Free CIM Asset Allocation & Risk Management Questions and Answers

Question 1

What is the main objective of asset allocation?

Accepted Answer

Balance risk and return

Answer

Avoid all market losses

Answer

Maximize short-term profits

Answer

Minimize taxes only

Question 2

Which factor is most critical in determining an investor’s asset allocation?

Accepted Answer

Risk tolerance

Answer

Client's age

Answer

Recent market trends

Answer

Number of accounts held

Question 3

What is systematic risk?

Accepted Answer

Risk affecting the whole market

Answer

Risk unique to a single asset

Answer

Unforeseen natural disasters

Answer

Managerial incompetence

Question 4

Which of the following is a passive asset allocation strategy?

Accepted Answer

Strategic asset allocation

Answer

Tactical asset allocation

Answer

Dynamic rebalancing

Answer

Market timing

Question 5

Which investment approach focuses on adjusting the portfolio based on short-term market predictions?

Accepted Answer

Tactical asset allocation

Answer

Strategic allocation

Answer

Core-satellite strategy

Answer

Buy and hold strategy

Question 6

What role does diversification play in risk management?

Accepted Answer

Reduces asset-specific risk

Answer

Eliminates all risk

Answer

Increases investment volatility

Answer

Concentrates exposure in one asset