Introduction of PRMIA 8006 Exam!

PRMIA 8006 is a certification exam for the Professional Risk Manager (PRM) designation. It is a comprehensive exam that tests a candidate's knowledge of risk management principles, practices, and techniques. The exam covers topics such as risk management frameworks, risk management processes, risk management tools, and risk management strategies.

What is the Duration of PRMIA 8006 Exam?

The PRMIA 8006 exam is a two-hour, multiple-choice exam.

What are the Number of Questions Asked in PRMIA 8006 Exam?

There is no set number of questions on the PRMIA 8006 exam. The exam is composed of multiple-choice questions and is designed to assess the candidate's knowledge of risk management principles and practices.

What is the Passing Score for PRMIA 8006 Exam?

The passing score required for the PRMIA 8006 exam is 70%.

What is the Competency Level required for PRMIA 8006 Exam?

The PRMIA 8006 exam is a Level III exam, which is the highest level of certification offered by PRMIA. To be eligible to take the exam, you must have completed the PRMIA 8005 exam and have at least two years of professional experience in risk management.

What is the Question Format of PRMIA 8006 Exam?

The PRMIA 8006 exam is a computer-based exam and consists of multiple-choice questions.

How Can You Take PRMIA 8006 Exam?

The PRMIA 8006 exam can be taken online or in a testing center. To take the exam online, you need to register through the PRMIA website and purchase the exam. Once you have purchased the exam, you will receive an email with instructions on how to access the exam. To take the exam in a testing center, you must register for the exam through the PRMIA website and select a testing center location. You will then receive an email with instructions on how to access the exam and the exact testing center address.

What Language PRMIA 8006 Exam is Offered?

The PRMIA 8006 Exam is offered in English.

What is the Cost of PRMIA 8006 Exam?

The cost of the PRMIA 8006 exam is $400 USD.

What is the Average Salary of PRMIA 8006 Certified in the Market?

The exact average salary after PRMIA 8006 exam certification will depend on the specific skills and experience of the individual, as well as the specific job market in their area. However, those with the certification typically have the potential to earn higher salaries than those without it.

Who are the Testing Providers of PRMIA 8006 Exam?

PRMIA offers the 8006 exam through Prometric, a global testing provider. Candidates must register directly with Prometric to schedule an appointment to take the exam.

What is the Recommended Experience for PRMIA 8006 Exam?

The recommended experience for PRMIA 8006 exam is three to five years of risk management experience. This experience can include working in the financial services industry, being a risk manager, or working in a related field such as banking, insurance, investments, or accounting.

What are the Prerequisites of PRMIA 8006 Exam?

The PRMIA 8006 exam requires applicants to have a minimum of three years of experience in financial risk management. Applicants should also have a strong understanding of the topics covered in the PRMIA Risk Management Professional (RMP) certification.

What is the Expected Retirement Date of PRMIA 8006 Exam?

The expected retirement date of PRMIA 8006 exam is not available online. You should contact PRMIA directly for more information.

What is the Difficulty Level of PRMIA 8006 Exam?

The difficulty level of the PRMIA 8006 exam is considered to be advanced. It is a comprehensive exam that covers a wide range of topics related to risk management. The exam is designed to test the knowledge and skills of professionals in the field of risk management. It is recommended that candidates prepare thoroughly for the exam in order to achieve a passing score.

What is the Roadmap / Track of PRMIA 8006 Exam?

The PRMIA 8006 Exam is a certification track/roadmap designed to assess the knowledge and skills of professionals in the field of risk management. It is an online exam that tests a candidate's understanding of the fundamentals of risk management, including topics such as risk identification, risk assessment, risk management strategies, and risk control. The exam is divided into two parts: a multiple-choice section and a written essay section. Successful completion of the exam leads to the PRMIA 8006 certification.

What are the Topics PRMIA 8006 Exam Covers?

PRMIA 8006 covers the following topics: 1. Risk Management Processes: This section covers the fundamental principles and practices of risk management, including risk identification, assessment, monitoring, and control. 2. Risk Measurement and Quantitative Analysis: This section covers the use of quantitative models and techniques to measure and analyze risk, including probability and statistics, Monte Carlo simulation, and value at risk. 3. Risk Management Applications: This section covers the application of risk management principles and techniques to various types of financial instruments and markets, including equities, fixed income, derivatives, and alternative investments. 4. Risk Management Regulation: This section covers the legal, regulatory, and compliance aspects of risk management, including the Basel Accords, Dodd-Frank Act, and other relevant regulations. 5. Risk Management Technology and Systems: This section covers the use of technology and systems to support risk management, including enterprise risk management systems, data management,

What are the Sample Questions of PRMIA 8006 Exam?

