[Sep-2021] Pass 8007 Exam in First Attempt Updated8007 ActualTorrent Exam Question
PRM Dumps 8007 Exam for Full Questions - Exam Study Guide
NEW QUESTION 63
On average, one trade fails every 10 days. What is the probability that no trade will fail tomorrow?
- A. 0.095
- B. 0.100
- C. 0.905
- D. 0.95
Answer: C
NEW QUESTION 64
You work for a brokerage firm that charges its client x per share. The volume of trade of a client of type A depends on the per share commission in the following manner. If the commission is x, the client of type A will trade e-ax shares on average each week. What is the optimal commission x that maximizes the income from client A, noting that a is greater than zero?
- A. a2
- B. 0
- C. 1
- D. a
Answer: C
NEW QUESTION 65
Suppose that f(x) and g(x,y) are functions. What is the partial derivative of f(g(x,y)) with respect to y?
- A. f'(g(x,y))
- B. f'(g(x,y)) dg/dy
- C. f(dg/dy)
- D. f(g(x,y)) dg/dy
Answer: B
NEW QUESTION 66
What is the 40th term in the following series: 4, 14, 30, 52, ...?
- A. 0
- B. 1
- C. 2
- D. 3
Answer: C
NEW QUESTION 67
Consider two securities X and Y with the following 5 annual returns:
X: +10%, +3%, -2%, +3%, +5%
Y: +7%, -2%, +3%, -5%, +10%
In this case the sample covariance between the two time series can be calculated as:
- A. 0.40729
- B. 0.32583
- C. 0.00109
- D. 0.00087
Answer: C
NEW QUESTION 68
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:
- A. 0.5290
- B. 0.5286
- C. 0.5292
- D. 0.5288
Answer: D
NEW QUESTION 69
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.)
- A. Cannot be determined without estimates of the volatilities of the individual returns
- B. 98%
- C. 64%
- D. 75%
Answer: D
NEW QUESTION 70
A biased coin has a probability of getting heads equal to 0.3. If the coin is tossed 4 times, what is the probability of getting heads at least two times?
- A. 0.7367
- B. 0.3483
- C. 0.2646
- D. None of these
Answer: B
NEW QUESTION 71
For the function f(x) =3x-x3 which of the following is true?
- A. x = -3 is a maximum
- B. x = 0 is a minimum
- C. None of these
- D. x = 2 is a maximum
Answer: C
NEW QUESTION 72
Consider an investment fund with the following annual return rates over 8 years: +6%, -6%, +12%, -12%,
+3%, -3%, +9%, -9% .
What can you say about the annual geometric and arithmetic mean returns of this investment fund?
- A. The arithmetic mean return is negative and the geometric mean return is zero
- B. None of the above
- C. The arithmetic mean return is equal to the geometric mean return
- D. The arithmetic mean return is zero and the geometric mean return is negative
Answer: D
NEW QUESTION 73
You invest $100 000 for 3 years at a continuously compounded rate of 3%. At the end of 3 years, you redeem the investment. Taxes of 22% are applied at the time of redemption. What is your approximate after-tax profit from the investment, rounded to $10?
- A. $7100
- B. $9420
- C. $7230
- D. $7350
Answer: D
NEW QUESTION 74
The natural logarithm of x is:
- A. 0
- B. log(e)
- C. the inverse function of exp(x)
- D. always greater than x, for x>0
Answer: C
NEW QUESTION 75
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?
- A. 7.12
- B. 7.29
- C. 6.59
- D. 7.44
Answer: A
NEW QUESTION 76
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)?
- A. The commodity returns are stationary
- B. None of the above
- C. The commodity prices are stationary
- D. The commodity returns are integrated of order 1
Answer: B
NEW QUESTION 77
In a 2-step binomial tree, at each step the underlying price can move up by a factor of u = 1.1 or down by a factor of d = 1/u. The continuously compounded risk free interest rate over each time step is 1% and there are no dividends paid on the underlying. Use the Cox, Ross, Rubinstein parameterization to find the risk neutral probability and hence find the value of a European put option with strike 102, given that the underlying price is currently 100.
- A. 5.66
- B. 6.31
- C. 4.18
- D. 5.19
Answer: B
NEW QUESTION 78
A quadratic form is
- A. an algebraic expression in two variables, x and y, involving , and terms.
- B. an algebraic expression in two variables, x and y, involving , , and terms.
- C. a specific solution of the Black-Scholes pricing formula
- D. defined as a positive definite Hessian matrix.
Answer: A
NEW QUESTION 79
If a random variable X has a normal distribution with mean zero and variance 4, approximately what proportion of realizations of X should lie between -4 and +4?
- A. 66.60%
- B. 99%
- C. 90%
- D. 95%
Answer: D
NEW QUESTION 80
A 2-year bond has a yield of 5% and an annual coupon of 5%. What is the Macaulay Duration of the bond?
- A. 1.86
- B. 0
- C. 1.75
- D. 1.95
Answer: D
NEW QUESTION 81
Let N(.) denote the cumulative distribution function of the standard normal probability distribution, and N' its derivative. Which of the following is false?
- A. N'(0) 0
- B. N(0) = 0.5
- C. N'(x) 0 as x
- D. N(x) 0 as x
Answer: D
NEW QUESTION 82
Which of the following is not a direct cause of autocorrelation or heteroskedasticity in the residuals of a regression model?
- A. Using an inappropriate functional form in the model
- B. The omission of a relevant explanatory variable
- C. A high positive correlation between two explanatory variables
- D. A structural break in the dependent variable
Answer: C
NEW QUESTION 83
Which statement regarding the matrix below is true?
- A. It is positive semi-definite
- B. It is negative definite
- C. It is positive definite
- D. It is not positive definite
Answer: D
NEW QUESTION 84
An operational risk analyst models the occurrence of computer failures as a Poisson process with an arrival rate of 2 events per year. According to this model, what is the probability of zero failures in one year?
- A. 0.14
- B. 0.25
- C. 0.50
- D. 0.02
Answer: A
NEW QUESTION 85
Maximum likelihood estimation is a method for:
- A. Finding parameter estimates of a given density function
- B. Solving a portfolio optimization problem
- C. Estimating the solution of a partial differential equation
- D. Estimating the implied volatility of a simple European option
Answer: A
NEW QUESTION 86
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