Free PRMIA 8006 Exam Dumps Questions & Answers

The 'transformation line' expresses the relationship between

• A.  Asset beta and expected return
• B.  Expected risk and return for all portfolios lying on the efficient frontier
• C.  The risk free rate and expected market risk premiums
• D.  Expected risk and return for a portfolio comprising a riskless asset and a risky bundle

A stock that pays no dividends is trading at $100 spot or $104 as a three month forward. The interest rate you can borrow at is 6% per annum. US treasury yields are 4% per annum. What should you do to profit in the situation?

• A.  Buy the forward and also buy the stock
• B.  Buy the stock and sell the forward
• C.  Sell the stock and buy the forward
• D.  It is not possible to profit from the situation

What kind of a risk attitude does a utility function with an upward sloping curvature indicate?

• A.  risk seeking
• B.  risk averse
• C.  risk neutral
• D.  risk mitigation

[According to the PRMIA study guide for Exam 1, Simple Exotics and Convertible Bonds have been excluded from the syllabus. You may choose to ignore this question. It appears here solely because the Handbook continues to have these chapters.] Which of the following best describes a shout option

• A.  an option which kicks in as a plain vanilla option if the underlying hits an agreed threshold
• B.  an option whose expiry is automatically extended if it finishes out of the money.
• C.  an option in which the buyer of the option has the option to extend the expiry of the option upon the payment of an extra premium
• D.  an option in which the holder of the option has the right to reset the strike price to be at-the-money once during the life of the option

An investor believes that the market is likely to stay where it is. Which of the following option strategies will help him profit should his view be proven correct (assume all strategies described below are long only)?

• A.  Strangle
• B.  Collar
• C.  Butterfly spread
• D.  Straddle