CIC CIC - Certified Investment Counselor Risk Management and Analysis Questions and Answers

Question 1

Which measure expresses the risk-adjusted return of a portfolio relative to the total risk taken?

Accepted Answer

Sharpe Ratio

Answer

Treynor Ratio

Answer

Jensen's Alpha

Answer

Information Ratio

Question 2

A portfolio's beta of 1.4 indicates that for every 1% move in the market, the portfolio is expected to move:

Accepted Answer

1.4%

Answer

0.7%

Answer

1.0%

Answer

2.0%

Question 3

Value at Risk (VaR) at the 95% confidence level over one day means that losses will exceed the VaR estimate on approximately:

Accepted Answer

1 out of 20 days

Answer

1 out of 5 days

Answer

1 out of 100 days

Answer

5 out of 100 days

Question 4

Which type of risk CANNOT be eliminated through diversification?

Accepted Answer

Systematic risk

Answer

Unsystematic risk

Answer

Idiosyncratic risk

Answer

Company-specific risk

Question 5

The standard deviation of a portfolio that holds two perfectly positively correlated assets compared to holding each asset alone is:

Accepted Answer

Equal to the weighted average of the individual standard deviations

Answer

Lower than either asset alone

Answer

Zero

Answer

Higher than either asset alone

Question 6

An investment counselor uses a Monte Carlo simulation primarily to:

Accepted Answer

Model a range of possible outcomes by running thousands of random scenarios

Answer

Calculate the exact future value of a portfolio

Answer

Determine the current market beta of a security

Answer

Compute the Sharpe Ratio of a benchmark