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FRM Part 1 Examination Questions – 17 Things to Note

Estimated reading time: 9 minutes

 

Introduction

The FRM part 1 exam is the initial step in attaining the globally acknowledged Financial Risk Manager certification.

The exam is administered on a global scale by the Global Association of Risk Professionals GARP®. This test covers several introductory and advanced topics in financial risk management.

Here are some critical things to remember about the questions.

 

1. What is the difficulty level like?

Exit polls by past candidates show that the Financial Risk Manager exam is actually harder than other certifications in finance.

When it comes to complexity-comparisons between the two levels, many candidates find part 2 to be more challenging.

There are more study materials involved in level 2 of the program, and it delves deeper into the concepts introduced in level 1.

Be that as it may, the difficulty level of the test depends on your academic and professional background as well as your level of preparedness.

 

2. What is the exam weighting for topics?

The topics that are covered include Foundations of Risk Management (20%), Quantitative Analysis (20%), Risk and Valuation Models (30%) and Financial Markets and Products (30%).

GARP has structured part 1 of the program to be accommodating to everyone with and without a background in finance and mathematics.

With a little dedication and a regular studying schedule, anyone can pass the exam.

 

3. Is the test more quantitative than qualitative?

The exam comprises of more mathematical calculations than part 2. Candidates need to be adept in using their financial calculator, and for that, regular practice is necessary.

GARP provides candidates with various types of calculators in the exam room, specifically models by Texas Instruments and Hewlett Packard.

Candidates with a background in banking or accounting are more likely to have it easy in quantities analysis and valuation models. Even so, GARP has designed the course curriculum to cover everything from scratch.

If you carry out an in-depth review of the topics and practice more, you will find the questions to be straightforward.

 

4. Which themes are the most critical?

The topics mentioned before are all equally tested. The questions test your inherent understanding of the subject matter. 

For a better chance of passing, you will need to have a grasp of quantitative analysis, financial markets, and products & valuation and risk models.

These include CAPM, popular financial mishaps, correlation measurement methods, futures and forwards, swaps, among others.

 

5. What is tested in Quantitative Analysis?

Probability and statistics make up core concepts in Risk Management. Probability, which measures chance, is a fundamental tool in risk modeling. 

On the other hand, statistics delves into analysis and building models for risk prediction. Part 2 and to a considerable extent, the entire syllabus, rests on risk management analysis.

The areas tested under quantitative analysis include probability distributions, sampling, correlation and regression, volatility and simulation types.

 

6. Is it possible to prepare for the test in 90 days?

The course typically demands about 300 hours’ worth of preparation. Comprehensive reading is what sets successful candidates apart from the rest. 

GARP’s questions are often about theoretical knowledge and its application in the real world. For higher chances of success, you need to master all the topics as outlined in GARP’s official study guide. 

A 3-month study schedule is feasible; although an extended time will help you strike a better balance between studies, work, and social obligations.

Study every day to gain a deep understanding of the concepts so you can be able to apply them in a practical setting.

The questions in the examinations aren’t typically direct. Instead, they tie theoretical knowledge to real-life situations in the financial world.

 

7. Is 1 month enough to clear the exam?

Yes, but only if you already have a solid foundation in finance. You can also make do with that time if you can manage to study for about 9 hours every day.

This, as many candidates take approximately 300 hours to review all the study materials thoroughly. The actual time it takes depends on your professional and academic background.

The examination differs from other higher learning tests because of the complexity of the questions. Candidates often need to review materials from GARP, plus questions from third party providers. 

Starting early can significantly work in your favor, but that’s not a reason for late registrants to despair.

Fast study techniques can help you efficiently utilize your time and remember most of what you learn. These techniques include selective reading that sifts through filler words.

Instead of reading whole texts, you will be targeting topics, subtopics, texts in bold and first and last paragraphs. 

Another technique is making small notes on the textbook with a pencil, as opposed to writing summaries in a separate notebook.

 

8. How should I prepare for the questions?

On the exam day, you will have 4 hours to convince the GARP professional body that you have internalized everything there is to know about the financial risk manager level 1 test.

The pass rate is historically between 40% and 50%, and the exam has 100 questions. The best preparation technique includes setting enough time to review the GARP textbooks, practicing the questions at the end of each topic.

Thereafter, you want to attempt mock exams and practice questions from different third party providers.

Create a study schedule that you can follow every day. Regular study is always better than last minute studies; past candidates can attest to that. Try to cover the whole curriculum, leaving nothing to chance. 

After that, start attempting sample papers, aiming to solve at least 1 exam papers every day. These mock tests will help you find out your areas of weakness. Brush up on all weak areas before the exam day.

 

9. Which questions are numerical?

There is usually some conflicting information about the nature of questions in the level 1 test. 

If you ask around among past candidates, many would say the exam skews towards numerical questions, while a good number will also say that the test is mostly theoretical.

