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SOA IFM Exam Questions and answers | Newest 2024/25 Rated A+
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SOA IFM Exam Questions and answers | Newest 2024/25 Rated A+
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SOA IFM Exam Questions and answers |Newest 2024/25 Rated A+
Derivative Security (Chp. 1) - Correct Answers A financial instrument whose value
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depends on another security.
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ll Option (Chp. 1) - Correct Answers An agreement allowing the buyer of the option to buy
ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll
ll or sell an asset at a specific price on a specific day.
ll ll ll ll ll ll ll ll ll ll ll
ll Clearinghouses (Chp. 1) - Correct Answers Matches the buyers and the sellers and ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll
ll keeps track of their obligations and payments.
ll ll ll ll ll ll
Measures of Market Size and Activity (Chp. 1) - Correct Answers 1) Trading Volumne
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2) Market Value
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3) Notional Value
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4) Open Interest
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Purpose of Derivatives (Chp. 1) - Correct Answers 1) Risk Management
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2) Speculation
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3) Reduced Transaction Costs
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4) Regulatory Arbitrage
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ll Hedging (Chp. 1) - Correct Answers Guaranteeing a buying or selling price.
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Derivative Perspectives (Chp. 1) - Correct Answers 1) End User
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2) Market-Maker
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3) Economic Observer
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ll Bid Price (Chp. 1) - Correct Answers The amount that a person will pay for an asset.
ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll
ll Offer Price/Ask Price (Chp. 1) - Correct Answers The price an asset can be bought for.
ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll
ll Bid-Ask Spread (Chp. 1) - Correct Answers The difference between the bid and ask
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ll prices.
Stock Orders (Chp. 1) - Correct Answers 1) Market Order
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2) Limit Order
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3) Stop Loss Sales Order
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ll Market Order (Chp. 1) - Correct Answers Pays the market price (ask/bid) to buy or sell
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ll stock immediately.
ll
, ll Limit Order (Chp. 1) - Correct Answers Specifies the max buying price or min selling
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ll price and not fulfilled until that price is avaliable.
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ll Stop Loss Sales Order (Chp. 1) - Correct Answers Specifies that the stock is sold if the
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ll price decreases to the specified amount.
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ll Long Position (Chp. 1) - Correct Answers Positive number of units in which the
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ll instrument was bought. ll ll
ll Short Position (Chp. 1) - Correct Answers Negative number of units in which the
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ll instrument was sold. ll ll
Short Selling Purposes (Chp. 1) - Correct Answers 1) Speculation
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2) Financing
ll
3) Hedging
ll
ll Lease Rate (Chp. 1) - Correct Answers The annual cost of holding an asset as a
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ll percentage of the asset value. ll ll ll ll
Repo Rate/Short Rate (Chp. 1) - Correct Answers Repo: interst rate paid by the lender
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for bonds.
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Short: interst rate paid by the lender for stocks.
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ll Cost of Capital (Chp. 2) - Correct Answers Interest rate paid to investors of the project.
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ll NPV [Formula] (Chp. 2) - Correct Answers
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ll NPV Perpetuity [Formula] (Chp. 2) - Correct Answers NPV = 1/i
ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll
ll NPV Growth Rate [Formula] (Chp. 2) - Correct Answers NPV = 1/(i-g)
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ll Break - Even Analysis (Chp. 2) - Correct Answers Determine the value of each
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ll assumption parameter for which the NPV is 0. ll ll ll ll ll ll ll
ll IRR (Chp. 2) - Correct Answers Internal Rate of Return
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ll Sensitivity Analysis (Chp. 2) - Correct Answers Caluclating the change in the NPV
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ll resulting from a change in a parameter. ll ll ll ll ll ll
ll Scenario Analysis (Chp. 2) - Correct Answers Calculate the NPV for various scenarios.
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Risk Measures (Chp. 2) - Correct Answers 1) Variance
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2) Semi-Variance
ll
3) VaR ll
4) TVarll
, ll Variance [Formula] (Chp. 2) - Correct Answers Var(R) = σ² = E[(R - µ)²] = E[R²] - µ²
ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll
ll Standard Deviation [Formula] (Chp. 2) - Correct Answers SD(R) = √(Var(R)) = σll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll
ll Volatility (Chp. 2) - Correct Answers Standard Deviation = Volatility ll ll ll ll ll ll ll ll ll ll ll ll ll ll
ll Semi-Variance [Downside Semi-Variance] (Chp. 2) - Correct Answers The square ll ll ll ll ll ll ll ll ll ll ll ll ll ll
ll difference from the mean only when that difference is negative. ll ll ll ll ll ll ll ll ll
ll Semi-Variance [Downside Semi-Variance] [Formula] (Chp. 2) - Correct Answers σ² = ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll
ll E[min(0,(R - µ))²] ll ll
ll Sample Semi-Variance [Sample Downside Semi-Variance] [Formula] (Chp. 2) - Correct
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ll Answers σ² = (1/n) ∑[min(0,(Ri - R))]² ll ll ll ll ll ll ll ll ll ll
ll Value-At-Risk [VaR] [Formula] (Chp. 2) - Correct Answers VaRα(X) = Fx⁻¹(α) ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll
ll Downside Tail Value-At-Risk [TVaR] [Formula] (Chp. 2) - Correct Answers TVaRα(X) = ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll
ll E[x|x<VaRα(X)] = (∫xf(x)dx)/α ll ll
ll Upside Tail Value-At-Risk [TVaR] [Formula] (Chp. 2) - Correct Answers TVaRα(X) =
ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll
ll E[x|x>VaRα(X)] = (∫xf(x)dx)/(1-α) ll ll
ll Risk Measure Properties (Chp. 2) - Correct Answers 1) Translation Invariance
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ll g(x+c) = g(x) + c ll ll ll ll
2) Positive Homogeneity
ll ll
g(cx) = (c)g(x)
ll ll ll
3) Subadditivity
ll
g(x+y) ≤ g(x) + g(y) [Upside]
ll ll ll ll ll ll
g(x+y) ≥ g(x) + g(y) [Downside]
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4) Monotonicity
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g(x) ≤ g(y) if Pr(x ≤ y) = 1 [Upside]
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g(x) ≥ g(y) if Pr(x ≥ y) = 1 [Downside]
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ll PV with Growth Rate [Formula] (Chp. 2) - Correct Answers PV = [1 - [(1+g)/(1+r)]ⁿ]/(r-g)
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Monte Carlo Simulation (Chp. 3) - Correct Answers Generates pseudorandom numbers
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from a distribution.
ll ll ll
Inversion for Exponential [Formula] (Chp. 3) - Correct Answers u = F(x) = 1 - e∧(-x/θ)
ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll ll
x = -θln(1-u)
ll ll
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