Practice Test Geeks(CFM) Certified Fund Manager Practice Test
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Investment Analysis & Portfolio Management Flashcards

7 cards from real CFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Investment Analysis & Portfolio Management flashcards as text

  1. A CFM candidate analyzes a company with a P/E ratio of 25x while the industry average is 15x. What does this most likely suggest?

    Answer: The market expects higher future growth from this company

    A higher P/E than peers typically reflects market expectations of superior future earnings growth or lower perceived risk.

  2. Which of the following best describes systematic risk in portfolio management?

    Answer: Market-wide risk that affects all securities and cannot be diversified away

    Systematic risk (market risk) affects the entire market and cannot be eliminated by diversification, unlike idiosyncratic risk.

  3. An investor uses a top-down investment approach. Which sequence correctly describes this process?

    Answer: Macroeconomic analysis → Sector selection → Stock selection

    The top-down approach starts with macroeconomic analysis, then narrows to sector selection, and finally individual stock picks.

  4. What is convexity in bond analysis used to measure?

    Answer: The curvature of the price-yield relationship, improving duration estimates for large yield changes

    Convexity captures the non-linear (curved) relationship between bond prices and yields, improving price change estimates beyond the linear duration approximation.

  5. A portfolio manager employs a core-satellite strategy. What does the 'core' component typically consist of?

    Answer: Passive index funds providing broad market exposure

    In a core-satellite strategy, the core is typically a low-cost passive index fund providing stable broad market exposure.

  6. Which of the following is an example of a relative value hedge fund strategy?

    Answer: Fixed income arbitrage

    Fixed income arbitrage exploits price discrepancies between related fixed income securities, making it a relative value strategy.

  7. A fund manager evaluates investment ideas using the Information Ratio. What does a high Information Ratio indicate?

    Answer: The manager consistently generates excess returns relative to active risk taken

    A high Information Ratio indicates the manager generates consistent alpha (active return) per unit of tracking error (active risk).