FRM DISCOUNTED CASH FLOW PRACTICE EXAM - (80 QUESTIONS) UP-TO-DATE
ACTUAL EXAM QUESTIONS AND 100% ACCURATE SOLUTIONS | VERIFIED ANSWERS -
INSTANT PDF DOWNLOAD
Examiner/Administrator: Global Association of Risk Professionals (GARP)
Candidate Name: ____________________________
Candidate ID: ________________________________
Date: ______________________________________
Examination Centre: __________________________
Time Allowed: 3 Hours
Total Questions: 80
Instructions: Answer all questions. Each question carries equal marks. Use of a financial
calculator is permitted. Show all necessary workings clearly. Select the most appropriate
answer for each question.
This assessment evaluates the candidate’s ability to apply discounted cash flow (DCF)
methodologies within financial risk management contexts, including valuation under
uncertainty, risk-adjusted discount rates, term structure modeling, and capital budgeting
,decisions. Candidates are expected to demonstrate analytical rigor, quantitative
reasoning, and sound judgment in interpreting financial data and valuation outputs. The
examination reflects industry-relevant scenarios aligned with global risk management
practices and emphasizes practical application over rote memorization.
Core Competency Areas:
Time Value of Money and Discounting Techniques
Valuation of Cash Flows under Uncertainty
Risk-Adjusted Discount Rates and WACC
Term Structure of Interest Rates
Equity and Fixed Income Valuation
Scenario and Sensitivity Analysis
Capital Budgeting and Project Valuation
Instructions to Candidates: Read each question carefully before selecting your answer.
Choose the best possible answer among the four options provided. Manage your time
efficiently, allocating approximately 2–3 minutes per question. Calculators may be used,
but all assumptions must be clearly understood. Avoid leaving any question unanswered.
,This examination contains 80 multiple-choice questions designed to reflect the rigor and
structure of professional financial risk management assessments.
Disclaimer: This is an original simulation exam designed for educational purposes and is
not affiliated with or endorsed by the official examining body.
Q1. A firm expects to receive a perpetual cash flow of $5 million annually. If the
appropriate discount rate is 10%, what is the value of the firm?
A. $45 million
B. $50 million
C. $55 million
D. $60 million
Correct Answer: 🔴 B. $50 million
Explanation: 🟡 The value of a perpetuity is calculated as Cash Flow / Discount Rate = 5 /
0.10 = $50 million. Option A underestimates, while C and D overestimate the valuation.
Only B correctly applies the perpetuity formula.
, Q2. A project generates cash flows of $100,000 annually for 3 years. If the discount rate is
8%, what is the present value?
A. $257,710
B. $258,000
C. $260,000
D. $270,000
Correct Answer: 🔴 A. $257,710
Explanation: 🟡 PV = 100,000 × [1 - (1.08)^-3]/0.08 ≈ 257,710. Options B–D are
approximations or incorrect rounding. A is most accurate.
Q3. Which of the following best describes the weighted average cost of capital (WACC)?
A. Cost of equity only
B. Cost of debt only
C. Weighted cost of all financing sources
D. Risk-free rate
Correct Answer: 🔴 C. Weighted cost of all financing sources
Explanation: 🟡 WACC incorporates both debt and equity costs weighted by their
proportions. A and B ignore components, while D is unrelated.
ACTUAL EXAM QUESTIONS AND 100% ACCURATE SOLUTIONS | VERIFIED ANSWERS -
INSTANT PDF DOWNLOAD
Examiner/Administrator: Global Association of Risk Professionals (GARP)
Candidate Name: ____________________________
Candidate ID: ________________________________
Date: ______________________________________
Examination Centre: __________________________
Time Allowed: 3 Hours
Total Questions: 80
Instructions: Answer all questions. Each question carries equal marks. Use of a financial
calculator is permitted. Show all necessary workings clearly. Select the most appropriate
answer for each question.
This assessment evaluates the candidate’s ability to apply discounted cash flow (DCF)
methodologies within financial risk management contexts, including valuation under
uncertainty, risk-adjusted discount rates, term structure modeling, and capital budgeting
,decisions. Candidates are expected to demonstrate analytical rigor, quantitative
reasoning, and sound judgment in interpreting financial data and valuation outputs. The
examination reflects industry-relevant scenarios aligned with global risk management
practices and emphasizes practical application over rote memorization.
Core Competency Areas:
Time Value of Money and Discounting Techniques
Valuation of Cash Flows under Uncertainty
Risk-Adjusted Discount Rates and WACC
Term Structure of Interest Rates
Equity and Fixed Income Valuation
Scenario and Sensitivity Analysis
Capital Budgeting and Project Valuation
Instructions to Candidates: Read each question carefully before selecting your answer.
Choose the best possible answer among the four options provided. Manage your time
efficiently, allocating approximately 2–3 minutes per question. Calculators may be used,
but all assumptions must be clearly understood. Avoid leaving any question unanswered.
,This examination contains 80 multiple-choice questions designed to reflect the rigor and
structure of professional financial risk management assessments.
Disclaimer: This is an original simulation exam designed for educational purposes and is
not affiliated with or endorsed by the official examining body.
Q1. A firm expects to receive a perpetual cash flow of $5 million annually. If the
appropriate discount rate is 10%, what is the value of the firm?
A. $45 million
B. $50 million
C. $55 million
D. $60 million
Correct Answer: 🔴 B. $50 million
Explanation: 🟡 The value of a perpetuity is calculated as Cash Flow / Discount Rate = 5 /
0.10 = $50 million. Option A underestimates, while C and D overestimate the valuation.
Only B correctly applies the perpetuity formula.
, Q2. A project generates cash flows of $100,000 annually for 3 years. If the discount rate is
8%, what is the present value?
A. $257,710
B. $258,000
C. $260,000
D. $270,000
Correct Answer: 🔴 A. $257,710
Explanation: 🟡 PV = 100,000 × [1 - (1.08)^-3]/0.08 ≈ 257,710. Options B–D are
approximations or incorrect rounding. A is most accurate.
Q3. Which of the following best describes the weighted average cost of capital (WACC)?
A. Cost of equity only
B. Cost of debt only
C. Weighted cost of all financing sources
D. Risk-free rate
Correct Answer: 🔴 C. Weighted cost of all financing sources
Explanation: 🟡 WACC incorporates both debt and equity costs weighted by their
proportions. A and B ignore components, while D is unrelated.
