PRMIA 8007 : Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition

8007 real exams

Exam Code: 8007

Exam Name: Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition

Updated: Sep 13, 2026

Q & A: 133 Questions and Answers

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PRMIA 8007 Exam Syllabus Topics:

SectionWeightObjectives
Topic 1: Linear Algebra and Matrix Theory20%- Matrix operations
  • 1. Determinants and trace
    • 2. Addition, multiplication, inversion
      - Vectors and eigenvalues
      • 1. Diagonalization
        • 2. Eigenvalues and eigenvectors
          Topic 2: Calculus and Functions20%- Single-variable calculus
          • 1. Limits and continuity
            • 2. Integrals and applications
              • 3. Derivatives and applications
                - Multivariable calculus
                • 1. Partial derivatives
                  • 2. Optimization
                    Topic 3: Probability Theory25%- Basic probability concepts
                    • 1. Conditional probability and independence
                      • 2. Axioms and rules
                        - Random variables and distributions
                        • 1. Expected value, variance, covariance
                          • 2. Discrete and continuous distributions
                            Topic 4: Numerical Methods & Financial Mathematics15%- Root finding and approximation
                            - Basics of risk modeling
                            - Time value of money
                            Topic 5: Statistics and Regression Analysis20%- Descriptive statistics
                            • 1. Measures of location and dispersion
                              • 2. Correlation and covariance
                                - Linear regression
                                • 1. Hypothesis testing and confidence intervals
                                  • 2. Simple and multiple regression

                                    PRMIA Exam II: Mathematical Foundations of Risk Measurement - 2015 Edition Sample Questions:

                                    Question #1

                                    The correlation between two asset returns is 1. What is the smallest eigenvalue of their correlation matrix?

                                    • A. 0
                                    • B. 0.5
                                    • C. 1
                                    • D. None of the above
                                    Reveal Solution  Discussion  0

                                    Correct Answer: A  🗳️

                                    Question #2

                                    The bisection method can be used for solving f(x)=0 for a unique solution of x, when

                                    • A. The function f(x) is differentiable
                                    • B. The function f(x) is continuous
                                    • C. The function f(x) is continuous and monotonic
                                    • D. The function f(x) is differentiable and we have an explicit expression for the derivative
                                    Reveal Solution  Discussion  0

                                    Correct Answer: C  🗳️

                                    Question #3

                                    Let a, b and c be real numbers. Which of the following statements is true?

                                    • A. The existence of negatives is defined by
                                    • B. The associativity of multiplication is defined by
                                    • C. The commutativity of multiplication is defined by
                                    • D. The distributivity of multiplication is defined by
                                    Reveal Solution  Discussion  0

                                    Correct Answer: D  🗳️

                                    Question #4

                                    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. 1
                                    • B. a
                                    • C. 42
                                    • D. a2
                                    Reveal Solution  Discussion  0

                                    Correct Answer: C  🗳️

                                    Question #5

                                    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 understated
                                    • B. The regression coefficient will be unbiased, but the standard error of the regression coefficient will be overstated
                                    • C. The regression coefficient will be too low and the standard error of the regression coefficient will be overstated
                                    • D. The regression coefficient will be too high and the standard error of the regression coefficient will be understated
                                    Reveal Solution  Discussion  0

                                    Correct Answer: B  🗳️

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