CIC Client Portfolio Management 4

Question 1

A client's portfolio has a beta of 1.4. How would this portfolio be expected to perform if the market rises 10%?

Accepted Answer

Rise approximately 14%

Answer

A beta of 1.4 means the portfolio is expected to move 1.4 times the market, so a 10% market gain implies approximately a 14% portfolio gain.

Question 2

Which asset class has historically provided the best long-term hedge against inflation?

Accepted Answer

Equities and real assets

Answer

Equities and real assets (such as real estate and commodities) have historically outpaced inflation over long periods.

Question 3

A new client has conflicting financial goals: maximizing growth and avoiding any portfolio losses. How should a counselor address this?

Accepted Answer

Explain that these goals are incompatible and help the client prioritize

Answer

Higher growth potential requires accepting greater volatility and risk of loss; the counselor must help the client reconcile conflicting objectives.

Question 4

What is the main advantage of using a core-satellite portfolio construction approach?

Accepted Answer

Combines low-cost passive exposure with targeted active strategies

Answer

The core-satellite approach uses a passive index core for broad market exposure while allocating a smaller satellite portion to active or alternative strategies.

Question 5

Which metric measures the percentage of a portfolio's return explained by movements in the benchmark index?

Accepted Answer

R-squared

Answer

R-squared indicates what percentage of a portfolio's performance variance is explained by the benchmark, ranging from 0 to 100.

(CIC) Certified Investment Counselor Practice Test

(CIC) Certified Investment Counselor Practice Test

CIC Client Portfolio Management 4