Free PRMIA 8002 Practice Exam with Questions & Answers

Which of the following properties is exhibited by multiplication, but not by addition?

Suppose we perform a principle component analysis of the correlation matrix of the returns of 13 yields along the yield curve. The largest eigenvalue of the correlation matrix is 9.8. What percentage of return volatility is explained by the first component? (You may use the fact that the sum of the diagonal elements of a square matrix is always equal to the sum of its eigenvalues.)

When the errors in a linear regression show signs of positive autocorrelation, which of the statements below is true?

An option has value 10 when the underlying price is 99 and value 9.5 when the underlying price is 101. Approximate the value of the option delta using a first order central finite difference.

Simple linear regression involves one dependent variable, one independent variable and one error variable. In contrast, multiple linear regression uses…

In a binomial tree lattice, at each step the underlying price can move up by a factor of u = 1.1 or down by a factor of . The continuously compounded risk free interest rate over each time step is 1% and there are no dividends paid on the underlying. The risk neutral probability for an up move is:

Which of the following can be used to evaluate a regression model?

(i) Magnitude of R2

(ii) Magnitude of TSS (total sum of squares)

(iii) Tests for statistical significance

(iv) Sign and magnitude of each regression parameter

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

You invest $2m in a bank savings account with a constant interest rate of 5% p.a. What is the value of the investment in 2 years time if interest is compounded quarterly?

You are investigating the relationship between weather and stock market performance. To do this, you pick 100 stock market locations all over the world. For each location, you collect yesterday's mean temperature and humidity and yesterday's local index return. Performing a regression analysis on this data is an example of…