CIM Investment Policy & Planning 2

Question 1

Which IPS element defines the yardstick used to evaluate the manager's investment results?

Accepted Answer

The benchmark

Answer

The benchmark specified in the IPS is the standard against which portfolio performance is measured.

Question 2

A client's willingness to take risk is high, but their ability to take risk is low. How should the adviser usually set the overall risk tolerance in the IPS?

Accepted Answer

Use the lower ability-based assessment

Answer

When ability and willingness conflict, the more conservative assessment usually prevails, and ability constrains willingness.

Question 3

A retiree needs $80,000 a year from a $2,000,000 portfolio and expects 3% inflation. Using the multiplicative method, what is the required nominal return?

Accepted Answer

7.12%

Answer

(1.04 × 1.03) − 1 = 7.12%, where 4% is the real spending rate.

Question 4

Which item belongs in the 'unique circumstances' section of an IPS?

Accepted Answer

A restriction against selling inherited shares of a family company

Answer

Unique circumstances cover client-specific restrictions, such as legacy holdings or ethical screens, that the other constraint categories don't address.

Question 5

A 45-year-old plans to retire at 65 and expects to live to about 90. How is this time horizon best described?

Accepted Answer

Long-term, multistage

Answer

A change in circumstances such as retirement creates separate stages within a long overall horizon.

CIM - Chartered Investment Manager Practice Test

CIM - Chartered Investment Manager Practice Test

CIM Investment Policy & Planning 2