Professional Risk Management (PRM) Exam – Sample

An investor buys a given amount of the US Treasury bond with coupon 4% and maturity January 1, 2018. The current clean price of the bond is 96.25625. The bond paid the coupon semi-annually on every January 1 and July 1. The settlement date was April 4, 2013. Calculate the dirty price of the bond.

Which of the following statements about Straddles and Strangles is FALSE?

Rank the following three bonds from shortest to longest duration. I. 6% 5-year semi-annual pay bond II. 6% 5-year annual pay bond III. 5-year zero-coupon bond

You are speaking with a bond portfolio manager who states that �my strategy is to match the duration of fixed income investments with the term structure of my clients� liabilities�. This strategy best reflects which of the following expectations theories of the term structure of interest rates?

An investor currently has a portfolio of stocks. He is analyzing two stocks, Stock Y and Z, for adding to his portfolio. Both Stock Y and Z have the same risk/return profile. However, the covariance for Stock Y and Z with the portfolio are 0.2 and 0.4. Which of the following statements is TRUE?

Assuming a positive relationship between futures prices and interest rates, which of the following is most accurate?

In disaster recovery planning, procedures are required to______.

Assume you live in a CAPM world and the expected return on the market portfolio is 9%, while the risk free rate is 3%. If the beta of stock A is 1.3, the expected return on A is:

Given a one-year probability of default of 20%, what would be the cumulative probability of default for the bond for the three years?

For EWMA (Exponentially Weighted Moving Average), using a decay factor of 0.94 and a tolerance level of 1% (i.e. excluding exponential weights below 1%), the effective number of data points used to estimate the covariance matrix is: