CIC CIC - Certified Investment Counselor Risk Management and Analysis Questions and Answers 2

Question 1

Duration measures a bond's sensitivity to changes in:

Accepted Answer

Interest rates

Answer

Duration quantifies how much a bond's price will change for a given change in interest rates, expressed in years.

Question 2

Which risk management technique involves purchasing a put option on a portfolio to limit downside losses?

Accepted Answer

Portfolio insurance

Answer

Portfolio insurance uses put options or dynamic hedging strategies to cap the maximum downside loss of a portfolio.

Question 3

A client's portfolio has a Treynor Ratio of 0.12. This means the portfolio earned $0.12 of excess return for every:

Accepted Answer

Unit of systematic risk (beta)

Answer

The Treynor Ratio measures excess return per unit of systematic (beta) risk, making it suitable for comparing portfolios in a diversified context.

Question 4

Reinvestment risk is MOST relevant for which type of fixed-income security?

Accepted Answer

Callable bonds paying high coupons

Answer

Callable bonds with high coupon payments expose investors to reinvestment risk because they are often called when rates fall, forcing reinvestment at lower yields.

Question 5

Which of the following BEST describes liquidity risk in a client's investment portfolio?

Accepted Answer

The risk that a position cannot be sold quickly at a fair price

Answer

Liquidity risk is the danger that an investor cannot convert a position to cash promptly without accepting a significant price concession.

(CIC) Certified Investment Counselor Practice Test

(CIC) Certified Investment Counselor Practice Test

CIC CIC - Certified Investment Counselor Risk Management and Analysis Questions and Answers 2