PRMIA 8007 Exam Questions Instant Access - No Installation Required

Question 1

You intend to invest $100 000 for five years. Four different interest payment options are available. Choose the interest option that yields the highest return over the five year period.

Aa lump-sum payment of $22 500 on maturity (in five years)

Ban annually compounded rate of 4.15%

Ca quarterly-compounded rate of 4.1%

Da continuously-compounded rate of 4%

Answer : C

Question 2

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)

Aconcave, concave, concave

Bconcave, convex, convex

Cconvex, concave, concave

Dconvex, convex, concave

Answer : C

Question 3

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?

Ax = -1, y = 0

Bx = 0, y = 20

Cx = 5, y = 0

DNone of the above

Answer : B

Question 4

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 5

Find the roots, if they exist in the real numbers, of the quadratic equation

A4 and -2

B-4 and 2

C1 and 0

DNo real roots

Answer : D

Question 6

Suppose 60% of capital is invested in asset 1, with volatility 40% and the rest is invested in asset 2, with volatility 30%. If the two asset returns have a correlation of -0.5, what is the volatility of the portfolio?

A36%

B36.33%

C26.33%

D20.78%

Answer : D

Question 7

Which of the following statements are true about Maximum Likelihood Estimation?

(i) MLE can be applied even if the error terms are not i.i.d. normal.

(ii) MLE involves integrating a likelihood function or a log-likelihood function.

(iii) MLE yields parameter estimates that are consistent.

A(i) and (ii)

B(i) only

C(i) and (iii)

D(i), (ii), and (iii)

Answer : C

PRMIA Mathematical Foundations of Risk Measurement â€“ 2015 Edition 8007 Exam Questions