Free AIFA Investment Analysis & Portfolio Management Questions and Answers

Question 1

What is the goal of investment analysis?

Accepted Answer

Make informed investment decisions

Answer

To avoid financial planning.

Answer

To reduce portfolio diversification.

Answer

To delay financial growth.

Question 2

Which factor is most important in portfolio diversification?

Accepted Answer

Investing in uncorrelated assets

Answer

Concentration in one sector.

Answer

Only investing in bonds.

Answer

Avoiding international assets.

Question 3

What does risk-return tradeoff refer to?

Accepted Answer

Higher return with higher risk

Answer

More risk means lower return.

Answer

Lower risk always means higher return.

Answer

Risk and return are unrelated.

Question 4

What is the primary purpose of asset allocation?

Accepted Answer

Balance risk and reward

Answer

To concentrate assets in one investment.

Answer

Avoid risk entirely.

Answer

Maximize taxes.

Question 5

Which model is used to calculate expected return of an asset?

Accepted Answer

Capital Asset Pricing Model (CAPM)

Answer

Discounted cash flow.

Answer

Dividend payout ratio.

Answer

Gross profit margin.

Question 6

What does beta measure in portfolio management?

Accepted Answer

Volatility relative to market

Answer

Liquidity of an asset.

Answer

Cash flow consistency.

Answer

Interest coverage ratio.

Question 7

What is a mutual fund?

Accepted Answer

Pooled investment managed by professionals

Answer

A personal bank account.

Answer

A government bond.

Answer

A real estate contract.

Question 8

Why is rebalancing a portfolio important?

Accepted Answer

Maintain asset allocation and risk level

Answer

To avoid buying new assets.

Answer

Reduce returns.

Answer

Increase tax liability.

Question 9

What is Sharpe ratio used for?

Accepted Answer

Evaluate return per unit of risk

Answer

To predict market crashes.

Answer

To calculate taxes.

Answer

To measure company revenue.