For effective studying, one needs to as much as they can for their test. If you analyze the previous year’s papers, you will find that 55% of the FRM level 1 exam questions are quantitative, while 45% are qualitative.

An estimated 4% to 8% of the statistical questions are ‘straightforward’ as they are based on some simple formula. The rest require an exhaustive understanding of varying concepts and lengthy calculations.

 

10. What should I do if I don’t understand a question?

In the exam, not all questions are straightforward. If the quiz is not making sense, try to see if you can obtain the implied meaning from any of the answers and then reread the question.

If you can’t get to the bottom of it, mark an answer, and move on to the next question. The exam is timed, and so obsessing over one question can create unnecessary issues.

It would be the worst scenario if you run out of time and not answer the easier questions.

By the way, exam prep experts always recommend starting with the easiest questions. These are the ‘low hanging fruits,’ meaning you can get them right in the shortest time possible.

After that, you will have enough time to spend unraveling the remaining harder questions.

 

11. If I don’t know the answer, can I leave it blank?

Under absolutely NO scenario should you have unanswered questions left at the end of your FRM examination

The exam has 100 multiple choice questions, and that gives you room to make educated guesses for questions you are unsure of.

An unanswered question in the exam has a maximum value of zero, while a randomly chosen answer (the effort for attempting) merits you a 25% chance of being correct.

Leaving a question unanswered therefore pays no dividends. The exam has no negative marking for an incorrect answer. Thus, guessing will not be an overbearing issue.

 

12. What should I do if the questions are confusing?

The questions are tough, and candidates should walk into the exam room expecting this.

This test evaluates your understanding of the curriculum, your critical thinking, and the ability to apply textbook concepts to real-life scenarios.

Nevertheless, GARP is not trying to frustrate or confuse you through the exam. So, keep a clear head and demonstrate that you are worthy of the prestigious certification.

In the exam room, your mastery of concepts and techniques is your weapon. Read all questions at least twice, marking keywords and core phrases to understand what is being tested.

Choose the right ‘weapon’ to use, pick the right answer among the listed, and move on.

 

13. What are the techniques for non-numerical questions?

GARP is known to twist words in exam questions and make all the answers sound the same. For that reason, candidates will sometimes tell you that non-numerical questions are often the most challenging.

Well, that may be subjective, but without a keen eye, you might end up giving the right answers to the wrong questions in the whole test.

When reading the questions, watch out for negatives, such as “which among the following is not an advantage…”

It is also wise to be on the lookout for double negatives such as “which among these is least likely a drawback…”

If you are reading the questions too quickly, and without marking key phrases, you are likely to miss such critical words. After analyzing a question, ensure to re-read all the answers.

Do not stop when you come upon a correct one. There might be a better option for the remaining choices.

 

14. Techniques for numerical questions

The course measures your overall intelligence and ability to handle critical scenarios in a corporate setting.

Here are ways to tackle the numerical questions:

  • Read the questions keenly, paying close attention to the overall message
  • Apply any calculator short cut techniques
  • Remember all the formulas from your revision and apply the most relevant one
  • After making your calculations, re-read the question to see if you have provided the answer that was needed
  • Manage your time well for all questions

 

15. What should I do when I encounter long and wordy questions?

It would help to read the questions word-for-word, dissecting the sentence into bits of information. Sift out the irrelevant bits of content from the paragraphs as these are what might make a wrong answer to sound right.

You can also put yourself in the examiner’s shoe and so as to find out the concept they are testing in that particular question. 

After reading and re-reading, some experts recommend that you try coming up with your answer before looking at the choices provided.

When you finally go through the multiple options, you will be less likely to get confused with the wording.

 

16. Is there an answer-pattern to watch out for?

A pattern implies that the examiner somehow structured the answers to follow a specific sequence. That may happen by coincidence, but it’s never planned for by the examiners.

GARP does not test your ability to unravel mystery patterns in the answers; instead, the body tests your full grasp of the various concepts within the Financial Risk Manager course.

 

17. What else should I remember when answering questions?

  • Even when the exam questions are hard, don’t lose confidence.
  • No candidate ever gets a perfect score in the exam, even after months of rigorous preparation.
  • The pass rate for the exam is low for a reason. Professionals are being created and sought after.
  • The moment you begin second-guessing yourself, you will start marking wrong answers.
  • Don’t be over-confident, even for the most (seemingly) straight forward questions.
  • Re-read the question and re-read your selected answer.

 

The final word

With adequate preparation, you can find the FRM part 1 exam to be easier than what most people say. The bottom line is adopting great study techniques and keeping a clear head during the exam.

Thank you for reading this article- we truly hope that you learned from it. Check out our other articles for even more insight and get all the free stuff from the Shop Page.

 

Maintain focus and keep going,

The QuestionBank Family