PRMIA 8007 Exam Practice Test Instant Access

Question 1

In statistical hypothesis tests, 'Type I error' refers to the situation in which...

AThe null hypothesis is accepted when in fact it should have been rejected

BThe null hypothesis is rejected when in fact it should have been accepted

CBoth null hypothesis and alternative hypothesis are rejected

DBoth null hypothesis and alternative hypothesis are accepted

Answer : B

Question 2

Which of the following statements are true about Maximum Likelihood Estimation?

(i) MLE can be applied even if the error terms are not i.i.d. normal.

(ii) MLE involves integrating a likelihood function or a log-likelihood function.

(iii) MLE yields parameter estimates that are consistent.

A(i) and (ii)

B(i) only

C(i) and (iii)

D(i), (ii), and (iii)

Answer : C

Question 3

In a multiple linear regression, the significance of R2 can be tested using which distribution?

ANormal distribution

BStudent's t distribution

CF-distribution

DBinomial distribution

Answer : C

Question 4

You want to test the hypothesis that a population parameter of a regression model is zero. Your alternative hypothesis is that 0. Denote by SD() the estimated standard deviation of , and by MEAN() the estimated mean of . Which test statistic is appropriate, and what is its distribution?

Atest statistic = SD()/MEAN(), normal distribution

Btest statistic = MEAN()/SD(), normal distribution

Ctest statistic = SD()/MEAN(), t distribution

Dtest statistic = MEAN()/SD(), t distribution

Answer : D

Question 5

Which of the following is not a direct cause of autocorrelation or heteroskedasticity in the residuals of a regression model?

AA structural break in the dependent variable

BA high positive correlation between two explanatory variables

CThe omission of a relevant explanatory variable

DUsing an inappropriate functional form in the model

Answer : B

Question 6

Consider the following distribution data for a random variable X: What is the mean and variance of X?

A3.6 and 7.15

B3.4 and 3.84

C3.5 and 3.45

DNone of these

Answer : D

Question 7

Let X be a random variable distributed normally with mean 0 and standard deviation 1. What is the expected value of exp(X)?

AE(exp(X)) = 1.6487

BE(exp(X)) = 1

CE(exp(X)) = 2.7183

DE(exp(X)) = 0.6065

Answer : A

PRMIA 8007 Mathematical Foundations of Risk Measurement – 2015 Edition Exam Practice Test