IMC Cheat Sheet 2026

The 30 highest-yield IMC facts, distilled from real exam questions. Print it, save it as a PDF, or study it here — free, no sign-up.

1. If two assets have a correlation coefficient of -0.8, what does this indicate? → They tend to move in opposite directions with high consistency
2. A portfolio manager achieves a Sharpe ratio of 0.85 compared to the market's Sharpe ratio of 0.60. What does this indicate? → The portfolio has earned more excess return per unit of total risk than the market
3. The information ratio is calculated as: → Active return / Tracking error
4. In UK market structure, what is 'T+2' settlement? → Settlement of a trade two business days after the trade date
5. What is a 'coupon' on a bond? → The regular interest payment made to the bondholder
6. An investment of £10,000 earns a compound annual return of 6% over 3 years. What is its approximate value at the end of the period? → £11,910
7. What does 'market capitalisation' mean for a listed company? → The total market value of a company's outstanding shares
8. A put option gives the holder the right to: → Sell the underlying asset at the strike price
9. Which valuation model estimates the value of a share by discounting expected future dividends? → The Dividend Discount Model (DDM)
10. What is the primary function of a custodian in investment management? → To safekeep and administer client assets, including settlement and corporate actions
11. What is the key characteristic of the Alternative Investment Market (AIM)? → It is a lightly regulated growth market for smaller companies
12. What is the primary goal of 'liability-driven investing' (LDI)? → To manage assets specifically to meet future liabilities, such as pension obligations
13. An investor with a 'balanced' risk profile would most likely hold which of the following asset allocations? → A mix of equities, bonds, property and some cash
14. What is the 'information ratio' in active fund management? → A measure of active return (alpha) per unit of active risk (tracking error)
15. What is 'tracking error' in the context of fund management? → The standard deviation of the difference between a fund's return and its benchmark return
16. A futures contract differs from a forward contract primarily because: → Futures are standardised and traded on an exchange with daily margin settlement
17. A firm claiming GIPS compliance must present a minimum of how many years of compliant performance history (or since inception if the firm is younger)? → 5 years
18. A portfolio achieves a return of 12% while its benchmark returns 9%. What is the active return? → 3%
19. A portfolio returns 15%, the risk-free rate is 4%, and the portfolio's beta is 1.1. What is the Treynor ratio? → 10.0
20. In the UK economy, what does Gross Domestic Product (GDP) measure? → The total value of all goods and services produced within the UK over a specific period
21. What is 'currency risk' in international investing? → The risk that exchange rate movements will reduce returns when investing in foreign assets
22. What is 'duration' in fixed income investing? → A measure of a bond's price sensitivity to interest rate changes, expressed in years
23. Which of the following is an example of a 'systematic risk' factor? → A rise in UK interest rates affecting all bond prices
24. What is the Sharpe ratio of a portfolio with a return of 12%, a risk-free rate of 3%, and a standard deviation of 15%? → 0.60
25. What is a 'fund of funds'? → A fund that invests in a portfolio of other funds rather than directly in securities
26. What is the primary purpose of a Central Counterparty (CCP) in financial markets? → To interpose itself between buyer and seller, guaranteeing trade settlement
27. Which of the following is a key characteristic of preference shares? → They receive dividends before ordinary shareholders and have priority in liquidation
28. What is the significance of the 'free float' for a listed company? → The proportion of shares available for public trading
29. What is the key advantage of a passive (index-tracking) investment strategy compared to active management? → It typically has lower management fees and transaction costs
30. Which of the following best describes an 'open-ended' investment fund? → A fund that can issue and redeem units based on investor demand