Practice Quiz

FRM Financial Risk Manager Practice Test - Question List

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11. Jenny is a gambler who has a utility function that is “more concave” or “curvier” than Tom’s utility function. Who is more risk averse?
  1. Jenny.
  2. Tom.
  3. Both are equal.
  4. None.
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12. A risk has two components: uncertainty and exposure. Interest rate risk is therefore a risk to the earnings or market value of a portfolio due to
  1. Exposure to interest rate fluctuations.
  2. Uncertainty in interests.
  3. Exposure to uncertain current interest rates.
  4. Uncertain future interest rate.
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13. Liquidity risk is financial risk due to uncertain liquidity. What can cause this to happen?
  1. A firm’s credit rating falls.
  2. A firm experiences sudden unexpected cash outflows.
  3. A firm’s market experiences a loss in liquidity.
  4. All of the above.
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14. You are a U.S. investor and you have stocks in France. The return that you will get is affected by both the change in the price of the stocks and the change of the Euro against the U.S. dollar. What kind of risk does this refer to?
  1. Foreign exchange risk.
  2. Liquidity risk.
  3. Interest rate risk.
  4. Geopolitical risk.
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15. What is inflation risk?
  1. The increase in prices of good and services in the economy.
  2. The risk that the value of assets or income will decrease.
  3. The risk that inflation will get out of control to become hyperinflation.
  4. The risk that is due to uncertainty of inflation.
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