PRMIA Associate PRM Practice Test

Associate PRM preparation is a good entry point for financial risk-management vocabulary: risk categories, markets, governance, controls, simple quantitative ideas, derivatives basics, and risk communication.

These 12 original questions are a public preview, not official PRMIA questions.

What these questions test

• recognizing major financial risk categories and risk-management language
• using risk governance, limits, controls, and reporting concepts correctly
• avoiding the common trap that one metric or one control solves all risk

Official-source check

Verify current certificate requirements, syllabus, and exam logistics with the PRMIA website .

Sample Exam Questions

Question 1

Topic: risk categories

Which pair is most clearly a financial risk-management category pair?

• A. Market risk and credit risk
• B. Font risk and color risk
• C. Lunch risk and travel risk
• D. Slide risk and hallway risk

Best answer: A

Explanation: Market and credit risk are core financial risk categories. Operational and liquidity risk are also common categories.

Question 2

Topic: market risk

What creates market risk for a bond portfolio?

• A. Changes in interest rates, spreads, or other market factors affecting bond value
• B. A missing meeting title
• C. A locked office door
• D. A printing delay only

Best answer: A

Explanation: Bond values are sensitive to market risk factors such as rates and spreads.

Question 3

Topic: credit risk

Which event is most directly credit risk?

• A. A borrower fails to make required debt payments
• B. A system password expires
• C. A stock index changes level
• D. A report has a formatting error

Best answer: A

Explanation: Credit risk concerns failure to meet financial obligations.

Question 4

Topic: operational risk

A trade is booked to the wrong account because of a manual process error. What risk type is most direct?

• A. Operational risk
• B. Pure interest-rate risk
• C. Equity beta only
• D. Commodity price risk only

Best answer: A

Explanation: Manual process failures are operational risk events.

Question 5

Topic: liquidity

Which statement best describes funding liquidity risk?

• A. The risk that an institution cannot meet cash obligations when due without unacceptable cost
• B. The risk that a chart is unclear
• C. The risk that a meeting is short
• D. The risk that an email is long

Best answer: A

Explanation: Funding liquidity risk concerns the ability to meet cash obligations.

Question 6

Topic: controls

Why are limits used in risk management?

• A. To constrain exposures and trigger review or escalation when risk exceeds approved levels
• B. To guarantee profit
• C. To remove reporting
• D. To hide risk appetite

Best answer: A

Explanation: Limits translate risk appetite into practical controls and escalation thresholds.

Question 7

Topic: diversification

Why can diversification reduce some risk?

• A. Losses from different exposures may not move together perfectly
• B. It guarantees no loss
• C. It removes all market exposure
• D. It eliminates governance

Best answer: A

Explanation: Diversification can reduce idiosyncratic concentration, but it does not eliminate all risk.

Question 8

Topic: derivatives basics

What is a derivative?

• A. A contract whose value is linked to an underlying asset, rate, index, or other variable
• B. A cash balance only
• C. A board policy only
• D. A meeting note

Best answer: A

Explanation: Derivatives derive value from an underlying reference.

Question 9

Topic: risk reporting

What should an entry-level risk report help a reader understand?

• A. Current exposure, limit status, changes, key drivers, and issues requiring action
• B. Only the report author’s name
• C. Only historical office moves
• D. No decision-relevant information

Best answer: A

Explanation: Risk reports should support action, oversight, and escalation.

Question 10

Topic: governance

What is the role of risk governance?

• A. Define roles, risk appetite, policies, oversight, escalation, and accountability
• B. Remove board oversight
• C. Eliminate controls
• D. Avoid accountability

Best answer: A

Explanation: Governance organizes who decides, who monitors, what limits apply, and how exceptions are escalated.

Question 11

Topic: scenario analysis

Why use scenario analysis?

• A. To explore how specified events or assumptions could affect exposures, losses, or liquidity
• B. To avoid thinking about severe events
• C. To guarantee exact forecasts
• D. To replace all controls

Best answer: A

Explanation: Scenario analysis helps understand potential outcomes under defined assumptions.

Question 12

Topic: common trap

Which statement is weakest?

• A. A risk metric should be understood with assumptions and limitations.
• B. Risk reports should support decisions.
• C. Diversification guarantees there can be no loss.
• D. Controls should connect to risk appetite.

Best answer: C

Explanation: Diversification can reduce some risk but does not guarantee positive outcomes or eliminate systemic risk.