Pass PRMIA Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition Exam in First Attempt Guaranteed Updated Dump from SurePassExams!
Pass 8007 Exam with 133 Questions - Verified By SurePassExams
NEW QUESTION 61
Let E(X ) = 1, E(Y ) = 3, Corr(X, Y ) = -0.2, E(X2 ) = 10 and E(Y2 ) = 13. Find the covariance between X and Y
- A. -1.2
- B. -2.8
- C. None of the above
- D. 1.3
Answer: A
NEW QUESTION 62
Consider two functions f(x) and g(x) with indefinite integrals F(x) and G(x), respectively. The indefinite integral of the product f(x)g(x) is given by
- A. F(x)g(x) - F(x)g'(x)dx
- B. F(x)G(x)
- C. F(x)g(x) + f(x)G(x)
- D. f(x)G(x) - F(x)g'(x)dx
Answer: A
NEW QUESTION 63
Which of the following statements is true?
- A. The constant plays an important role in the mathematical description of continuous compounding.
- B. Continuous compounding is the better method because it results in higher present values compared to discrete compounding.
- C. Discrete and continuous compounding produce the same results if the discount rate is positive.
- D. Continuous compounding can be thought as making the compounding period infinitesimally small.
Answer: D
NEW QUESTION 64
Let N(.) denote the cumulative distribution function of the standard normal probability distribution, and N' its derivative. Which of the following is false?
- A. N'(0) 0
- B. N(0) = 0.5
- C. N'(x) 0 as x
- D. N(x) 0 as x
Answer: D
NEW QUESTION 65
The determinant of a matrix X is equal 2. Which of the following statements is true?
- A. det(2X) =
- B. det(2X) = 4 det(X)
- C. det(2X) = 2 det(X)
- D. det(2X) = det(X)2
Answer: B
NEW QUESTION 66
Which of the following statements about skewness of an empirical probability distribution are correct?
1. When sampling returns from a time series of asset prices, discretely compounded returns exhibit higher skewness than continuously compounded returns
2. When the mean is significantly less than the median, this is an indication of negative skewness
3. Skewness is a sign of asymmetry in the dispersion of the data
- A. Statements 1 and 3 are correct
- B. All three statements are correct
- C. Statements 2 and 3 are correct
- D. Statements 1 and 2 are correct
Answer: B
NEW QUESTION 67
Solve the simultaneous linear equations: x + 2y - 2 = 0 and y - 3x = 8
- A. x = 1, y = 0.5
- B. x = -2, y = 2
- C. x = 2, y = 0
- D. None of the above
Answer: B
NEW QUESTION 68
A 2-step binomial tree is used to value an American put option with strike 104, given that the underlying price is currently 100. At each step the underlying price can move up by 20% or down by 20% and the risk-neutral probability of an up move is 0.55. There are no dividends paid on the underlying and the discretely compounded risk free interest rate over each time step is 2%. What is the value of the option in this model?
- A. 11.82
- B. 12.33
- C. 12.78
- D. 12.49
Answer: D
NEW QUESTION 69
There are two portfolios with no overlapping of stocks or bonds. Portfolio 1 has 6 stocks and 6 bonds.
Portfolio 2 has 4 stocks and 8 bonds. If we randomly select one stock, what is the probability that it came from Portfolio1?
- A. 0.3
- B. 0.5
- C. 0.6
- D. None of these
Answer: C
NEW QUESTION 70
Which of the following is a false statement concerning the probability density function and the cumulative distribution function of a random variable?
- A. the PDF is non-negative.
- B. the definite integral of the PDF from minus infinity to plus infinity is zero.
- C. the definite integral of the CDF from minus infinity to plus infinity is undefined.
- D. the CDF approaches 1 as its argument approaches infinity.
Answer: B
NEW QUESTION 71
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...
- A. Multiple time-series regression
- B. Simple time-series regression
- C. Simple cross-section regression
- D. Multiple cross-section regression
Answer: D
NEW QUESTION 72
A biased coin has a probability of getting heads equal to 0.3. If the coin is tossed 4 times, what is the probability of getting heads at least two times?
- A. 0.7367
- B. 0.3483
- C. 0.2646
- D. None of these
Answer: B
NEW QUESTION 73
Maximum likelihood estimation is a method for:
- A. Finding parameter estimates of a given density function
- B. Solving a portfolio optimization problem
- C. Estimating the solution of a partial differential equation
- D. Estimating the implied volatility of a simple European option
Answer: A
NEW QUESTION 74
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?
- A. 7.12
- B. 7.29
- C. 6.59
- D. 7.44
Answer: A
NEW QUESTION 75
Find the first-order Taylor approximation p(x) for the function: at the point .
- A. x-1
- B. -x
- C. x+1
- D. -x+1
Answer: D
NEW QUESTION 76
Which of the following is consistent with the definition of a Type I error?
- A. A Type I occurs whenever data series are serially correlated
- B. The probability of a Type I error is 100% minus the significance level
- C. A Type I error would have occurred if the performance of a stock was positively correlated with the performance of a hedge fund, but in a linear regression, the hypothesis of positive correlation was rejected
- D. A Type I error would have occurred if the performance of a stock was positively correlated with the performance of a hedge fund, but in a linear regression, the hypothesis of no correlation was rejected
Answer: C
NEW QUESTION 77
Assume that 40% of all financial organizations investigated by authorities turn out to be fraudulent.
What is the probability of randomly investigating 2 different organizations and finding that neither is fraudulent; and what is the probability of finding exactly one being fraudulent?
- A. 1/3 and 8/17
- B. 9/25 and 12/25
- C. 2/5 and 1/2
- D. 2/5 and 3/5
Answer: B
NEW QUESTION 78
......
Penetration testers simulate 8007 exam: https://www.surepassexams.com/8007-exam-bootcamp.html