Question 1

A trading firm uses reinforcement learning to determine the best time to buy or sell an asset. They have partial information about the state transitions and aim to maximize long-term profits by identifying the best action in each state. Which reinforcement learning approach is most suitable for this scenario?

Options :

A : Model-based approach

B : Policy gradient

C : Value-based approach

D : Supervised learning

Answer: C

Question 2

While using Naïve Bayes for text classification, a bank wants to classify customer feedback as “Good” or “Bad.” How does the model handle the probability of classifying feedback with words it hasn’t encountered?

Options :

A : It assigns zero probability to the class if a new word is present.

B : It ignores the new word in classification.

C : It calculates probabilities based on prior data alone.

D : It smooths probabilities to avoid zero probabilities.

Answer: D

Question 3

A problem-solving AI model is being developed to solve the Tower of Hanoi puzzle by systematically planning moves to achieve the final goal. The model needs to evaluate intermediate steps to clear disks strategically for future moves. Which approach would best help the model to complete this task?

Options :

A : Tactical lookahead, as it considers each immediate move without long-term planning.

B : Strategic planning, by identifying intermediate moves that contribute to the end goal.

C : Reinforcement learning, by rewarding moves that lead to progress in the puzzle.

D : Randomized search, by exploring different moves without a predefined plan.

Answer: B

Question 4

An investment firm is setting up its model risk management framework. Who is primarily responsible for approving or rejecting models based on validation results?

Options :

A : Model developers

B : Internal auditors

C : Senior management

D : Model validators

Answer: C

Question 5

What is a primary reason to remove duplicate observations during data cleaning?

Options :

A : To improve data storage efficiency

B : To avoid biases in analysis

C : To handle missing data effectively

D : To address inconsistent recording

Answer: B

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