Free PRMIA 8007 Exam Actual Questions

The questions for 8007 were last updated On Nov 20, 2024

Question No. 1

Which of the provided answers solves this system of equations?

2y -- 3x = 3y +x

y2 + x2 = 68

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Correct Answer: C

Question No. 2

You are given the following regressions of the first difference of the log of a commodity price on the lagged price and of the first difference of the log return on the lagged log return. Each regression is based on 100 data points and figures in square brackets denote the estimated standard errors of the coefficient estimates:

Which of the following hypotheses can be accepted based on these regressions at the 5% confidence level (corresponding to a critical value of the Dickey Fuller test statistic of -- 2.89)?

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Correct Answer: D

Question No. 3

A 2-step binomial tree is used to value an American put option with strike 105, given that the underlying price is currently 100. At each step the underlying price can move up by 10 or down by 10 and the risk-neutral probability of an up move is 0.6. There are no dividends paid on the underlying and the continuously compounded risk free interest rate over each time step is 1%. What is the value of the option in this model?

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Correct Answer: A

Question No. 4

For a quadratic equation, which of the following is FALSE?

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Correct Answer: C

Question No. 5

Suppose I trade an option and I wish to hedge that option for delta and veg

a. Another option is available to trade. To complete the hedge I would

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Correct Answer: C