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FRM Part 2 — free MCQ practice

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FRM Part 2 subjects

Finance (29)

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DerivativesFinanceRisk Management

Try a FRM Part 2 question

Acting to reduce a firm's exposure to a risk it already faces is called:Read the answer and worked solution →Betting on a future outcome in order to profit from it is called:Read the answer and worked solution →Merging with its own supplier to control input prices is a firm's use of vertical:Read the answer and worked solution →Although it reduces commodity price risk, that strategy is described as not being a perfect:Read the answer and worked solution →

Worked practice questions

Acting to reduce a firm's exposure to a risk it already faces is called:

  1. Hedging
  2. Heading
  3. Hoarding
  4. Housing
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Correct answer: A. Hedging

1. The exposure exists before any action is taken. 2. The action is meant to cut that exposure. 3. Such an action is hedging. _Source: OpenStax Principles of Finance 2e, Chapter 20, Risk Management and the Financial Manager._

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Betting on a future outcome in order to profit from it is called:

  1. Circulating
  2. Speculating
  3. Stipulating
  4. Simulating
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Correct answer: B. Speculating

1. No existing exposure is being reduced here. 2. The position is taken deliberately for gain. 3. That is speculating. _Source: OpenStax Principles of Finance 2e, Chapter 20, Risk Management and the Financial Manager._

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Merging with its own supplier to control input prices is a firm's use of vertical:

  1. Integration
  2. Innovation
  3. Inspection
  4. Insulation
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Correct answer: A. Integration

1. The supplier and buyer become one company. 2. Input prices then stop moving against the firm. 3. That strategy is vertical integration. _Source: OpenStax Principles of Finance 2e, Chapter 20, Risk Management and the Financial Manager._

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How to practise

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