1. What are the three components of a Risk Management Framework? 2. What is the purpose of a Risk Appetite Statement? 3. Describe the steps involved in developing a Risk Tolerance Limit? 4. What is the difference between a Risk Management Plan and a Risk Mitigation Plan? 5. What are the key components of a Risk Register? 6. How can you use Basel II to measure operational risk? 7. What are the key elements of a Risk Management Policy? 8. What are the different types of risk management tools? 9. What is the purpose of a Risk Assessment and Control Matrix? 10. How can you use Monte Carlo simulation to manage risk?

← Back to exam page

Free 8006 – Exam I: Finance Theory Financial Instruments Financial Markets - 2015 Edition Practice Test Question

Free demo downloads

Loading demo links...

Showing 1–15 of 15 questions

Question 1

If r be the yield of a bond, which of the following relationships is true:

Select an option, then click Submit answer.

○
- Modified Duration / (1 + r) = Macaulay Duration
○
- Modified Duration x (1 + r) = Macaulay Duration
○
Modified Duration x (1 + r) = Macaulay Duration
○
Modified Duration / (1 + r) = Macaulay Duration

Ask AI for More Explanation

— your own AI account, opens inside the app

Question 2

Which of the following statements is false:

Select an option, then click Submit answer.

○
The value of an FRA at expiration is determined by the spot interest rate prevailing at expiration
○
The value of an FRA (forward rate agreement) at inception is zero.
○
An FRA can be valued at anytime in its lifetime using the spot interest rate for the period to which the FRA relates
○
Notional principals are exchanged at the start and the end of an FRA to eliminate credit risk

Ask AI for More Explanation

— your own AI account, opens inside the app

Question 3

What can the buyer of a 6 x 12 FRA expect to receive (or pay) if the contracted rate is 10% and the settlement rate is 12%? Assume contract notional is $100m.

Select an option, then click Submit answer.

○
Pay $1,000,000
○
Receive $1,000,000
○
Pay $943,396
○
Receive $943,396

Ask AI for More Explanation

— your own AI account, opens inside the app

Reference / correct answer:

Receive $943,396

The buyer of the FRA gets to borrow $100m at 10% per annum for 6 months at the end of 6 months from the contract date. Thus, the interest due is $100m * 10% * 6/12 = $5m. However, at the end of the 6 months (when the notional borrowing period begins), the spot rate is 12%. The interest due on a borrowing at the spot rate would be $100m * 12% * 6/12 = $6m. Since the buyer gets to borrow cheaper than the going rate, he or she has made a gain of $1m on the FRA. However, this amount is not due immediately, it is due at the end of the 6 month borrowing period (ie, 12 months from the date the contract was entered into). The seller of the FRA can make the buyer whole by paying the buyer the present value of $1m due in 6 months time, which is $1m/(1 + 12%*6/12) = $1m/1.06 = $943,396. Thus, Choice 'd' is the correct answer. Remember that the FRA gets settled at the beginning of the notional borrowing period as all future cash flows, and the applicable discount rates are known with certainty. The buyer and the seller do not need to wait for the entire period to get over first. The cash settlement allows the buyer to borrow at the market rate and still have the same net borrowing cost as he or she had initially contracted for in the FRA.

Question 4

Which of the following correctly describes a "reverse repo"?

Select an option, then click Submit answer.

○
An asset swap that is offset by an identical but opposite swap
○
Lending cash with securities as a collateral
○
Borrowing cash while posting securities as a collateral
○
A repo with an undefined maturity period

Ask AI for More Explanation

— your own AI account, opens inside the app

Question 5

An investor believes that the market is likely to stay where it is. Which of the following option strategies will help him profit should his view be proven correct (assume all strategies described below are long only)?

Select an option, then click Submit answer.

○
Strangle
○
Collar
○
Butterfly spread
○
Straddle

Ask AI for More Explanation

— your own AI account, opens inside the app

Question 6

A trader finds that a stock index is trading at 1000, and a six month futures contract on the same index is available at 1020. The risk free rate is 2% per annum, and the dividend rate is 1% per annum. What should the trader do?

Select an option, then click Submit answer.

○
Buy the index spot and sell the futures contract
○
Buy the futures contract and sell the index spot
○
Buy the index spot and buy the futures contract
○
Sell the futures contract

Ask AI for More Explanation

— your own AI account, opens inside the app

Question 7

The effectiveness of a hedge is determined by which of the following expressions, where x,y is the correlation between the asset being hedged and the hedge position:

Select an option, then click Submit answer.

