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The following 8006 questions are part of our PRIMA 8006 real exam questions full version. There are 286 in our 8006 full version. All of our 8006 real exam questions can guarantee you success in the first attempt. If you fail 8006 exam with our PRIMA 8006 real exam questions, you will get full payment fee refund. Want to practice and study full verion of 8006 real exam questions? Go now!

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PRIMA 8006 Exam Actual Questions

The questions for 8006 were last updated on Feb 21,2025 .

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Question#1

What is the fair price for a bond paying annual coupons at 5% and maturing in 5 years.
Assume par value of $100 and the yield curve is flat at 6%.

A. $104.33
B. $95.79
C. $100.00
D. $94.73

Explanation:
The coupon payments can be considered an annuity which can be valued using the formula for the PV of annuities= annuity. Therefore the value of the five coupon payments is 5 * ((1-1/(1.06^5))/0.06) = $21.06 Similarly the principal payment at the end of 5 years can be valued as 100/1.065 = $74.73 Therefore the total value of the bond today is $95.79

Question#2

For a stock that does not pay dividends, which of the following represents the delta of a futures contract?

A. 0
B. e^(rt)
C. 1
D. Futures contracts do not have a delta as they are not options

Explanation:
The delivery price of a futures contract is given by Se^(rt), just as in the case of a forward contract. However, a key difference is that a forward is settled at maturity whereas a futures contract pays out the P&L daily. So if the spot price increases from S to S, the holder of a futures contract immediately receives the change in the delivery price without any discounting to the present. That is, the holder of the futures contract receives (S + S)e^(rt) - Se^(rt) = Se^(rt) right away. Therefore the delta of a futures contract is e^rt, which given positive non-zero values of r and t can only be greater than zero.
Therefore Choice 'b' is the correct answer. Note the difference from a forward contract where this difference is not received till the delivery date, therefore making the delta of the forward contract to be equal to 1.

Question#3

[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 relating to convertible debt are true:
I. A hard call protection means the bond cannot be called by the issuer till the share price reaches a threshold
II. It is advantageous for the issuer to call its convertible securities when the share price exceeds the conversion price
III. When the issuer's share prices is very high, the convertible bond trades at a discount to the value of the shares it is convertible into
IV. Convertible bonds generally have to carry a higher coupon than on equivalent non-convertible securities to make them attractive to investors

A. III and IV
B. I and II
C. I, III and IV
D. II and III

Explanation:
A 'hard call protection' means the bond cannot be called until a certain date, regardless of what the share price is. Therefore statement I is false. Also note that a 'soft call protection' means that a bond can be called only if the share price reaches a certain threshold.
It is advantageous for the issuer to call its convertible securities when the share price exceeds the conversion price - because these shares can instead be sold in the market at the higher share price than the lower conversion price. Statement II is true.
When the issuer's share price is very high, the convertible bond trades at a discount to the share price because it is almost certain to be called by the issuer and be redeemed at par. Therefore statement III is right. Statement IV is incorrect because convertible bonds need to pay less coupon than equivalent non-convertible bonds because of the value of the option embedded in them.

Question#4

If the quoted discount rate of a 3 month treasury bill futures contract is 10%, what is the price of a 3-month treasury bill with a principal at maturity of $100?

A. $90
B. $110.00
C. $102.50
D. $97.50

Explanation:
T-bill futures 'discount' can be converted to a price for the bill using the formula Price = [1 - discount * number of days/360]. In this case, this works out to (1- 10% *90/360) * 100 = $97.50. Choice 'd' is the correct answer.

Question#5

Which of the following does not explain the shape of an yield curve?

A. Market segmentation theory
B. The expectations hypothesis
C. The efficient markets hypothesis
D. The liquidity preference theory

Explanation:
The efficient markets hypothesis states that all known information is captured in the prices of a security. It does not explain the shape of the yield curve.
The expectations hypothesis, the LPT and the market segmentation theory are all attempts to explain the shape of the term structure of interest rates.
Therefore Choice 'c' is the correct answer as it does not explain the shape of the yield curve.

Exam Code: 8006Q & A: 286 Q&AsUpdated:  Feb 21,2025

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