PRMIA Exam 8006 Topic 1 Question 99 Discussion

Actual exam question for PRMIA's 8006 exam

Question #: 99
Topic #: 1

[All 8006 Questions]

Arrange the following rates in descending order, assuming an upward sloping yield curve:

1. The 10 year zero rate

2. The forward rate from year 9 to 10

3. The yield-to-maturity on a 10 year coupon bearing bond

A1, 2, 3

B2, 1, 3

C1, 3, 2

D3, 2, 1

Show Suggested Answer

Suggested Answer: A

Futures contracts carry no gamma. Only options have gamma. Choice 'a' is the correct answer. Any instrument whose price varies in a linear fashion with respect to the underlying will have gamma equal to zero.

by Ronna at Sep 19, 2024, 12:58 AM

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Rebecka

7 months ago

Parabolic? Sounds like my last attempt at baking a cake. I'm going with B, because who doesn't love a good negative gamma?

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Dominque

8 months ago

Hmm, that's interesting. I'll have to review that concept again.

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8 months ago

Haha, is this a trick question? The answer has to be D. Convexity all the way!

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Evan

7 months ago

I'm going with A. Zero seems like the safest bet.

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Socorro

7 months ago

I'm not sure, but I think it might be C. Parabolic sounds right to me.

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Leota

7 months ago

I think the answer is D too. Convexity is key.

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Dominque

8 months ago

I think the gamma in a commodity futures contract is always negative.

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