PRMIA Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition Sample Questions:
1. Which of the provided answers solves this system of equations?
2y - 3x = 3y +x
y2 + x2 = 68
A) x = 2; y = 8
B) x = -2; y = -8
C) x = 2; y = -8
D) x = 1; y = square root of 67
2. I have a portfolio of two stocks. The weights are equal. The one volatility is 30% while the other is 40%. The minimum and maximum possible values of the volatility of my portfolio are:
A) 30% and 40%
B) 10% and 70%
C) 10% and 40%
D) 5% and 35%
3. What is the angle between the following two three dimensional vectors: a=(1,2,3), b=(-4,2,0)?
A) 180 degrees
B) 90 degrees
C) 57 degrees
D) 45 degrees
4. When the errors in a linear regression show signs of positive autocorrelation, which of the statements below is true?
A) The regression coefficient will be unbiased, but the standard error of the regression coefficient will be overstated
B) The regression coefficient will be too low and the standard error of the regression coefficient will be overstated
C) The regression coefficient will be too high and the standard error of the regression coefficient will be understated
D) The regression coefficient will be unbiased, but the standard error of the regression coefficient will be understated
5. Which of the following statements is true?
A) Continuous compounding is the better method because it results in higher present values compared to discrete compounding.
B) Discrete and continuous compounding produce the same results if the discount rate is positive.
C) Continuous compounding can be thought as making the compounding period infinitesimally small.
D) The constant plays an important role in the mathematical description of continuous compounding.
Solutions:
| Question # 1 Answer: C | Question # 2 Answer: D | Question # 3 Answer: B | Question # 4 Answer: A | Question # 5 Answer: C |
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