PRIMA 8006 PRM Certification – Exam I: Finance Theory, Financial Instruments, Financial Markets – 2015 Edition Online Training
PRIMA 8006 Online Training
The questions for 8006 were last updated at Dec 24,2024.
- Exam Code: 8006
- Exam Name: PRM Certification - Exam I: Finance Theory, Financial Instruments, Financial Markets – 2015 Edition
- Certification Provider: PRIMA
- Latest update: Dec 24,2024
Using covered interest parity, calculate the 3 month CAD/USD forward rate if the spot CAD/USD rate is 1.1239 and the three month interest rates on CAD and USD are 0.75% and 0.4% annually respectively.
- A . 1.1249
- B . 1.1229
- C . 1.1278
- D . 1.1200
A receiver option on a swap is a swaption that gives the buyer the right to:
- A . swap two options between the two counterparties
- B . receive the fixed rate and pay a variable rate
- C . receive the swap spread in effect on a future date and pay a variable underlying rate
- D . pay the fixed rate and receive a variable rate
[According to the PRMIA study guide for Exam 1, Simple Exotics and Convertible Bonds have been excluded from the syllabus. You may choose to ignore this question. It appears here solely because the Handbook continues to have these chapters.]
A company that uses physical commodities as an input into its manufacturing process wishes to use options to hedge against a rise in its raw material costs.
Which of the following options would be the most cost effective to use?
- A . Writer-extendible options
- B . Correlation options
- C . Vanilla options
- D . Average rate options
A company has a long term loan from a bank at a fixed rate of interest. It expects interest rates to go down.
Which of the following instruments can the company use to convert its fixed rate liability to a floating rate liability?
- A . A fixed for floating interest rate swap
- B . A currency swap
- C . A forward rate agreement
- D . Interest rate futures
A trader comes in to work and finds the following prices in relation to a stock: $100 spot, $10 for a call expiring in one year with a strike price of $100, and $10 for a put with the same expiry and strike. Interest rates are at 5% per year, and the stock does not pay any dividends.
What should the trader do?
- A . Buy the call, buy the put and sell the stock
- B . Buy the call, sell the put and sell the stock
- C . Buy the put, sell the call and buy the stock
- D . Do nothing
Which of the following does not explain the shape of an yield curve?
- A . Market segmentation theory
- B . The expectations hypothesis
- C . The efficient markets hypothesis
- D . The liquidity preference theory
If the quoted discount rate of a 3 month treasury bill futures contract is 10%, what is the price of a 3-month treasury bill with a principal at maturity of $100?
- A . $90
- B . $110.00
- C . $102.50
- D . $97.50
[According to the PRMIA study guide for Exam 1, Simple Exotics and Convertible Bonds have been excluded from the syllabus. You may choose to ignore this question. It appears here solely because the Handbook continues to have these chapters.]
Which of the following statements relating to convertible debt are true:
I. A hard call protection means the bond cannot be called by the issuer till the share price reaches a threshold
II. It is advantageous for the issuer to call its convertible securities when the share price exceeds the conversion price
III. When the issuer’s share prices is very high, the convertible bond trades at a discount to the value of the shares it is convertible into
IV. Convertible bonds generally have to carry a higher coupon than on equivalent non-convertible securities to make them attractive to investors
- A . III and IV
- B . I and II
- C . I, III and IV
- D . II and III
For a stock that does not pay dividends, which of the following represents the delta of a futures contract?
- A . 0
- B . e^(rt)
- C . 1
- D . Futures contracts do not have a delta as they are not options
What is the fair price for a bond paying annual coupons at 5% and maturing in 5 years.
Assume par value of $100 and the yield curve is flat at 6%.
- A . $104.33
- B . $95.79
- C . $100.00
- D . $94.73
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