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Free APRM Practice Questions

10 free, exam-style Associate Professional Risk Manager (APRM) practice questions with answers and explanations. No signup required. Work through them below, then take the full free APRM practice test to study every exam domain.

These 10 free APRM questions are organized by exam domain, so you can see how each part of the Associate Professional Risk Manager blueprint is tested. Reveal the answer and explanation under each question.

Domain 1: Risk Management, Corporate Risk Management, and Risk & Return Theory

Question 1

A bank's assets exceed its liabilities, yet it cannot raise enough cash to meet a sudden surge in depositor withdrawals. The risk that has materialized is BEST classified as:

  1. Funding liquidity risk despite remaining solvent
  2. Insolvency arising from liabilities exceeding assets
  3. Market risk from a decline in asset values
  4. Credit risk caused by depositor defaults
Show answer & explanation

Correct answer: A - Funding liquidity risk despite remaining solvent

Domain 2: Risk Governance and Financial Regulation

Question 2

Under the Basel framework, the requirement that banks publicly disclose their risk exposures and capital adequacy so that market participants can assess them falls under:

  1. Pillar 1 - Minimum Capital Requirements
  2. Pillar 2 - Supervisory Review
  3. Pillar 3 - Market Discipline
  4. Pillar 4 - Liquidity Standards
Show answer & explanation

Correct answer: C - Pillar 3 - Market Discipline

Domain 3: Fintech and Its Impact on Financial Intermediation and Risk Management

Question 3

The functional (Merton) perspective on financial systems, applied to fintech, holds that the most stable basis for analysis is:

  1. The specific institutions that currently provide financial services
  2. The economic functions the financial system performs
  3. The technologies used to deliver financial services
  4. The regulations governing financial intermediaries
Show answer & explanation

Correct answer: B - The economic functions the financial system performs

Domain 4: Introduction to Financial Markets

Question 4

Which feature distinguishes an exchange-traded futures contract from an over-the-counter (OTC) forward contract?

  1. It is privately negotiated and fully customized to each counterparty's needs
  2. It is standardized and marked to market daily through a clearinghouse
  3. It exposes each party to greater bilateral counterparty risk
  4. It can be settled only by physical delivery at maturity
Show answer & explanation

Correct answer: B - It is standardized and marked to market daily through a clearinghouse

Domain 5: Market Risk, Asset-Liability Management, Stress Testing, and Scenario Analysis

Question 5

A risk manager reports a 1-day 99% Value at Risk (VaR) of $5 million. A colleague asks how much the firm should expect to lose on the worst days that fall beyond this threshold. The measure that answers this question is:

  1. The 95% VaR
  2. The standard deviation of the daily return distribution
  3. The maximum historical drawdown
  4. Expected Shortfall (Conditional VaR)
Show answer & explanation

Correct answer: D - Expected Shortfall (Conditional VaR)

Question 6

A bond portfolio has a modified duration of 5. If market interest rates rise by 1% (100 basis points), the approximate change in the portfolio's value is:

  1. An increase of about 5%
  2. An increase of about 0.5%
  3. A decrease of about 0.5%
  4. A decrease of about 5%
Show answer & explanation

Correct answer: D - A decrease of about 5%

Domain 6: Credit Scoring, Retail Credit Risk Management, Commercial Credit Risk Management, Risk Management Practices

Question 7

A corporate loan has a probability of default (PD) of 4%, a loss given default (LGD) of 60%, and an exposure at default (EAD) of $5,000,000. What is the expected loss on this loan?

  1. $120,000
  2. $200,000
  3. $1,200,000
  4. $3,000,000
Show answer & explanation

Correct answer: A - $120,000

Domain 7: Operational Risk

Question 8

A trader exceeds authorized limits and conceals the positions, which later produce large losses when markets move against them. Although the losses appear in the trading book, the root cause is BEST classified as:

  1. Market risk, because the losses materialized from adverse market moves
  2. Credit risk, because a trading counterparty was exposed
  3. Operational risk, rooted in a failure of internal controls
  4. Liquidity risk, because the positions could not be closed out
Show answer & explanation

Correct answer: C - Operational risk, rooted in a failure of internal controls

Domain 8: Risk Capital Attribution and Risk-Adjusted Performance Measurement

Question 9

A business unit reports a RAROC of 18% while the firm's hurdle rate is 12%. Based on this, the unit is:

  1. Creating value, since its return exceeds the hurdle rate
  2. Merely breaking even on a risk-adjusted basis
  3. Carrying insufficient economic capital for its risk profile
  4. Destroying value, because its return lags its cost of risk capital
Show answer & explanation

Correct answer: A - Creating value, since its return exceeds the hurdle rate

Domain 9: Case Studies and PRMIA Standards

Question 10

Metallgesellschaft's near-collapse is often cited as a case where a hedging program itself triggered a crisis. The PRIMARY lesson is that:

  1. Hedging programs always raise a firm's total risk exposure
  2. A maturity mismatch between hedge and exposure can create funding strains
  3. Commodity exposures should be hedged only with long-dated credit derivatives
  4. Broad diversification is inherently safer than any hedging strategy
Show answer & explanation

Correct answer: B - A maturity mismatch between hedge and exposure can create funding strains

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