PRMIA 8002 P R M Exam Questions Instant Access

Question 1

Stress testing portfolios requires changing the asset volatilities and correlations to extreme values. Which of the following would lead to a non positive definite covariance matrix?

AChanging the volatilities to be greater than 100%

BChanging all the correlations to be unity

CChanging all the correlations to be zero

DAll of the above

Answer : B

Question 2

Find the first-order Taylor approximation p(x) for the function: at the point .

A-x

B-x+1

Cx-1

Dx+1

Answer : B

Question 3

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?

A2/5 and 1/2

B2/5 and 3/5

C1/3 and 8/17

D9/25 and 12/25

Answer : D

Question 4

Which of the following statements is not correct?

AEvery linear function is also a quadratic function.

BA function is defined by its domain together with its action.

CFor finite and small domains, the action of a function may be specified by a list.

DA function is a rule that assigns to every value x at least one value of y.

Answer : D

Question 5

Consider an investment fund with the following annual return rates over 8 years: +6%, -6%, +12%, -12%, +3%, -3%, +9%, -9% .

What can you say about the annual geometric and arithmetic mean returns of this investment fund?

AThe arithmetic mean return is zero and the geometric mean return is negative

BThe arithmetic mean return is negative and the geometric mean return is zero

CThe arithmetic mean return is equal to the geometric mean return

DNone of the above

Answer : A

Question 6

A typical leptokurtotic distribution can be described as a distribution that is relative to a normal distribution

Apeaked and thin at the center and with heavy (fat) tails

Bpeaked and thin at the center and with thin tails

Cflat and thick at the center and with heavy (fat) tails

Dflat and thick at the center and with thin tails

Answer : A

Question 7

Suppose a discrete random variable can take on the values -1, 0 and 1 each with a probability of 1/3. Then the mean and variance of the variable is

Amean is 0, variance is 2/3

Bmean is 0, variance is 1/3

Cmean is 0, variance is 1/2

Dmean is 1/3, variance is 1/3

Answer : A

PRMIA Mathematical Foundations of Risk Measurement :II 8002 P R M Exam Questions