frm level2 practice exam 2016

2016FRMPartIIPracticeExam®FinancialRiskManagerExamination(FRM)PartIIPracticeExam©2016GlobalAssociationofRiskProfessionals.Allrightsreserved.ItisillegaltoreproducethismaterialinanyformatwithoutpriorwrittenapprovalofGARP,GlobalAssociationofRiskProfessionals,Inc.1TableofContentsIntroductionto2016FRMPartIIPracticeExam............................................12016FRMPartIIPracticeExam-CandidateAnswerSheet...........................32016FRMPartIIPracticeExam–Questions..................................................42016FRMPartIIPracticeExam–AnswerKey.............................................342016FRMPartIIPracticeExam–Answers&Explanations.........................35FinancialRiskManagerExamination(FRM)PartIIPracticeExam©2016GlobalAssociationofRiskProfessionals.Allrightsreserved.ItisillegaltoreproducethismaterialinanyformatwithoutpriorwrittenapprovalofGARP,GlobalAssociationofRiskProfessionals,Inc.1IntroductionTheFRMExamisapractice-orientedexamination.Itsquestionsarederivedfromacombinationoftheory,assetforthinthecorereadings,and“real-world”workexperience.Candidatesareexpectedtounderstandriskmanagementconceptsandapproachesandhowtheywouldapplytoariskmanager’sday-to-dayactivities.TheFRMExamisalsoacomprehensiveexamination,testingariskprofessionalonanumberofriskmanagementconceptsandapproaches.Itisveryrarethatariskmanagerwillbefacedwithanissuethatcanimmediatelybeslottedintoonecategory.Intherealworld,ariskmanagermustbeabletoidentifyanynumberofrisk-relatedissuesandbeabletodealwiththemeffectively.The2016FRMPartIandPartIIPracticeExamshavebeendevelopedtoaidcandidatesintheirpreparationfortheFRMExaminMayandNovember2016.ThesePracticeExamsarebasedonasampleofquestionsfrompriorFRMExamsandaresuggestiveofthequestionsthatwillbeinthe2016FRMExam.The2016FRMPartIPracticeExamcontains100multiple-choicequestionsandthe2016FRMPartIIPracticeExamcontains80multiple-choicequestions,thesamenumberofquestionsthattheactual2016FRMExamPartIand2016FRMExamPartIIwillcontain.Assuch,thePracticeExamsweredesignedtoallowcandidatestocalibratetheirpreparednessbothintermsofmaterialandtime.The2016FRMPracticeExamsdonotnecessarilycoveralltopicstobetestedinthe2016FRMExamasanytestsamplesfromtheuniverseoftestablepossibleknowledgepoints.However,thequestionsselectedforinclusioninthePracticeExamswerechosentobebroadlyreflectiveofthematerialassignedfor2016aswellastorepresentthestyleofquestionthattheFRMCommitteeconsidersappropriatebasedonassignedmaterial.Foracompletelistofcurrenttopics,corereadings,andkeylearningobjectivescandidatesshouldrefertothe2016FRMExamStudyGuideand2016FRMLearningObjectives.CorereadingswereselectedbytheFRMCommitteetoassistcandidatesintheirreviewofthesubjectscoveredbytheExam.QuestionsfortheFRMExamarederivedfromthecorereadings.ItisstronglysuggestedthatcandidatesstudythesereadingsindepthpriortosittingfortheExam.SuggestedUseofPracticeExamsTomaximizetheeffectivenessofthepracticeexams,candidatesareencouragedtofollowtheserecommendations:1.Planadateandtimetotakethepracticeexam.Setdatesappropriatelytogivesufficientstudy/reviewtimeforthepracticeexampriortotheactualexam.2.Simulatethetestenvironmentascloselyaspossible.•Takethepracticeexaminaquietplace.•Haveonlythepracticeexam,candidateanswersheet,calculator,andwritinginstruments(pencils,erasers)available.•Minimizepossibledistractionsfromotherpeople,cellphones,televisions,etc.;putawayanystudymaterialbeforebeginningthepracticeexam.•Allocate4hourstocompleteFRMPartIPracticeExamand4hourstocompleteFRMPartIIPracticeExamandkeeptrackofyourtime.TheactualFRMExamPartIandFRMExamPartIIare4hourseach.FinancialRiskManagerExamination(FRM)PartIIPracticeExam©2016GlobalAssociationofRiskProfessionals.Allrightsreserved.ItisillegaltoreproducethismaterialinanyformatwithoutpriorwrittenapprovalofGARP,GlobalAssociationofRiskProfessionals,Inc.2•Completetheentireexamandanswerallquestions.Pointsareawardedforcorrectanswers.ThereisnopenaltyontheFRMExamforanincorrectanswer.•FollowtheFRMcalculatorpolicy.Candidatesareonlyallowedtobringcertaintypesofcalculatorsintotheexamroom.TheonlycalculatorsauthorizedforuseontheFRMExamin2016arelistedbelow,therewillbenoexceptionstothispolicy.Youwillnotbeallowedintotheexamroomwithapersonalcalculatorotherthanthefollowing:TexasInstrumentsBAIIPlus(includingtheBAIIPlusProfessional),HewlettPackard12C(includingtheHP12CPlatinumandtheAnniversaryEdition),HewlettPackard10BII,HewlettPackard10BII+andHewlettPackard20B.3.AftercompletingtheFRMPracticeExams•Calculateyourscorebycomparingyouranswersheetwiththepracticeexamanswerkey.•UsethepracticeexamAnswersandExplanationstobetterunderstandthecorrectandincorrectanswersandtoidentifytopicsthatrequireadditionalreview.Consultreferencedcorereadingstopreparefortheexam.•Remember:pass/failstatusfortheactualexamisbasedonthedistributionofscoresfromallcandidates,souseyourscoresonlytogaugeyourownprogressandlevelofpreparedness.FinancialRiskManagerExamination(FRM)PartIIPracticeExam©2016GlobalAssociationofRiskProfessionals.Allrightsreserved.Itisillegaltoreproducethismaterialinanyformatwithoutpr