CFM Cheat Sheet 2026

The 30 highest-yield CFM facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. Why is ethical behavior critical in investment management? → It supports long-term client relationships and fiduciary duties
2. What is negative convexity, commonly found in mortgage-backed securities (MBS)? → Price gains are smaller than duration predicts when rates fall, due to prepayment risk
3. What is modified duration used for in fixed income portfolio management? → Estimating the percentage price change of a bond for a given change in yield
4. What is the main objective of financial regulations? → To ensure transparency and protect investors
5. What does a p-value below 0.05 indicate in hypothesis testing for a fund performance study? → The result is statistically significant at the 5% significance level
6. Which law aims to combat insider trading? → Securities Exchange Act of 1934
7. Which of the following is a component of the Capital Asset Pricing Model (CAPM)? → Risk-free rate
8. Which regulation requires investment advisers to disclose conflicts of interest? → Investment Advisers Act of 1940
9. In portfolio optimization, what does the efficient frontier represent? → The set of portfolios offering the maximum expected return for a given level of risk
10. Which investment is generally considered the least risky? → Treasury bills
11. What does a tracking error of 4% indicate for an active equity fund manager? → The annualized standard deviation of the fund's active returns versus the benchmark is 4%
12. In the context of CFM certification, what is the most important consideration when implementing due diligence & fund selection? → Ensuring alignment with established standards, stakeholder needs, and best practices
13. In the context of CFM certification, what is the most important consideration when implementing fund administration & operations? → Ensuring alignment with established standards, stakeholder needs, and best practices
14. A fund manager calculates a Sharpe ratio of 1.5. What does this indicate? → The fund earned 1.5 units of excess return per unit of total risk
15. What does beta measure in a stock? → Volatility compared to the market
16. What does Value at Risk (VaR) at a 95% confidence level represent? → The loss not expected to be exceeded with 95% probability over a given time horizon
17. What does a Price-to-Book (P/B) ratio below 1.0 typically indicate? → The stock is trading below the net asset value recorded on the company's balance sheet
18. How is enterprise value (EV) calculated? → Market capitalization plus net debt (total debt minus cash)
19. What is a credit default swap (CDS) primarily used for? → Hedging credit risk on a reference entity
20. What is the difference between nominal yield and real yield on a bond? → Real yield adjusts the nominal yield for expected inflation
21. Which statistical measure is most useful for comparing risk-adjusted performance across funds with different absolute risk levels? → Coefficient of variation
22. What distinguishes investment-grade from high-yield (speculative-grade) bonds? → Investment-grade bonds are rated BBB-/Baa3 or higher, reflecting lower default risk
23. In the context of CFM certification, what is the most important consideration when implementing investor relations & reporting? → Ensuring alignment with established standards, stakeholder needs, and best practices
24. What does a Z-spread represent in fixed income analysis? → The constant spread added to the entire Treasury spot rate curve to equal a bond's price
25. Which asset class is typically the most volatile? → Equities (stocks)
26. Which economic indicator reflects the total value of goods and services produced? → Gross Domestic Product
27. What is the primary risk of an overly aggressive portfolio? → It faces higher volatility and risk of loss
28. What is considered a defensive stock? → A stock with stable returns during downturns
29. Why is diversification important in portfolio management? → It spreads risk across multiple investments
30. In the context of CFM certification, what is the most important consideration when implementing fund structuring & legal frameworks? → Ensuring alignment with established standards, stakeholder needs, and best practices