Free PRMIA 8007 Exam Dumps Questions & Answers

In a portfolio there are 7 bonds: 2 AAA Corporate bonds, 2 AAA Agency bonds, 1 AA Corporate and 2 AA Agency bonds. By an unexplained characteristic the probability of any specific AAA bond outperforming the others is twice the probability of any specific AA bond outperforming the others. What is the probability that an AA bond or a Corporate bond outperforms all of the others?

• A.  8/11
• B.  5/7
• C.  None of these
• D.  6/11

A 2-step binomial tree is used to value an American put option with strike 104, given that the underlying price is currently 100. At each step the underlying price can move up by 20% or down by 20% and the risk-neutral probability of an up move is 0.55. There are no dividends paid on the underlying and the discretely compounded risk free interest rate over each time step is 2%. What is the value of the option in this model?

• A.  12.49
• B.  11.82
• C.  12.33
• D.  12.78

I have $5m to invest in two stocks: 75% of my capital is invested in stock 1 which has price 100 and the rest is invested in stock 2, which has price 125. If the price of stock 1 falls to 90 and the price of stock 2 rises to 150, what is the return on my portfolio?

• A.  2.50%
• B.  -5%
• C.  5%
• D.  -2.50%

Let E(X ) = 1, E(Y ) = 3, Corr(X, Y ) = -0.2, E(X2 ) = 10 and E(Y2 ) = 13. Find the covariance between X and Y

• A.  -2.8
• B.  -1.2
• C.  1.3
• D.  None of the above

Which of the following statements is not correct?

• A.  Every linear function is also a quadratic function.
• B.  For finite and small domains, the action of a function may be specified by a list.
• C.  A function is a rule that assigns to every value x at least one value of y.
• D.  A function is defined by its domain together with its action.