FREE CIM Portfolio Management Techniques Questions and Answers

Question 1

What is the primary goal of portfolio diversification?

Accepted Answer

Reduce unsystematic risk

Answer

Increase tax liabilities

Answer

Eliminate all investment risk

Answer

Maximize short-term gains

Question 2

Which measure evaluates a portfolio’s risk-adjusted return?

Accepted Answer

Sharpe Ratio

Answer

Alpha

Answer

Beta

Answer

Standard Deviation

Question 3

What does a negative alpha indicate in a portfolio?

Accepted Answer

Underperformance after risk adjustment

Answer

Superior performance

Answer

Benchmark match

Answer

Increased liquidity

Question 4

Which asset class is typically considered the most volatile?

Accepted Answer

Equities

Answer

Bonds

Answer

Cash equivalents

Answer

Real estate

Question 5

What is rebalancing in portfolio management?

Accepted Answer

Adjusting allocations back to target levels

Answer

Avoiding market corrections

Answer

Buying only high-performing assets

Answer

Holding all investments indefinitely

Question 6

Which strategy focuses on minimizing downside risk?

Accepted Answer

Capital preservation

Answer

Growth investing

Answer

Momentum trading

Answer

Speculative investing