Practice Test GeeksCIM - Chartered Investment Manager Practice Test
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Financial Planning Flashcards

7 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 7 Financial Planning flashcards as text

  1. A client needs $50,000 in 8 years and expects a 6% annual return. Approximately how much must be invested today?

    Answer: $31,371

    PV = 50,000 / (1.06)^8 = 50,000 / 1.5938 ≈ $31,371.

  2. Which ratio best measures a household's ability to cover essential expenses during a sudden income loss?

    Answer: Emergency fund (liquidity) ratio

    The liquidity ratio compares liquid assets to monthly non-discretionary expenses, showing how many months the client can survive.

  3. Under the traditional 28/36 guideline used by mortgage lenders, total monthly debt payments should not exceed what share of gross monthly income?

    Answer: 36%

    The 36% figure caps total debt service, while 28% caps housing costs alone.

  4. A 35-year-old client with stable income and a long horizon asks about time diversification. Which statement is most accurate?

    Answer: Annualized return volatility tends to fall over longer horizons, though the dispersion of terminal wealth can rise

    Annualized return dispersion narrows with time, but the range of ending wealth outcomes widens, so risk is not eliminated.

  5. In the financial planning process, what step comes immediately after gathering client data and understanding goals?

    Answer: Analyzing and evaluating the client's current financial situation

    Planners analyze the current situation before developing and presenting recommendations.

  6. Which type of life insurance offers flexible premiums and an adjustable death benefit with a cash value credited at a declared interest rate?

    Answer: Universal life

    Universal life features flexible premiums and death benefits with cash value credited at a declared or index-linked rate.

  7. A client's human capital is highly correlated with the equity market because they work in the financial sector. What is the most appropriate implication for their financial capital allocation?

    Answer: Reduce equity exposure, especially to financial stocks, to diversify total wealth

    Equity-like human capital argues for less equity and less sector-specific exposure in the financial portfolio.