PRMIA 8007 Exam Practice Test Instant Access

Question 1

A 95% confidence interval for a parameter estimate can be interpreted as follows:

AThe probability that the real value of the parameter is within this interval is 95%.

BThe probability that the real value of the parameter is outside this interval is 95%.

CThe probability that the estimated value of the parameter is within this interval is 95%.

DThe probability that the estimated value of the parameter is outside this interval is 95%.

Answer : A

Question 2

When the errors in a linear regression show signs of positive autocorrelation, which of the statements below is true?

AThe regression coefficient will be too high and the standard error of the regression coefficient will be understated

BThe regression coefficient will be too low and the standard error of the regression coefficient will be overstated

CThe regression coefficient will be unbiased, but the standard error of the regression coefficient will be understated

DThe regression coefficient will be unbiased, but the standard error of the regression coefficient will be overstated

Answer : D

Question 3

Which of the following is consistent with the definition of a Type I error?

AThe probability of a Type I error is 100% minus the significance level

BA 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

CA 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

DA Type I occurs whenever data series are serially correlated

Answer : B

Question 4

Let N(.) denote the cumulative distribution function of the standard normal probability distribution, and N' its derivative. Which of the following is false?

AN(0) = 0.5

BN'(0) 0

CN(x) 0 as x

DN'(x) 0 as x

Answer : C

Question 5

Which of the following is a false statement concerning the probability density function and the cumulative distribution function of a random variable?

Athe PDF is non-negative.

Bthe definite integral of the CDF from minus infinity to plus infinity is undefined.

Cthe CDF approaches 1 as its argument approaches infinity.

Dthe definite integral of the PDF from minus infinity to plus infinity is zero.

Answer : D

Question 6

An operational risk analyst models the occurrence of computer failures as a Poisson process with an arrival rate of 2 events per year. According to this model, what is the probability of zero failures in one year?

A0.02

B0.14

C0.25

D0.50

Answer : B

Question 7

Let f(x) = c for x in [0,4] and 0 for other values of x.

What is the value of the constant c that makes f(x) a probability density function; and what if f(x) = cx for x in [0,4]?

A1/4 and 1/7

B1/7 and 1/9

C1/4 and 1/6

DNone of the above

Answer : D

PRMIA 8007 Mathematical Foundations of Risk Measurement – 2015 Edition Exam Practice Test