of trust among participating banks.

C : Information-sharing among different national regulators has evolved significantly over the past several years and is now a widespread practice at a large majority of jurisdictions.

D : The sharing of cybersecurity information among banks is less frequently observed and generally considered to be less effective than other cyber-security information-sharing practices.

Answer: B

Question 4

If one of the entities in the CDX NA IG index defaults, the CDS index would most likely:

A : continue with 124 entities, and the notional principal of each entity would remain the same.

B : continue with a replacement entity, with no change to the notional principal.

C : continue with 99 entities, and the notional principal of each entity would be reduced by 1%.

D : make a payoff and be discontinued.

Answer: A

Question 5

Assume that a credit rating of A has a default probability of 0.07%, and a credit rating of AA has a default probability of 0.04%. If a bank is seeking a target rating of A, it will want to ensure that its economic capital will cover unexpected losses at a confidence level of:

A : 96.00%.

B : 93.00%.

C : 99.93%.

D : 99.96%.

Answer: C

Page: 1 / 101

Total 503 Questions | Updated On: Jan 04, 2026

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