20 FRM® Sample Questions to Prepare You for Exam Day

If you’re studying for the FRM® exam, you probably feel a little overwhelmed—and that’s totally normal. With the volume of content and the complexity of topics resulting in a 50-55% pass rate, it’s easy to wonder where to even start. That’s where practice questions come in. Getting hands-on with real exam-style scenarios is one of the smartest ways to study.

Whether you’re still deciding if the Financial Risk Manager designation is right for you or you’re knee-deep in review notes, these FRM® sample questions will help you build confidence, boost accuracy, and sharpen your problem-solving instincts.

I’ll explain what the FRM® exam covers and how to study more strategically. Then, I’ll give you 20 questions to test your knowledge—10 for Part I and 10 for Part II.

Key Takeaways

• Practice Makes Proficient: Sample questions help you apply key concepts like credit risk, market risk, and operational risk in a test-like format.
• Both Parts Matter: FRM® Part I focuses on foundations, while Part II dives deeper into applications—mastering both is crucial for certification.
• Real Exam Feel: Practicing with mock questions simulates real exam pressure and teaches time management, pacing, and content prioritization.
• Concept Over Memorization: The FRM® exam isn’t just about formulas—it’s about understanding how financial risk management works in real scenarios.
• Flexible Study Boost: Whether you’re just starting or reviewing, questions help pinpoint your weak spots and turn confusion into clarity.

What Does the FRM® Exam Cover?

The FRM® exam is split into two parts, and each focuses on different areas of financial risk management.

Part I

• Foundations of risk management
• Quantitative analysis
• Financial markets and products
• Valuation and risk models

Part II

• Market risk and credit risk
• Operational risk and resiliency
• Liquidity and treasury risk
• Current issues in financial markets
• Risk management for investments

You’ll need to understand risk models, credit risk, operational failures, risk measures, the risk-free rate, and more—all in a highly analytical, real-world context. In short, it’s tough. However, doing well on practice questions is one of the most effective ways to prepare.

Practice Tips for FRM® Candidates

Before you dive into the questions, here are a few quick tips to make the most of your practice:

• Mix Question Types: Don’t just do quantitative problems. FRM® covers theory, strategy, and decision-making, too.
• Time Yourself: Practicing under pressure helps you manage time on the real exam.
• Use the Answers: The real value is in the explanation. Understand why you got it right—or wrong.
• Keep a Miss Log: Track mistakes and re-review until you fully get the concept.

Now, let’s get to it.

🧠 FRM® Part I Sample Questions

1. Foundations of Risk Management
What is the primary objective of financial risk management?
A) Eliminate all possible risks
B) Maximize returns in all situations
C) Reduce risks to an acceptable level
D) Avoid losses at all costs

Correct Answer: C

2. Quantitative Analysis
A distribution has a mean of 100 and a standard deviation of 20. What is the z-score of 140?
A) 1
B) 2
C) 3
D) 4

Correct Answer: B

3. Financial Markets and Products
Which instrument is best used to hedge interest rate risk?
A) Stock options
B) Interest rate swaps
C) Currency forwards
D) Credit default swaps

Correct Answer: B

4. Valuation and Risk Models
What does the Black-Scholes model assume about volatility?
A) It’s variable
B) It’s constant
C) It depends on market sentiment
D) It’s based on interest rates

Correct Answer: B

5. Quantitative Analysis
Which of the following is true under the Central Limit Theorem?
A) A small sample size will always be normal
B) The population must be normally distributed
C) The sampling distribution becomes normal as sample size grows
D) Standard deviation must be zero

Correct Answer: C

6. Foundations of Risk Management
What’s the main purpose of a risk measure?
A) Predict returns
B) Estimate potential loss
C) Maximize gains
D) Choose high-risk assets

Correct Answer: B

7. Financial Markets and Products
Which contract type introduces counterparty risk?
A) Exchange-traded futures
B) Listed options
C) OTC forward contracts
D) Treasury bills

Correct Answer: C

8. Valuation and Risk Models
What does Value at Risk (VaR) measure?
A) The expected return of an investment
B) The worst-case scenario
C) The potential loss at a given confidence level
D) The total possible loss

Correct Answer: C

9. Foundations of Risk Management
Which of the following is an example of operational risk?
A) A credit downgrade
B) Market volatility
C) System outage at a trading firm
D) Currency depreciation

Correct Answer: C

10. Quantitative Analysis
Which test error involves rejecting a true null hypothesis?
A) Type I
B) Type II
C) Type III
D) Confidence error

Correct Answer: A

📘 FRM® Part II Sample Questions

1. Market Risk Measurement and Management
Which approach is NOT used to calculate Value at Risk?
A) Monte Carlo Simulation
B) Historical Simulation
C) Regression Forecasting
D) Variance-Covariance

Correct Answer: C

2. Credit Risk Measurement and Management
What is the main purpose of a credit default swap (CDS)?
A) Hedge market risk
B) Provide liquidity
C) Transfer credit exposure
D) Monitor counterparty risk

Correct Answer: C

3. Operational Risk and Resiliency
Which is a key part of operational risk management?
A) Bond pricing
B) Stress testing
C) Business continuity planning
D) Portfolio rebalancing

Correct Answer: C

4. Liquidity and Treasury Risk
Liquidity risk is best described as:
A) Risk of not meeting short-term obligations
B) Risk of inflation
C) Risk of credit downgrade
D) Risk of high returns

Correct Answer: A

5. Risk and Investment Management
Why diversify a portfolio?
A) Reduce systematic risk
B) Reduce unsystematic risk
C) Increase short-term gains
D) Increase market exposure

Correct Answer: B

6. Current Issues in Financial Markets
Which is considered systemic risk?
A) A single hedge fund failure
B) An industry-wide credit crunch
C) A corporate bond default
D) A client-side tech outage

Correct Answer: B

7. Market Risk Measurement
Stress testing is used to:
A) Ensure portfolio liquidity
B) Measure extreme market effects
C) Guarantee compliance
D) Predict daily returns

Correct Answer: B

8. Credit Risk
What does probability of default (PD) represent?
A) The loss severity of a default
B) Likelihood of a borrower defaulting
C) The chance of full recovery
D) A bond’s credit rating

Correct Answer: B

9. Operational Risk and Resiliency
KRIs (Key Risk Indicators) are used to:
A) Signal rising operational risk
B) Track inflation expectations
C) Grade corporate bonds
D) Evaluate market exposure

Correct Answer: A

10. Liquidity and Treasury Risk
What does the Liquidity Coverage Ratio (LCR) require?
A) Banks to hold a minimum amount of equity
B) Institutions to maintain enough high-quality liquid assets
C) Credit agencies to reduce risk weightings
D) Loans to be backed by derivatives

Correct Answer: B

Final Thoughts

The FRM® exam is no joke. It’s analytical, scenario-based, and heavy on application. But the good news? The more practice you do, the more it starts to click. By reviewing sample questions, learning from mistakes, and building a strong sense of how the exam thinks, you’re building a skill set that risk professionals use every day in the real world.

Whether you’re preparing for Part I, Part II, or both, let this be your reminder: you don’t have to feel 100% ready to get started. Sometimes, just opening up that first practice quiz is all it takes to get the momentum going. You’ve got this.

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