Free GARP 2016-FRR Exam Questions

Become GARP Certified with updated 2016-FRR exam questions and correct answers

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Total 390 Questions | Updated On: Jul 23, 2026

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Question 1

A corporate bond gives a yield of 6%. A same maturity government bond yields 2%. The

probability of the corporate bond defaulting is 2.5%. In case of default, investors expect to

lose 60% of their investment. The risk premium in the credit spread is:

A : 1.5%

B : 4.5%

C : 2.5%

D : 0.5%

Answer: C

Question 2

Which one of the following four options is NOT a typical component of a currency swap?

A : initial currency exchange of the notional amount

B : nomination of the original notional amount into a foreign currency

C : riodic exchange of interest payments in different currencies

D : final currency exchange

Answer: B

Question 3

PV01 is a method of describing interest rate risk. Which one of the following is a specific weakness of PV01?

A : PV01 overestimates convexity risk

B : PV01 is not very good at describing value change due to large changes in interest rates

C : PV01 underestimates the effect of small changes in interest rates

D : PV01 requires a large number of calculations to produce a reasonable estimate of the effect of interest rate changes

Answer: B

Question 4

Which one of the following is a typical source of funding for a commercial banks assets?

A : Consumer deposits

B : Cash

C : Commercial lending

D : Commodities markets

Answer: A

Question 5