Practice Test GeeksCIM - Chartered Investment Manager Practice Test
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CIM Fixed Income & Debt Securities Flashcards

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

Read the first 6 CIM Fixed Income & Debt Securities flashcards as text

  1. The term 'laddering' in fixed income portfolio management refers to:

    Answer: Constructing a portfolio with bonds maturing at regular intervals over time

    A bond ladder staggers maturities so that a portion of the portfolio matures regularly, reducing reinvestment risk and providing consistent liquidity.

  2. Which type of bond is exempt from federal income tax on interest payments in the United States?

    Answer: Municipal bonds

    Municipal bonds issued by state and local governments are generally exempt from federal income tax, making them attractive to investors in higher tax brackets.

  3. A CIM advisor compares a municipal bond yield to a taxable bond yield. The taxable-equivalent yield (TEY) formula is:

    Answer: TEY = Municipal yield ÷ (1 – tax rate)

    The taxable-equivalent yield shows what a taxable bond must yield to match a tax-exempt municipal bond's after-tax return: TEY = muni yield ÷ (1 – marginal tax rate).

  4. In a rising interest rate environment, which bond portfolio strategy would best protect against price losses?

    Answer: Shortening duration by shifting to shorter-maturity bonds

    Shorter-duration bonds experience smaller price declines when rates rise, so reducing portfolio duration is a defensive strategy in a rising rate environment.

  5. A floating-rate note (FRN) differs from a fixed-rate bond primarily because its:

    Answer: Coupon payments reset periodically based on a reference interest rate such as SOFR

    Floating-rate notes pay coupons that adjust periodically with a benchmark rate like SOFR, reducing interest rate risk compared to fixed-rate bonds.

  6. When constructing a fixed income sleeve for a client's portfolio, a CIM advisor should consider which of the following first?

    Answer: The client's income needs, time horizon, tax situation, and risk tolerance

    Portfolio construction must begin with the client's individual circumstances — income requirements, tax bracket, investment horizon, and risk tolerance — before selecting specific securities.