CIMA Cheat Sheet 2026

The 30 highest-yield CIMA facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. What is tax evasion? → Engaging in illegal practices to avoid taxes.
2. What is the purpose of an Investment Policy Statement (IPS) in the consulting process? → To establish investment objectives and guidelines
3. A CIMA professional is evaluating a hedge fund with a 2-and-20 fee structure. What does '2-and-20' refer to? → 2% management fee and 20% performance fee
4. Which of the following best describes a fund of funds in the context of alternative investments? → A fund that invests in a portfolio of other hedge funds or private equity funds
5. An investor implementing a 'constant proportion portfolio insurance' (CPPI) strategy will: → Increase equity exposure when markets rise and reduce it when markets fall
6. Which behavioral concept explains why investors tend to follow the investment decisions of the crowd, often contributing to market bubbles? → Herding behavior
7. What is the purpose of tax deductions? → To reduce a taxpayer's overall tax burden.
8. What is a key ethical concern when offering proprietary products? → Conflict of interest
9. Infrastructure investments are often attractive to institutional investors because they typically offer: → Long-duration, inflation-linked cash flows with low correlation to equities
10. According to behavioral finance principles, which client communication strategy is most effective for long-term client retention? → Establishing clear expectations, goals, and written plans before market volatility occurs
11. An analyst is evaluating a portfolio that lies below the Capital Market Line (CML). What does this position signify? → The portfolio is inefficient, offering a suboptimal risk-return trade-off.
12. What is the primary purpose of an Investment Policy Statement (IPS)? → To communicate portfolio objectives and constraints
13. What is the purpose of tax law? → To regulate the tax rates on individuals and corporations.
14. The framing effect in behavioral finance demonstrates that: → Investors make different decisions based on how the same information is presented
15. Which of the following is an example of systematic risk? → Interest rate hike
16. When constructing an Investment Policy Statement (IPS), which of the following should be established FIRST before determining asset allocation? → Identifying the investor's objectives and constraints
17. What does the time value of money principle imply? → A dollar today has more value than a dollar tomorrow
18. What does beta measure in finance? → Systematic risk relative to the market
19. Core-satellite portfolio construction combines which two elements? → A passively managed core with actively managed satellite positions
20. What is the J-curve effect commonly observed in private equity fund performance? → Early negative returns followed by positive returns as investments mature
21. Which metric evaluates a portfolio’s return per unit of total risk? → Sharpe Ratio
22. Which of the following represents the real interest rate? → Nominal rate - inflation
23. When rebalancing a portfolio, a 'corridor' or 'threshold' rebalancing strategy triggers a rebalance when: → An asset class weight drifts outside a predefined band around its target
24. Which hedge fund strategy attempts to profit from pricing discrepancies between convertible bonds and the underlying equity? → Convertible arbitrage
25. What is the main difference between federal and state tax law? → Federal tax law applies nationwide, while state tax law is specific to each state.
26. What is the significance of the IRS in tax law? → To regulate and enforce tax laws.
27. A major limitation of mean-variance optimization is that it: → Is highly sensitive to small changes in input estimates
28. An investor in a private equity fund is said to be in the 'blind pool' stage when: → Capital is committed before specific investments are identified
29. Which concept refers to the empirical finding that asset allocation decisions account for the majority of portfolio return variability over time? → Policy portfolio dominance
30. In private real estate investing, the term 'cap rate' refers to: → Net operating income divided by property value