○
Option A
○
Option B
○
Option C
○
Option D

Ask AI for More Explanation

— your own AI account, opens inside the app

Question 8

Which of the following statements are true in respect of a fixed income portfolio:

I. A hedge based on portfolio duration is valid only for small changes in interest rates andneeds periodic readjusting

II. A duration based portfolio hedge can be improved by making a convexity adjustment

III. A long position in bonds benefits from the resulting negative convexity

IV. A duration based hedge makes the implicit assumption that only parallel shifts in theyield curve are possible

Select an option, then click Submit answer.

○
II and IV
○
I and II
○
I, II and IV
○
I and IV
○
A hedge based on portfolio duration is valid only for small changes in interest rates andneeds periodic readjusting

II. A duration based portfolio hedge can be improved by making a convexity adjustment

III. A long position in bonds benefits from the resulting negative convexity

IV. A duration based hedge makes the implicit assumption that only parallel shifts in theyield curve are possible

Ask AI for More Explanation

— your own AI account, opens inside the app

Question 9

Which of the following assumptions underlie the 'square root of time' rule used for computing volatility estimates over different time horizons?

I. asset returns are independent and identically distributed (i.i.d.)

II. volatility is constant over time

III. no serial correlation in the forward projection of volatility

IV. negative serial correlations exist in the time series of returns

Select an option, then click Submit answer.

○
I and II
○
I and III
○
III and IV
○
I, II and III
○
asset returns are independent and identically distributed (i.i.d.)

II. volatility is constant over time

III. no serial correlation in the forward projection of volatility

IV. negative serial correlations exist in the time series of returns

Ask AI for More Explanation

— your own AI account, opens inside the app

Question 10

If the implied volatility is known for a call option, what can be said about the implied volatility for a put option with the same strike and maturity?

Select an option, then click Submit answer.

○
The implied volatility for the put will be the same as that for the call but with a negative sign
○
The implied volatility for the put will be the same as that for the call
○
The implied volatility for the put will be given by the expression [1 - ] where is the implied volatility for the call
○
The implied volatility for the put cannot be determined from the implied volatility of the call

Ask AI for More Explanation

— your own AI account, opens inside the app

Question 11

The rate of dividend on a stock goes up. What is the effect on the price of a call option on this stock?

Select an option, then click Submit answer.

○
It may affect the call value either way depending upon the risk-free rate
○
It decreases the value of the call
○
It increases the value of the call
○
It does not affect the value of the call

Ask AI for More Explanation

— your own AI account, opens inside the app

Reference / correct answer:

It decreases the value of the call

Everything else remaining the same, an increase in the rate of dividends causes the value of call options to fall and the value of put options to rise. Therefore, Choice 'b' is the correct answer. (In the exam, the question could address either a call or a put option, so be aware of the answer in either case).

To understand this, consider how dividends are accounted for when valuing an option using the Black Scholes model. Future dividends are discounted to the present using the risk free rate and this discounted value is reduced from the spot price used in the BSM valuation. Effectively, this reduces the spot price used in the BSM formula. When the spot price reduces, and the exercise price remains the same, then the value of the call option goes down. In the same way, when spot price is reduced by the present value of dividends (and the exercise price stays the same), obviously the put option becomes more valuable.

Therefore an increase in the rate of dividends increases the value of the put option. There is another intuitive way to think about this: A call option is like a long position in the stock, but the holder of the call option is not entitled to receive dividends (unlike the holder of the stock). Since the holder of the call option has to forego the dividends, he is willing to pay less for the option; or in other words, the value of the call reduces.

In the same way, a put option is like having a short position in the stock. The holder of the short position has to borrow the stock in order to get into the short position in the first place. When dividends are paid, the holder of the short stock position has to make good any dividends that might be paid to the lender of the stock. The holder of a put option does not have to make any such payments. Therefore the put option is more valuable, and the existence of dividends (or an increase in dividends) increases the value of the put option.

(Try this out using the Black Scholes Excel model given under the tutorials by varying the spot price.)

Question 12

Which of the following statements are true:

I. Forward prices for a stock will fall if dividend expectations increase for the period thecontract is alive

II. Three month forward prices will decline if the 10 year rate goes up, and short term ratesstay unchanged

III. Futures exchanges require buyers but not sellers to deposit initial margins

IV. Variation margin is to be deposited when a futures contract is entered into

V. Futures exchanges requires hedgers and speculators to deposit identical margins

VI. Interest rate futures contracts carry duration but no convexity due to the daily cashsettlements

Select an option, then click Submit answer.

○
I and IV
○
I
○
II and III
○
I, II, V and VI
○
Forward prices for a stock will fall if dividend expectations increase for the period thecontract is alive

II. Three month forward prices will decline if the 10 year rate goes up, and short term ratesstay unchanged

III. Futures exchanges require buyers but not sellers to deposit initial margins

IV. Variation margin is to be deposited when a futures contract is entered into
○
Futures exchanges requires hedgers and speculators to deposit identical margins

VI. Interest rate futures contracts carry duration but no convexity due to the daily cashsettlements

Ask AI for More Explanation

— your own AI account, opens inside the app

Question 13

[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 best describes a shout option

Select an option, then click Submit answer.

