Explanation
Given volatility, weights and correlation, we do not need any additional information on covariances - and therefore statement I is incorrect.
To evaluate the other statements, consider the formula for portfolio variance (recalling that standard deviation is just the square root of the variance) portfolio_var_diff_corr Statement II is incorrect because this statement describes what the standard deviation of the portfolio would be if the assets were to be perfectly positively correlated (here they are negatively correlated).
Statement III is incorrect. When the two assets are uncorrelated (ie correlation = 0), the combined standard deviation is the square root of the weighted sum of variances, where the squares of the asset weights are used as weights (see formula above).
Statement IV is correct. When the assets are perfectly positively correlated, they are effectively the same asset and the combined standard deviation of a portfolio of such assets is nothing but the sum of their weighted standard deviations.
Also refer to the tutorial (and the Excel model - you will find it under Exam 2) for portfolio variances to see how portfolio volatility behaves when correlations are -1, 0 or +1.

Explanation
There was no event such as the CDO squeeze in 2008. (Quite on the contrary, securitized products were selling at distressed prices.).
The silver squeeze of 1979-80 (Hunt brothers), the Chicago fire of 1872 (leading to a short squeeze on wheat), and the wheat squeeze (Hutchingson) of 1866 are real historical events that led to short squeezes in commodity markets. Choice 'b' is therefore the correct answer.
For the PRM exam, you should try to remember the event broadly, and the commodity involved.

Explanation
https://riskprep.com/images/stories/questions/102.06.a.png is the coefficient of risk aversion at x. Its inverse, ie https://riskprep.com/images/stories/questions/102.06.b.png, is called the coefficient of risk tolerance.


Risk aversion or risk tolerance is indicated in a utility function by its curvature. A concave utility function indicates risk aversion and a convex function indicates risk tolerance. The curvature is measured as a ratio of the second derivative to the first derivative of a function. A negative second derivative implies concavity. The expression is the coefficient of risk aversion, and its inverse, which is in the same units as wealth, is called the coefficient of risk tolerance.

Notional principals are not exchanged at the start and the end of an FRA. In fact, if the notional principals were to be exchanged, it would increase credit risk and not decrease it by introducing settlement risk.
Therefore Choice 'd' is incorrect.
All other choices correctly describe various aspects of an FRA.

Explanation
The price of a treasury bill can be calculated as [Future value / (1 + yield x days-to-maturity/365)] =
100/(1+5%*90/365) = $98.78.