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: Oct 27, 2026

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Question 1

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

Question 2

A risk analyst is reviewing his bank’s credit risk management policies. He notes that banks have limits on related-party financing decisions. His colleague agrees and correctly adds that:

A : the term single client only refers to a legal person.

B : acceptances and letters of credit should be factored into the risk exposure of a single client.

C : all banks have a limit of 10% of capital for a single client.

D : loan collateral should be included in exposure sizing using mark-to-market principles.

Answer: B

Question 3

Which of the following risks is specifically recognized by the incremental risk charge (IRC)?

A : Jump-to-default risk, as measured by 99% VaR, because a default could cause a significant loss for the bank.

B : Equity price risk, because a change in market prices could materially impact mark-to-market accounting for risk.

C : Expected shortfall risk, because it is important to understand the amount of loss potential in the tail.

D : Interest rate risk, as measured by 97.5% expected shortfall, because an increase in interest rates could cause a significant loss for the bank.

Answer: A

Question 4

Which of the following statements about expected shortfall estimates and coherent risk measures are true?

A : Expected shortfall estimates quantiles for the tail region and coherent risk measures estimate quantiles for the non-tail region only.

B : Expected shortfall and coherent risk measures estimate quantiles for the entire loss distribution.

C : Expected shortfall estimates quantiles for the entire distribution and coherent risk measures estimate quantiles for the tail region only

D : Expected shortfall and coherent risk measures estimate quantiles for the tail region.

Answer: D

Question 5

A bank treasurer is seeking to identify the most appropriate investment maturitystrategy to apply considering the status of its balance sheet and the economicconditions it is currently facing. The treasurer gathers the following information:• The bank faces a high interest rate environment with a flat yield curve.• The bank’s asset mix includes a high proportion of US Treasury bondspurchased years ago when interest rates were significantly lower.• The bank has a high proportion of revenues from loans and anticipates arecord high level of profitability this year.Which of the following strategies would be the most appropriate for the bank to takein order to maintain its current level of total income?

A : A Barbell strategy

B : C Riding the yield curve

C : D Tax swap

D : B Carry trade

Answer: C

Page: 1 / 101

Total 503 Questions | Updated On: Oct 27, 2026

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