○
an option in which the holder of the option has the right to reset the strike price to be atthe-money once during the life of the option
○
an option which kicks in as a plain vanilla option if the underlying hits an agreed threshold
○
an option in which the buyer of the option has the option to extend the expiry of the option upon the payment of an extra premium
○
an option whose expiry is automatically extended if it finishes out of the money.

Ask AI for More Explanation

— your own AI account, opens inside the app

Question 14

A refiner may use which of the following instruments to simultaneously protect against a fall in the prices of its products and a rise in the prices of its inputs:

Select an option, then click Submit answer.

○
crude oil swaps
○
options on the crack spread
○
crude oil futures
○
calendar spread options

Ask AI for More Explanation

— your own AI account, opens inside the app

Question 15

When graphing the efficient frontier, the two axes are:

Select an option, then click Submit answer.

○
Asset beta and standard deviation of the market portfolio
○
Expected return and asset's beta
○
Portfolio return and market standard deviation
○
Portfolio return and portfolio standard deviation

Ask AI for More Explanation

— your own AI account, opens inside the app

About the 8006 Free Practice Test

Thinking of taking the Exam I: Finance Theory Financial Instruments Financial Markets - 2015 Edition (8006) exam? This free PRMIA practice test is the place to start. The 15 questions are a free sample of the full Study4Pass practice set of 287 questions, so you can check your level before you commit to the real exam. The free sample is made up of 15 single-answer questions, each with a full explanation. Questions are spread across the areas that matter most on the real exam: Risk Management Processes, Risk Measurement and Quantitative Analysis, Risk Management Applications and Risk Management Regulation. PRMIA 8006 is a certification exam for the Professional Risk Manager (PRM) designation.

The PRMIA 8006 Exam is designed for risk management professionals and those seeking to become certified in Professional Risk Manager (PRM) designation. The PRMIA 8006 exam requires applicants to have a minimum of three years of experience in financial risk management.

Certification: Exam I: Finance Theory Financial Instruments Financial Markets - 2015 Edition (8006)
Vendor: PRMIA
Free on this page: 15 practice questions with answers and explanations
Full practice set: 287 questions

Treat this sample as a diagnostic. Answer honestly, check the explanation after every question, and note which topics feel shaky. A short, focused review of those topics is worth more than re-reading everything — and the full set lets you drill them topic by topic.

A good way to use this page: take the whole sample in one sitting, then go back over every explanation with fresh eyes. Mark the topics that felt uncertain, not just the ones you got wrong — uncertain answers are unmarked risk on the real exam. One or two focused passes like this usually move a score more than days of passive reading.

Inside the full 8006 practice set:

All 287 questions with answers and explanations
Timed Exam Simulation that mirrors the real exam pressure
Topic Training to drill one domain at a time
Ask AI for More Explanation on every question
Flag questions and review them before you finish

How to use this 8006 free practice test

Answer a question, then check the result to see the correct answer and the explanation behind it. Work at your own pace — there is no timer and no signup. Stuck on a concept? This is an AI-Enabled practice test: use Ask AI on any question and get the underlying concept explained in plain words, so you learn the reasoning instead of memorizing answers. When the free sample feels comfortable, the full set of 287 questions adds timed Exam Simulation, topic-by-topic training, and flagged-question review — the closest thing to exam day you can get before the real thing.

What to study for each 8006 domain

Risk Management Processes — This section covers the fundamental principles and practices of risk management, including risk identification, assessment, monitoring, and control.
Risk Measurement and Quantitative Analysis — This section covers the use of quantitative models and techniques to measure and analyze risk, including probability and statistics, Monte Carlo simulation, and value at risk.
Risk Management Applications — This section covers the application of risk management principles and techniques to various types of financial instruments and markets, including equities, fixed income, derivatives, and alternative…
Risk Management Regulation — This section covers the legal, regulatory, and compliance aspects of risk management, including the Basel Accords, Dodd-Frank Act, and other relevant regulations.
Risk Management Technology and Systems — This section covers the use of technology and systems to support risk management, including enterprise risk management systems, data management,

8006 practice test — quick questions

Is this 8006 practice test free?

Yes. Every question on this page — all 15 of them — is free to use, and you never need to create an account to try them.

How many questions are in the full 8006 set?

The full Study4Pass set for 8006 has 287 practice questions. This page gives you 15 of them free so you can judge the quality and difficulty first.

Does the free test show the answers?

Yes. Check any question to reveal the correct answer and its explanation, and use Ask AI whenever you want the underlying concept explained step by step.