CIFC Data Analysis and Interpretation 2

Question 1

A mutual fund's standard deviation is 12% and its mean return is 8%. What does this indicate about the fund's risk profile?

Accepted Answer

Returns can typically range from -4% to 20% within one standard deviation

Answer

One standard deviation means returns typically fall within one SD above or below the mean, so 8% ± 12% gives a range of -4% to 20%.

Question 2

Which measure best captures the risk-adjusted return of a portfolio compared to a benchmark index?

Accepted Answer

Alpha

Answer

Alpha measures a portfolio's excess return relative to its benchmark after adjusting for risk, indicating manager skill.

Question 3

A fund reports a trailing 3-year annualized return of 9%. An investor contributed $10,000 three years ago. Approximately what is the current value?

Accepted Answer

$12,950

Answer

Using compound growth: $10,000 × (1.09)^3 ≈ $10,000 × 1.295 ≈ $12,950.

Question 4

When analyzing a fund's performance chart, a consistently upward-sloping line with few dips most likely indicates:

Accepted Answer

Low volatility and relatively stable positive returns

Answer

A smooth upward slope with few dips indicates low volatility and consistent positive performance over the period.

Question 5

A balanced fund has 60% equities and 40% fixed income. If equities return 10% and fixed income returns 4%, what is the blended portfolio return?

Accepted Answer

7.6%

Answer

Blended return = (0.60 × 10%) + (0.40 × 4%) = 6% + 1.6% = 7.6%.

(CIFC) Canadian Investment Funds Course Practice Test