PRMIA 8007 Exam Practice Test Instant Access

Question 1

When a number is written with a fraction as an exponent, such as , which of the following is the correct computation?

ATake the square-root of 75 and raise it to the 5th power

BDivide 75 by 2, then raise it to the 5th power

CMultiply 75 by 2.5

DSquare 75, then take the fifth root of it

Answer : A

Question 2

I have a portfolio of two stocks. The weights are 60% and 40% respectively, the volatilities are both 20%, while the correlation of returns is 100%. The volatility of my portfolio is

A4%

B14.4%

C20%

D24%

Answer : C

Question 3

The quarterly compounded rate of return is 6% per annum. What is the corresponding effective annual return?

A1.50%

B6%

C6.14%

DNone of the above

Answer : C

Question 4

What is the angle between the following two three dimensional vectors: a=(1,2,3), b=(-4,2,0)?

A90 degrees

B180 degrees

C57 degrees

D45 degrees

Answer : A

Question 5

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 6

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

A10 basis point rise

B24 basis fall

C24 basis point rise

D30 basis points fall.

Answer : D

Question 7

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

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