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 false:
- A . The value of an FRA at expiration is determined by the spot interest rate prevailing at expiration
- B . The value of an FRA (forward rate agreement) at inception is zero.
- C . An FRA can be valued at anytime in its lifetime using the spot interest rate for the period to which the FRA relates
- D . Notional principals are exchanged at the start and the end of an FRA to eliminate credit risk
The value of which of the following options cannot be less than its intrinsic value
- A . a Bermudan put
- B . a European put
- C . an American put
- D . a European call
What is the yield to maturity for a 5% annual coupon bond trading at par? The bond matures in 10 years.
- A . Less than 5%
- B . Equal to 5%
- C . Greater than 5%
- D . Cannot be determined based on the given information
The LIBOR square swap offers the square of the interest rate change between contract inception and settlement date. If LIBOR at inception is y, and upon settlement is x, the contract pays (x – y)2 for x > y; and -(x – y)2 for x < y.
What of the following cannot be a value of the gamma of this contract?
- A . -2
- B . 1
- C . 2
- D . 0
An equity portfolio manager desires to be ‘market neutral’. His portfolio is valued at $10m and has a beta of 0.7 to the broad market index. The index is currently at 1000 and an index contract multiplier is specified as 250.
What should he do to make the beta of his portfolio zero?
- A . Sell 40 contracts of the index futures contract
- B . Buy 28 contracts of the index futures contract
- C . Buy 40 contracts of the index futures contract
- D . Sell 28 contracts of the index futures contract
[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 is true?
I. Knock-out options start lifeless and convert to a plain vanilla option when the barrier is hit
II. Barrier options are cheaper than equivalent vanilla options
III. Average price options are more expensive than equivalent vanilla options
IV. Digital options have a high gamma close to the strike price
- A . II, III and IV
- B . II and IV
- C . I and III
- D . I, II and IV
What is the running yield on a 6% coupon bond selling at a clean price of $96?
- A . 5.70%
- B . 6.25%
- C . 6.30%
- D . 6.00%
An investor holds $1m in a 10 year bond that has a basis point value (or PV01) of 5 cents. She seeks to hedge it using a 30 year bond that has a BPV of 8 cents.
How much of the 30 year bond should she buy or sell to hedge against parallel shifts in the yield curve?
- A . Sell $1,600,000
- B . Sell $625,000
- C . Buy $1,000,000
- D . Buy $1,600,000
If the continuously compounded risk free rate is 4% per year, and the continuous rate of dividend on a broad market index is 1% annually, what is the no-arbitrage 6-month futures price of the index if its spot value is $1000?
- A . $1015.11
- B . $1015.00
- C . $1030.45
- D . $985.11
Backwardation can be explained by:
- A . expectations of oversupply in the future
- B . convenience yields being greater than the total carrying cost
- C . short term shortages in the spot markets
- D . all of the above
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