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PRMIA 8007

8007

Exam Code: 8007

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

Updated: Jul 24, 2026

Q & A: 133 Questions and Answers

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8007 exam dumps

PRMIA 8007 Exam Syllabus Topics:

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

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

                                    1. You invest $2m in a bank savings account with a constant interest rate of 5% p.a. What is the value of the investment in 2 years time if interest is compounded quarterly?

                                    A) None of them
                                    B) $2.205,000
                                    C) $2,208,972
                                    D) $2,210,342


                                    2. 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) 5.19
                                    B) 6.31
                                    C) 5.66
                                    D) 4.18


                                    3. If the annual volatility of returns is 25% what is the variance of the quarterly returns?

                                    A) 0.0625
                                    B) 0.1250
                                    C) None of the above
                                    D) 0.0156


                                    4. For a quadratic equation, which of the following is FALSE?

                                    A) If the discriminant is negative, there are no real solutions
                                    B) If the discriminant is negative there are two different real solutions
                                    C) If the discriminant is zero, there is only one solution
                                    D) If the discriminant is positive there are two different real solutions


                                    5. If a time series has to be differenced twice in order to be transformed into a stationary series, the original series is said to be:

                                    A) non-linear
                                    B) integrated of order 2
                                    C) non-functional
                                    D) differential


                                    Solutions:

                                    Question # 1
                                    Answer: C
                                    Question # 2
                                    Answer: B
                                    Question # 3
                                    Answer: D
                                    Question # 4
                                    Answer: B
                                    Question # 5
                                    Answer: B

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