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 Apr 22,2025.
- Exam Code: 8006
- Exam Name: PRM Certification - Exam I: Finance Theory, Financial Instruments, Financial Markets – 2015 Edition
- Certification Provider: PRIMA
- Latest update: Apr 22,2025
Which of the following statements is not correct with respect to a European call option:
- A . A increase in the risk-free rate of interest always increases the value of the option
- B . An increase in the price of the underlying always increases the value of the option
- C . An increase in the time to expiry always increases the value of the option
- D . An increase in the volatility of the underlying always increases the value of the option
Which of the following expressions represents the Treynor ratio, where is the expected return, is the standard deviation of returns, rm is the return of the market portfolio and rf is the risk free rate:
A)
B)
C)
D)
- A . Option A
- B . Option B
- C . Option C
- D . Option D
Which of the following best describes the efficient frontier?
- A . The efficient frontier identifies portfolios with the lowest return per unit of volatility
- B . The efficient frontier identifies portfolios with the highest return per unit of volatility
- C . The efficient frontier identifies the market portfolio
- D . The efficient frontier identifies portfolios with the highest volatility for a given level of return
Profits and losses on futures contracts are:
- A . settled upfront
- B . settled upon the expiry of the contract
- C . settled by moving collateral
- D . settled daily
Determine the enterprise value of a firm whose expected operating free cash flows are $100 each year and are growing with GDP at 2.5%. Assume its weighted average cost of capital is 7.5% annually.
- A . $4,000
- B . $1,000
- C . $1,333
- D . $2,000
An investor in mortgage backed securities can hedge his/her prepayment risk using which of the following?
I. Long swaption
II. Short cap
III. Short callable bonds
IV. Long fixed/floating swap
- A . II and III
- B . I and III
- C . II and IV
- D . I and IV
A bank sells an interest rate swap to its client, with the client agreeing to pay the bank a fixed 4% and receive 3 month LIBOR + 100 basis points, payments due every quarter. After quarter 1, the 3 month LIBOR is 2% pa.
Which of the following payments will happen in respect of this swap, assuming the contract notional is $100m, and the rate convention is 30/360?
- A . Bank pays customer $1,000,000 and customer pays the bank $750,000
- B . Bank pays customer $250,000
- C . Customer pays bank $250,000
- D . Bank pays customer $1,000,000
Which of the following statements are true:
I. All investors regardless of their expectations face the same efficient frontier which is always the market portfolio
II. Investors will have different efficient frontiers based upon their views of expected risks, returns and correlations
III. Investors risk appetite will determine their choice of the combination of risk-free and risky assets to hold
IV. If all investors have identical views on expected returns, standard deviation and correlations, they will hold risky assets in identical proportions
- A . III and IV
- B . II, III and IV
- C . I and II
- D . I, II, III and IV
Which of the following statements is true in relation to an American style option:
I. Put-call parity applies to American options
II. An American put will never be cheaper than a European put
III. An American put option should never be exercised early for a non-dividend paying stock
IV. An American put option is always at least as valuable as its intrinsic value
- A . I, II and III
- B . II and III
- C . II and IV
- D . III and IV
The theta of a delta neutral options position is large and positive.
What can we say about the gamma of the position?
- A . The gamma must be large and positive
- B . The gamma must be large and negative
- C . The gamma must be small and positive
- D . The gamma must be small and negative
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