PRMIA 8002 - PRM Certification - Exam II: Mathematical Foundations of Risk Measurement Exam
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Total 132 questions
Question #6 (Topic: )
You invest $2m in a bank savings account with a constant interest rate of 5% p.a. What is
the value of the investment in 2 years time if interest is compounded quarterly?
the value of the investment in 2 years time if interest is compounded quarterly?
A. $2,208,972
B. $2,210,342
C. $2.205,000
D. None of them
Answer: A
Question #7 (Topic: )
For each of the following functions, indicate whether its graph is concave or convex:
Y = 7x2 + 3x + 9
Y = 6 ln(3x)
Y = exp(-4x)
Y = 7x2 + 3x + 9
Y = 6 ln(3x)
Y = exp(-4x)
A. concave, concave, concave
B. concave, convex, convex
C. convex, concave, concave
D. convex, convex, concave
Answer: C
Question #8 (Topic: )
A 2-step binomial tree is used to value an American put option with strike 105, given that
the underlying price is currently 100. At each step the underlying price can move up by 10
or down by 10 and the risk-neutral probability of an up move is 0.6. There are no dividends
paid on the underlying and the continuously compounded risk free interest rate over each
time step is 1%. What is the value of the option in this model?
the underlying price is currently 100. At each step the underlying price can move up by 10
or down by 10 and the risk-neutral probability of an up move is 0.6. There are no dividends
paid on the underlying and the continuously compounded risk free interest rate over each
time step is 1%. What is the value of the option in this model?
A. 7.12
B. 6.59
C. 7.44
D. 7.29
Answer: A
Question #9 (Topic: )
A typical leptokurtotic distribution can be described as a distribution that is relative to a
normal distribution
normal distribution
A. peaked and thin at the center and with heavy (fat) tails
B. peaked and thin at the center and with thin tails
C. flat and thick at the center and with heavy (fat) tails
D. flat and thick at the center and with thin tails
Answer: A
Question #10 (Topic: )
You are investigating the relationship between weather and stock market performance. To
do this, you pick 100 stock market locations all over the world. For each location, you
collect yesterday's mean temperature and humidity and yesterday's local index return.
Performing a regression analysis on this data is an example of
do this, you pick 100 stock market locations all over the world. For each location, you
collect yesterday's mean temperature and humidity and yesterday's local index return.
Performing a regression analysis on this data is an example of
A. Simple time-series regression
B. Multiple time-series regression
C. Simple cross-section regression
D. Multiple cross-section regression
Answer: D
