100% Free GARP 2016-FRR Practice Test Questions and Answers 2026

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Total 390 Questions | Updated On: May 21, 2026

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Question 1

A trader for EtaBank wants to take a leveraged position in Collateralized Debt Obligations.If these CDOs can be used in a repo transaction at a 20% haircut, what is the maximumleverage factor for a transaction with the CDOs?

A : 0.8

B : 1.5

C : 3

D : 5

Answer: C

Question 2

What are the add-on losses faced by a bank that is going bankrupt?I. The discount accepted by the bank for selling its assets in a fire sale.II. The increased cost of funding liabilities in a financially distressed situation.III. The reduction in the present value of future growth opportunities.IV. Loss of goodwill and intangible assets.

A : I, II

B : II, III, IV

C : III, IV

D : I, II, III, IV.

Answer: D

Question 3

Which of the following statements presents an advantage of using risk and control selfassessments (RCSA) in the operational risk framework?I. RCSA provides very accurate scoring of risks and controls due to its subjective nature.II. RCSA program provides insight into risks that exist in a firm, but that may or may nothave occurred before.III. RCSA program can produce biased but transparent operational risk reporting.IV. RCSA program allows each department to take ownership of its own risks and controls.

A : I and III

B : II and IV

C : I, II and III

D : II, III, and IV

Answer: B

Question 4

Which of the following statements about the interest rates and option prices is correct?

A : If rho is positive, rising interest rates increase option prices.

B : If rho is positive, rising interest rates decrease option prices.

C : As interest rates rise, all options will rise in value.

D : As interest rates fall, all options will rise in value

Answer: A

Question 5

Which one of the following four statements regarding the current value of a transaction andits purposes is INCORRECT?

A : For cash settled instrument the final market value is used to settle the transaction withthe counterparty

B : Profit and loss calculations are made by comparing the current values to the intrinsicvalues.

C : Margin call by futures exchanges are based on the current market value.

D : Counterparty credit risk calculations are made by analyzing the current values of alldeals with the same counterparty.

Answer: B

Page: 1 / 78

Total 390 Questions | Updated On: May 21, 2026

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