FRM 2026 Part II Market Risk Measurement and Management Interest Rate Risk Free Quiz 2

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FRM 2026 Part II Market Risk Measurement and Management Interest Rate Risk Free Quiz 2

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FRM 2026 Part II Market Risk Measurement and Management Interest Rate Risk Free Quiz 2

Practice FRM 2026 Part II Market Risk Measurement and Management MCQs from Interest Rate Risk. Get instant results with Explanation.

General10 MCQs

1. What is Asset-Liability Management (ALM)?

A. ALM manages the structure of assets and liabilities to manage interest rate riskB. ALM is only for credit riskC. ALM is the same as capital managementD. ALM is not used in interest rate risk management

2. How can an interest rate swap be used for hedging?

A. An interest rate swap can convert a fixed-rate loan to a floating-rate loanB. An interest rate swap can eliminate all interest rate riskC. An interest rate swap is not used for hedgingD. An interest rate swap can convert a floating-rate loan to a fixed-rate loan

3. What is a forward rate agreement (FRA)?

A. FRAs are exchange-tradedB. FRAs are agreements to fix an interest rate for a future periodC. FRAs are used to speculate on equity pricesD. FRAs are the same as interest rate swaps

4. What are interest rate caps and floors?

A. A cap protects against falling ratesB. A floor protects against rising ratesC. A cap protects against rising rates; a floor protects against falling ratesD. Caps and floors are not used for hedging

5. How are duration and convexity used to measure interest rate risk?

A. Duration and convexity together provide a better estimate of price change for large yield changesB. Duration alone is sufficient for all yield changesC. Convexity is not used in interest rate risk measurementD. Duration is the same as convexity

General10 MCQs

6. What is key rate duration?

A. Key rate duration is the same as modified durationB. Key rate duration measures sensitivity to parallel shiftsC. Key rate duration is not used in practiceD. Key rate duration measures sensitivity to changes in specific points on the yield curve

7. What is the duration gap?

A. Duration gap is the difference between the maturity of assets and liabilitiesB. Duration gap is the difference between the duration of assets and liabilitiesC. A positive duration gap exposes the bank to rising interest ratesD. Duration gap is not used in ALM

8. What is the economic value of equity (EVE)?

A. EVE is the same as book value of equityB. EVE is not affected by interest rate changesC. EVE measures the net present value of assets minus liabilities and is used in interest rate risk managementD. EVE is only for regulatory reporting

9. What is net interest income (NII) and how is it affected by interest rate risk?

A. NII is the difference between interest earned and paid, and is sensitive to interest rate changesB. NII is not affected by interest ratesC. NII is the same as net incomeD. NII is only for regulatory reporting

10. What is the Basel standard for interest rate risk in the banking book (IRRBB)?

A. IRRBB is not regulated by BaselB. IRRBB only applies to the trading bookC. IRRBB is the same as market riskD. Basel has issued standards for IRRBB, requiring measurement and capital

📋 FRM - Test Online Practice Quizzes

FRM

Conducting Body: Global Association of Risk Professionals GARP

Frequency: three times a year: May, August, and November | Time: 240 Minutes

Negative Marking: No

⚡ Test Pattern (Total: 100 MCQs):

Foundations of Risk Management: 25 MCQs
Quantitative Analysis: 25 MCQs
Financial Markets and Products: 25 MCQs
Valuation and Risk Models: 25 MCQs

Merit Formula: -

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