Practice Test Geeks(CIMA) Certified Investment Management Analyst Practice Test
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Investment Vehicles and Strategies Flashcards

7 cards from real CIMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. A swap overlay is used to convert a fixed-rate bond portfolio to floating-rate exposure. The portfolio manager enters into a swap where they:

    Answer: Pay fixed and receive floating, offsetting the fixed coupons from the bond portfolio

    To convert fixed exposure to floating, the manager pays fixed (matching the bonds' coupon income) and receives floating, netting to floating-rate exposure.

  2. A separately managed account (SMA) differs from a mutual fund primarily in that an SMA:

    Answer: Gives the investor direct ownership of the underlying securities with customization ability

    In an SMA, the investor directly owns individual securities and can customize the portfolio for tax management or restrictions, unlike pooled mutual fund investors.

  3. Which type of real assets investment is most appropriate for an investor seeking direct exposure to commodity price movements without commodity storage costs?

    Answer: Commodity futures contracts or commodity index funds

    Commodity futures and futures-based index funds provide direct price exposure without requiring physical storage or handling of commodities.

  4. In a defined benefit pension plan's liability-driven investing (LDI) framework, the primary goal is to:

    Answer: Match the duration and cash flows of plan assets to pension liabilities to reduce funding ratio volatility

    LDI focuses on aligning asset duration and cash flows with liability characteristics, reducing the plan's sensitivity to interest rate changes.

  5. A risk parity portfolio allocates capital such that:

    Answer: Each asset class contributes equally to overall portfolio risk rather than capital

    Risk parity equalizes the risk contribution (typically measured as volatility) from each asset class, often resulting in larger allocations to lower-volatility assets like bonds.

  6. A convertible bond with a conversion premium of 25% means:

    Answer: The convertible bond's price is 25% above the value of the shares it converts into

    Conversion premium is the percentage by which the convertible bond's market price exceeds the current equity value (parity value) of the conversion option.

  7. A credit default swap (CDS) buyer is most analogous to someone who:

    Answer: Purchases insurance protection against a reference entity defaulting on its debt

    The CDS protection buyer pays periodic premiums and receives a payout if the reference entity defaults, functioning like an insurance buyer.