Medium FRM Part 1 Practice Questions

291 free medium-difficulty FRM Part 1 questions, drawn live from KomFi's calibrated bank. The exam backbone: the difficulty band where most scoring happens.

1. According to the standard 'Default Waterfall' of a Central Counterparty (CCP), which layer of financial resour
2. An American put option is deep in the money. Why might it be optimal to exercise this option early?
3. If at maturity the futures price were significantly higher than the spot price, what would occur?
4. How is the 'swap rate' typically determined at the inception of an interest-rate swap?
5. If a clearinghouse uses its own 'skin in the game' to cover a default, where does this typically sit in the de
6. In the standard credit rating hierarchy used by major agencies, which of the following ratings represents the
7. Why is it NOT considered a down payment?
8. What is a major disadvantage of an OTC forward for a participant who needs to exit their position early?
9. What is the primary reason why time value is greatest for an at-the-money (ATM) option?
10. What is the primary risk associated with 'Point-in-Time' (PIT) ratings when used for determining regulatory ca
11. What is the put's price, and what would happen if the put traded at $2.00?
12. If the basis (Spot - Futures) 'strengthens' (becomes more positive), what is the outcome for the hedger?
13. An airline hedges its jet fuel requirements using heating oil futures. The standard deviation of jet fuel pric
14. What is the riskless profit per share from an arbitrage trade?
15. If the underlying asset price at maturity is $62, what is the net profit of the position?
16. An investor expects a stock to remain stable at around $100… — What is the name of this strategy and what is i
17. If the portfolio is comprised of a 2-year segment with a Key-Rate Duration (KRD) of 1.0 and a 5-year segment w
18. If the market moves from contango to backwardation during this period, how does this change the basis?
19. A stock index trades at S_0 = 1200, q = 2.5%, r = 4.5%, and T = 0.5. A 1200 strike European put trades at p =
20. What is the invoice price the long party pays at delivery?
21. A U.S. bank borrows 100 million JPY for one year at 1%, converts them to USD at a spot rate of 140.00, and inv
22. A U.S. investor holds a CHF 1,000,000 bond. The current spot rate is CHF/USD = 1.10. To hedge the CHF exposure
23. If the standard deviation of futures price changes (σ_F) is much larger than the standard deviation of spot pr
24. On a currency pair, r_d = 2%, r_f = 6%, S_0 = 1.50, and T = 0.5. If a 1.50 strike European call trades at 0.05
25. What does a high convenience yield typically signal about the underlying physical commodity market?
26. What is the primary reason why put-call parity applies only to European options and not necessarily to America
27. Which exotic option would a speculator use if they believe a stock will experience a massive, sudden rally to
28. Which historical episode serves as a primary warning against ignoring the funding liquidity risk inherent in '
29. Which of the following is an example of 'rollover risk' in a hedging program?
30. If the pool realizes $120 million in losses, what is the percentage loss to the Mezzanine tranche notional?

Sign up free — drill medium FRM Part 1 questions with full explanations →