Practice Test GeeksCIM - Chartered Investment Manager Practice Test
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Risk Assessment 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 Risk Assessment flashcards as text

  1. A portfolio has a 1-day 95% VaR of $2 million. Assuming i.i.d. normal returns, what is the approximate 10-day 95% VaR?

    Answer: $6.32 million

    VaR scales with the square root of time, so $2M × √10 ≈ $6.32M.

  2. Which risk measure is coherent because it satisfies subadditivity, unlike VaR?

    Answer: Expected shortfall (CVaR)

    Expected shortfall satisfies all four coherence axioms, including subadditivity, which VaR can violate.

  3. A fund manager earns 12% with a standard deviation of 18% while the risk-free rate is 3%. What is the Sharpe ratio?

    Answer: 0.50

    Sharpe = (12% − 3%) / 18% = 0.50.

  4. Which ratio uses only downside deviation below a minimum acceptable return in its denominator?

    Answer: Sortino ratio

    The Sortino ratio penalizes only harmful volatility below the target return.

  5. Historical simulation VaR differs from parametric VaR mainly because it:

    Answer: Makes no assumption about the shape of the return distribution

    Historical simulation reprices the portfolio using actual past returns, so no distribution is assumed.

  6. A stock has a beta of 1.4, the risk-free rate is 4%, and the expected market return is 9%. What is its CAPM required return?

    Answer: 11.0%

    Required return = 4% + 1.4 × (9% − 4%) = 11.0%.

  7. Which type of risk can NOT be reduced by adding more securities to a well-diversified portfolio?

    Answer: Systematic risk

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