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PRMIA Exam 8007 Topic 1 Question 69 Discussion

Actual exam question for PRMIA's 8007 exam
Question #: 69
Topic #: 1
[All 8007 Questions]

What is the total derivative of the function f(x,y) = ln(x+y), where ln() denotes the natural logarithmic function?

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Suggested Answer: D

by Penney at Apr 13, 2024, 01:58 AM

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Queen
11 months ago
I also calculated it and got around 0.5290. I think it's close to option A.
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Lindsay
11 months ago
I calculated it and got around 0.5288. So, I think option D is the correct answer.
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Mireya
11 months ago
I agree with It should be close to 0.53 due to the factors mentioned.
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Lelia
12 months ago
I think the risk neutral probability for an up move is around 0.53.
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German
1 years ago
Hmm, I'm not entirely convinced. Let me double-check the calculations. *scribbles on notepad* Ah, I see where the rounding error might come in. I think C is the correct answer.
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Aron
1 years ago
Okay, plugging in the values, we get (e^(0.01) - 1/1.1) / (1.1 - 1/1.1), which simplifies to 0.5292. So I think the answer is B.
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Stevie
11 months ago
Yes, the answer is indeed B) 0.5292.
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Ardella
11 months ago
I agree with your calculation.
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Broderick
1 years ago
Ah, I remember this from the lectures. The risk-neutral probability is calculated as (e^(rt) - d) / (u - d), where r is the risk-free rate, t is the time step, u is the up factor, and d is the down factor.
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An
1 years ago
I agree, the key is understanding the risk-neutral probability formula and applying it correctly. Let's go through the steps together and see if we can arrive at the right answer.
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Margot
1 years ago
Okay, let's think this through. We have the up and down factors, the risk-free rate, and the question is asking for the risk-neutral probability of an up move. This is going to require some formula manipulation to get the right answer.
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Ozell
1 years ago
Hmm, this is a tricky one. The binomial tree model is a core concept in options pricing, so I'm sure the exam writers are testing our understanding of the underlying assumptions and calculations.
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