Practice Test GeeksCIM - Chartered Investment Manager Practice Test
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Investment Analysis 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 Investment Analysis flashcards as text

  1. The risk-free rate is 3%, a stock's beta is 1.2, and the market risk premium is 6%. What is the stock's required return under CAPM?

    Answer: 10.2%

    Required return = 3% + 1.2 × 6% = 10.2%.

  2. A portfolio returned 11% with a standard deviation of 16% while the risk-free rate was 3%. What is its Sharpe ratio?

    Answer: 0.50

    Sharpe = (11% − 3%) / 16% = 0.50.

  3. Which performance measure divides excess portfolio return by beta?

    Answer: Treynor ratio

    The Treynor ratio measures excess return per unit of systematic risk (beta).

  4. A fund earned 14% with a beta of 1.1. The risk-free rate was 4% and the market returned 12%. What is the fund's Jensen's alpha?

    Answer: 1.2%

    Expected = 4% + 1.1 × (12% − 4%) = 12.8%, so alpha = 14% − 12.8% = 1.2%.

  5. For a two-asset portfolio, at what correlation coefficient is it theoretically possible to build a zero-risk portfolio?

    Answer: −1.0

    With perfect negative correlation, weights can be chosen so the assets' risks fully offset.

  6. Which type of risk cannot be eliminated through diversification?

    Answer: Systematic risk

    Systematic (market) risk affects all securities and remains after diversification.

  7. A manager generates 2% active return relative to the benchmark with a tracking error of 4%. What is the information ratio?

    Answer: 0.5

    Information ratio = active return / tracking error = 2% / 4% = 0.5.