SOA IFM Exam Questions and
Answers 100% Pass
Derivative Security (Chp. 1) - ✔✔A financial instrument whose value depends on
another security.
Option (Chp. 1) - ✔✔An agreement allowing the buyer of the option to buy or sell an
asset at a specific price on a specific day.
Clearinghouses (Chp. 1) - ✔✔Matches the buyers and the sellers and keeps track of their
obligations and payments.
Measures of Market Size and Activity (Chp. 1) - ✔✔1) Trading Volumne
2) Market Value
3) Notional Value
4) Open Interest
Purpose of Derivatives (Chp. 1) - ✔✔1) Risk Management
2) Speculation
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,3) Reduced Transaction Costs
4) Regulatory Arbitrage
Hedging (Chp. 1) - ✔✔Guaranteeing a buying or selling price.
Derivative Perspectives (Chp. 1) - ✔✔1) End User
2) Market-Maker
3) Economic Observer
Bid Price (Chp. 1) - ✔✔The amount that a person will pay for an asset.
Offer Price/Ask Price (Chp. 1) - ✔✔The price an asset can be bought for.
Bid-Ask Spread (Chp. 1) - ✔✔The difference between the bid and ask prices.
Stock Orders (Chp. 1) - ✔✔1) Market Order
2) Limit Order
3) Stop Loss Sales Order
Market Order (Chp. 1) - ✔✔Pays the market price (ask/bid) to buy or sell stock
immediately.
Limit Order (Chp. 1) - ✔✔Specifies the max buying price or min selling price and not
fulfilled until that price is avaliable.
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,Stop Loss Sales Order (Chp. 1) - ✔✔Specifies that the stock is sold if the price decreases
to the specified amount.
Long Position (Chp. 1) - ✔✔Positive number of units in which the instrument was
bought.
Short Position (Chp. 1) - ✔✔Negative number of units in which the instrument was
sold.
Short Selling Purposes (Chp. 1) - ✔✔1) Speculation
2) Financing
3) Hedging
Lease Rate (Chp. 1) - ✔✔The annual cost of holding an asset as a percentage of the asset
value.
Repo Rate/Short Rate (Chp. 1) - ✔✔Repo: interst rate paid by the lender for bonds.
Short: interst rate paid by the lender for stocks.
Cost of Capital (Chp. 2) - ✔✔Interest rate paid to investors of the project.
NPV [Formula] (Chp. 2) - ✔✔
NPV Perpetuity [Formula] (Chp. 2) - ✔✔NPV = 1/i
NPV Growth Rate [Formula] (Chp. 2) - ✔✔NPV = 1/(i-g)
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, Break - Even Analysis (Chp. 2) - ✔✔Determine the value of each assumption parameter
for which the NPV is 0.
IRR (Chp. 2) - ✔✔Internal Rate of Return
Sensitivity Analysis (Chp. 2) - ✔✔Caluclating the change in the NPV resulting from a
change in a parameter.
Scenario Analysis (Chp. 2) - ✔✔Calculate the NPV for various scenarios.
Risk Measures (Chp. 2) - ✔✔1) Variance
2) Semi-Variance
3) VaR
4) TVar
Variance [Formula] (Chp. 2) - ✔✔Var(R) = σ² = E[(R - µ)²] = E[R²] - µ²
Standard Deviation [Formula] (Chp. 2) - ✔✔SD(R) = √(Var(R)) = σ
Volatility (Chp. 2) - ✔✔Standard Deviation = Volatility
Semi-Variance [Downside Semi-Variance] (Chp. 2) - ✔✔The square difference from the
mean only when that difference is negative.
Semi-Variance [Downside Semi-Variance] [Formula] (Chp. 2) - ✔✔σ² = E[min(0,(R - µ))²]
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Answers 100% Pass
Derivative Security (Chp. 1) - ✔✔A financial instrument whose value depends on
another security.
Option (Chp. 1) - ✔✔An agreement allowing the buyer of the option to buy or sell an
asset at a specific price on a specific day.
Clearinghouses (Chp. 1) - ✔✔Matches the buyers and the sellers and keeps track of their
obligations and payments.
Measures of Market Size and Activity (Chp. 1) - ✔✔1) Trading Volumne
2) Market Value
3) Notional Value
4) Open Interest
Purpose of Derivatives (Chp. 1) - ✔✔1) Risk Management
2) Speculation
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,3) Reduced Transaction Costs
4) Regulatory Arbitrage
Hedging (Chp. 1) - ✔✔Guaranteeing a buying or selling price.
Derivative Perspectives (Chp. 1) - ✔✔1) End User
2) Market-Maker
3) Economic Observer
Bid Price (Chp. 1) - ✔✔The amount that a person will pay for an asset.
Offer Price/Ask Price (Chp. 1) - ✔✔The price an asset can be bought for.
Bid-Ask Spread (Chp. 1) - ✔✔The difference between the bid and ask prices.
Stock Orders (Chp. 1) - ✔✔1) Market Order
2) Limit Order
3) Stop Loss Sales Order
Market Order (Chp. 1) - ✔✔Pays the market price (ask/bid) to buy or sell stock
immediately.
Limit Order (Chp. 1) - ✔✔Specifies the max buying price or min selling price and not
fulfilled until that price is avaliable.
100% Pass Guarantee Katelyn Whitman All Rights Reserved © 2025 2
,Stop Loss Sales Order (Chp. 1) - ✔✔Specifies that the stock is sold if the price decreases
to the specified amount.
Long Position (Chp. 1) - ✔✔Positive number of units in which the instrument was
bought.
Short Position (Chp. 1) - ✔✔Negative number of units in which the instrument was
sold.
Short Selling Purposes (Chp. 1) - ✔✔1) Speculation
2) Financing
3) Hedging
Lease Rate (Chp. 1) - ✔✔The annual cost of holding an asset as a percentage of the asset
value.
Repo Rate/Short Rate (Chp. 1) - ✔✔Repo: interst rate paid by the lender for bonds.
Short: interst rate paid by the lender for stocks.
Cost of Capital (Chp. 2) - ✔✔Interest rate paid to investors of the project.
NPV [Formula] (Chp. 2) - ✔✔
NPV Perpetuity [Formula] (Chp. 2) - ✔✔NPV = 1/i
NPV Growth Rate [Formula] (Chp. 2) - ✔✔NPV = 1/(i-g)
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, Break - Even Analysis (Chp. 2) - ✔✔Determine the value of each assumption parameter
for which the NPV is 0.
IRR (Chp. 2) - ✔✔Internal Rate of Return
Sensitivity Analysis (Chp. 2) - ✔✔Caluclating the change in the NPV resulting from a
change in a parameter.
Scenario Analysis (Chp. 2) - ✔✔Calculate the NPV for various scenarios.
Risk Measures (Chp. 2) - ✔✔1) Variance
2) Semi-Variance
3) VaR
4) TVar
Variance [Formula] (Chp. 2) - ✔✔Var(R) = σ² = E[(R - µ)²] = E[R²] - µ²
Standard Deviation [Formula] (Chp. 2) - ✔✔SD(R) = √(Var(R)) = σ
Volatility (Chp. 2) - ✔✔Standard Deviation = Volatility
Semi-Variance [Downside Semi-Variance] (Chp. 2) - ✔✔The square difference from the
mean only when that difference is negative.
Semi-Variance [Downside Semi-Variance] [Formula] (Chp. 2) - ✔✔σ² = E[min(0,(R - µ))²]
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