CME-1 Investment Analysis & Portfolio Management

Question 1

What does 'systematic risk' (market risk) mean in investment analysis?

Accepted Answer

Risk inherent to the entire market that cannot be diversified away

Answer

Risk specific to one company

Answer

Risk of currency fluctuation only

Answer

Credit risk of a single issuer

Question 2

What is the Capital Asset Pricing Model (CAPM) used for?

Accepted Answer

Estimating the expected return of an asset based on its beta and market risk premium

Answer

Calculating book value of assets

Answer

Valuing bonds

Answer

Assessing liquidity risk

Question 3

What does a beta of 1.5 indicate about a stock?

Accepted Answer

The stock is expected to move 1.5 times the market's percentage change in the same direction

Answer

The stock moves opposite to the market

Answer

The stock has no systematic risk

Answer

The stock underperforms the market always

Question 4

What is the Price-to-Earnings (P/E) ratio used for in equity analysis?

Accepted Answer

Comparing market price to earnings per share to assess relative valuation

Answer

Measuring dividend yield

Answer

Assessing debt levels

Answer

Calculating return on equity

Question 5

What is 'duration' in fixed income analysis?

Accepted Answer

A measure of a bond's price sensitivity to changes in interest rates

Answer

The maturity date of a bond

Answer

The coupon payment frequency

Answer

The credit rating of the bond

Question 6

What is the efficient frontier in portfolio theory?

Accepted Answer

The set of optimal portfolios offering the highest expected return for a given level of risk

Answer

The maximum possible return regardless of risk

Answer

The risk-free rate boundary

Answer

The minimum risk portfolio only