PRM 8007 Real Exam Questions and Answers FREE Updated on Sep 15, 2021
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NEW QUESTION 34
Let N(.) denote the cumulative distribution function and suppose that X and Y are standard normally distributed and uncorrelated. Using the fact that N(1.96)=0.975, the probability that X 0 and Y 1.96 is approximately
- A. 0.488%
- B. 0.25%
- C. 0.495%
- D. 0.49%
Answer: A
NEW QUESTION 35
Exploring a regression model for values of the independent variable that have not been observed is most accurately described as...
- A. Hypothesis testing
- B. Prediction
- C. Estimation
- D. Regression
Answer: B
NEW QUESTION 36
Which of the following statements is not correct?
- A. A function is a rule that assigns to every value x at least one value of y.
- B. For finite and small domains, the action of a function may be specified by a list.
- C. Every linear function is also a quadratic function.
- D. A function is defined by its domain together with its action.
Answer: A
NEW QUESTION 37
An underlying asset price is at 100, its annual volatility is 25% and the risk free interest rate is 5%. A European put option has a strike of 105 and a maturity of 90 days. Its Black-Scholes price is 7.11. The options sensitivities are: delta = -0.59; gamma = 0.03; vega = 19.29. Find the delta-gamma approximation to the new option price when the underlying asset price changes to 105
- A. 6.49
- B. 5.03
- C. 4.59
- D. 4.54
Answer: D
NEW QUESTION 38
A typical leptokurtotic distribution can be described as a distribution that is relative to a normal distribution
- A. peaked and thin at the center and with heavy (fat) tails
- B. flat and thick at the center and with heavy (fat) tails
- C. peaked and thin at the center and with thin tails
- D. flat and thick at the center and with thin tails
Answer: A
NEW QUESTION 39
Which of the following can be used to evaluate a regression model?
(i) Magnitude of R2
(ii) Magnitude of TSS (total sum of squares)
(iii) Tests for statistical significance
(iv) Sign and magnitude of each regression parameter
- A. (i), (ii), and (iii)
- B. (i), (iii), and (iv)
- C. (i) and (iv)
- D. (i), (ii), (iii), and (iv)
Answer: B
NEW QUESTION 40
I have $5m to invest in two stocks: 75% of my capital is invested in stock 1 which has price 100 and the rest is invested in stock 2, which has price 125. If the price of stock 1 falls to 90 and the price of stock 2 rises to 150, what is the return on my portfolio?
- A. -5%
- B. -2.50%
- C. 5%
- D. 2.50%
Answer: B
NEW QUESTION 41
Suppose I trade an option and I wish to hedge that option for delta and vega. Another option is available to trade. To complete the hedge I would
- A. trade the other option in such a way as to make the portfolio delta and vega neutral.
- B. trade the underlying in such a way as to make the portfolio delta and vega neutral.
- C. trade the other option in such a way as to make the portfolio vega neutral, and then trade the underlying in such a way as to make the portfolio delta neutral.
- D. trade the underlying in such a way as to make the portfolio delta neutral, and then trade the other option in such a way as to make the portfolio vega neutral.
Answer: C
NEW QUESTION 42
What is the probability of tossing a coin and getting exactly 2 heads out of 5 throws?
- A. 8/15
- B. None of these
- C. 9/23
- D. 10/32
Answer: D
NEW QUESTION 43
Which of the following is not a direct cause of autocorrelation or heteroskedasticity in the residuals of a regression model?
- A. Using an inappropriate functional form in the model
- B. The omission of a relevant explanatory variable
- C. A high positive correlation between two explanatory variables
- D. A structural break in the dependent variable
Answer: C
NEW QUESTION 44
The bisection method can be used for solving f(x)=0 for a unique solution of x, when
- A. The function f(x) is continuous
- B. The function f(x) is differentiable
- C. The function f(x) is continuous and monotonic
- D. The function f(x) is differentiable and we have an explicit expression for the derivative
Answer: C
NEW QUESTION 45
The Lagrangian of a constrained optimisation problem is given by L(x,y,) = 16x+8x2+4y-(4x+y-20), where is the Lagrange multiplier. What is the solution for x and y?
- A. x = -1, y = 0
- B. None of the above
- C. x = 0, y = 20
- D. x = 5, y = 0
Answer: C
NEW QUESTION 46
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)
- A. concave, convex, convex
- B. convex, concave, concave
- C. concave, concave, concave
- D. convex, convex, concave
Answer: B
NEW QUESTION 47
In a quadratic Taylor approximation, a function is approximated by:
- A. a cubic polynomial
- B. a parabola
- C. a constant
- D. a straight line
Answer: B
NEW QUESTION 48
An asset price S is lognormally distributed if:
- A. the change in price (dS) is normally distributed
- B. 1/S is normally distributed
- C. ln(1+dS/S) is normally distributed
- D. ln(dS/S) is normally distributed
Answer: C
NEW QUESTION 49
Over four consecutive years fund X returns 1%, 5%, -3%, 8%. What is the average growth rate of fund X over this period?
- A. 2.75%
- B. None of the above
- C. 2.67%
- D. 2.49%
Answer: C
NEW QUESTION 50
A bond has modified duration 6 and convexity 30. Find the duration-convexity approximation to the percentage change in bond price when its yield increases by 5 basis points
- A. 30 basis points fall.
- B. 10 basis point rise
- C. 24 basis fall
- D. 24 basis point rise
Answer: A
NEW QUESTION 51
When the errors in a linear regression show signs of positive autocorrelation, which of the statements below is true?
- A. The regression coefficient will be too high and the standard error of the regression coefficient will be understated
- B. The regression coefficient will be too low and the standard error of the regression coefficient will be overstated
- C. The regression coefficient will be unbiased, but the standard error of the regression coefficient will be overstated
- D. The regression coefficient will be unbiased, but the standard error of the regression coefficient will be understated
Answer: C
NEW QUESTION 52
An indefinite integral of a polynomial function is
- A. always positive
- B. always less than the function itself
- C. always increasing
- D. none of the above
Answer: D
NEW QUESTION 53
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