CISI ICWIM Exam Questions Free Practice Test

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Questions # 1:

The Arbitrage Pricing Theory (APT) assumes investors can sell short. This involves:

Options:

Not selling the whole of your shareholding in one trade

Selling something you do not own, intending to buy it back at a lower price later

Selling your shares and buying them back a short time later

Selling lots of securities over a short time frame

Expert Solution

Questions # 2:

When creating a portfolio for a risk-averse client, why would you select stocks with a beta of less than one?

Options:

So that the portfolio is easier to understand

So that the portfolio moves in line with the market

In order to produce a low-volatility portfolio

To produce a high-volatility portfolio

Expert Solution

Questions # 3:

A non-profit, whole-of-life assurance policy will pay:

Options:

A return, linked to the insurance company's units

A fixed sum, provided death occurs within a pre-determined time

An amount linked to the prevailing rate of inflation

A fixed sum chosen at the outset

Expert Solution

Questions # 4:

A manufacturing company has increased its level of output to the point where marginal costs start to exceed average total costs. What does this indicate?

Options:

Fixed costs are likely to fall

The market has become saturated

Variable costs are now negligible

Productive capacity is constrained

Expert Solution

Questions # 5:

Which of the following forms part of the Financial Planning Standards Board’s six-step process for financial planning?

Options:

Analyse client’s financial status

Challenge client’s risk appetite

Minimise client’s tax burden

Organise client's financial affairs

Expert Solution

Questions # 6:

Which term is used to describe a dividend payment made by a company with insufficient earnings to do so?

Options:

An ex-dividend payment

A proxy dividend payment

A scrip dividend payment

An uncovered dividend payment

Expert Solution

Questions # 7:

How would an active fund manager seek to avoid underperforming their peer group when deciding on asset allocation?

Options:

Through the use of asset allocation by consensus

By assessing the prospects for each main asset class

By hedging currency and market risk

Through the use of quantitative models

Expert Solution

Questions # 8:

When a hedge fund puts together an equity arbitrage position, it will seek to balance respective:

Options:

Alphas

Betas

Deltas

Gammas

Expert Solution

Questions # 9:

In normal market circumstances, the yield curve slopes upward. Why is this?

Options:

Longer-dated bonds are generally more sensitive to interest rate changes than short-dated bonds because holders are exposed to risk for a longer period

As long as the interest being paid on the government bond is near to the interest rate available on the market, there is little risk that the resale value will be significantly different from the purchase price

The longer an investor ties up capital, the higher the rate of interest they will demand to compensate themselves for the greater risk and opportunity cost on the capital they have invested

Although bonds are generally less risky than equities, their prices are intrinsically linked to the general level of interest rates and expectations of future changes

Expert Solution

Questions # 10:

The return on a whole-of-life unit-linked policy is:

Options:

Directly related to the performance of the insurance company's fund

Related to the Consumer Price Index (CPI)

Linked to the rate of inflation

Dependent on prevailing interest rates

Expert Solution

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