Adaptive test 1

Question 1

CPPI eliminates what

Answer 1

exposure to risk assets, but this is not a hard floor

Question 2

Risk strategy that sets a hard sllor for downside protection

Answer 2

Buying Puts

Question 3

How do you find approx. value of a property using the income approach

Answer 3

take net operating income / by cap rate

Question 4

Cost of illiquid alternative investments versus liquid alts usually is what

Answer 4

higher

Question 5

Capitalization descriptors help investors understand what of an investment

Answer 5

Market value

Question 6

Investor is reviewing free cash flow from equity models seeks dividends. Notices that a company pays dividends without free cash flow, it is likely coming from what

Answer 6

different source than net income or new debt

Question 7

If the arithmetic mean and the median of data set are extremely far apart, an advisor can assume that the data are

Answer 7

skew toward the mean

Question 8

A useful tool to review the movement of one variable to the movement of another variable in a data set is a

Answer 8

scatterplot

Question 9

The core goal of attribution analysis is to determine the effectiveness and ability of

Answer 9

Fund managers and portfolios

Question 10

A limitation of the Treynor ratio is that the ratio

Answer 10

ranks funds with similar risk the same

Question 11

Omegan Ratio defined

Answer 11

the probability-weighted ratio of gains versus losses for some threshold return target

Question 12

can change the Omega ratio

Answer 12

investors risk tolerance

Question 13

Sharpe ratio

Answer 13

The average return above the risk-free rate per unit of total risk

Question 14

Reward to variability

Answer 14

sharpe ratio

Question 15

A limitation to Jensen’s alpha is that it is predicated on

Answer 15

one factor model

Question 16

If a consultant adds enough securities to a portfolio, the consultant eventually will be left with exposure to which risk

Answer 16

interest rate risk

Question 17

A consultant’s vendor firm rewards the consultant for business that has been directed their way with a family trip to Costa Rica

Answer 17

has the responsibility to disclose the trip to his clients

Question 18

A consultant does not control policies of the firm. With regard to IWI’s Performance Reporting Standards, the consultant

Answer 18

must use best efforts and submit a written request for the firm to comply

Question 19

When making comments to the media and general public, a consultant holding themself out with any IWI certification must

Answer 19

disclose beneficial compensation if relevant

Question 20

If a consultant believes a situation could lead to a conflict of interest, the consultant should

Answer 20

notify firm in writing

Question 21

An ex-client of a consultant asks for assistance on a tax basis question that came up while a client of the consultant. The consultant should

Answer 21

Maintain professionalism and offer information that is allowable by the consultant’s firm.

Question 22

Consultants must disclose fully to clients

Answer 22

services provided and compensation received

Question 23

Additional compensation and benefits from third parties must be disclosed to

Answer 23

employers in advance

Question 24

Returns reported by IWI members should be computed and communicated in compliance with

Answer 24

The IWI Performance Reporting Guidelines

Question 25

According to margin lending guidelines, when the value of an equity falls below the maintenance margin, an investor may be required to

Answer 25

deposit funds into the portfolio

Question 26

Investors who need to fund a series of future expenses should engage in

Answer 26

cash flow matching

Question 27

A client's current financial position can be used to analyze

Answer 27

potential estate issues

Question 28

Foundations usually are bound by the dual mandate of

Answer 28

Spending and growth

Question 29

In the allocation of assets, after making capital market assumptions, a manager should

Answer 29

identify candidate portfolios

Question 30

Risk tolerance is an investors

Answer 30

willingness and ability to take risk

Question 31

The tenet of buying low and selling high is reflected in the asset allocation strategy of

Answer 31

constant mix

Question 32

The IPS monitoring goals of the client in the IPS are usually

Answer 32

clearly outlined and at regular intervals

Question 33

UPAIA helps trustees balance the need for

Answer 33

Creating income and preserving principal

Question 34

The UPMIFA covers

Answer 34

spending when endowments are considered underwater

Question 35

IPS reviews should be reviewed

Answer 35

annually and when directed by clients.

Question 36

What should not be included in IPS

Answer 36

Specific investments

Question 37

All investors should be profiled

Answer 37

individually

Question 38

UPIA introducted what

Answer 38

Delegation of management strategies.

Question 39

With institutional clients, a unique element to the IPS is that the benchmark may be:

Answer 39

linked to a liability

Question 40

UPAIA was designed to carry out the wishes of the

Answer 40

Trust creator

Question 41

UPMIFA addresses the need to what

Answer 41

preserve purchasing power of the principal

Question 42

Liability policies inside of the IPS frequently address the constraint of

Answer 42

liquidity

Question 43

For endowments that have spending policies, the spending policy should be thought of as

Answer 43

a rule to follow in the IPS

Question 44

A trustee’s ability to add derivatives as a portfolio option in an IPS is due to

Answer 44

UPIA

Question 45

A consultant believes greenhouse emissions will lead to imminent changes in a foreign government that can have far-reaching consequences. This risk is best categorized as a

Answer 45

Macro risk

Question 46

Example of Maco risk

Answer 46

Governmental

Question 47

Absolute strategies diversify out what

Answer 47

beta and allow investors to focus on manager alpha

Question 48

A consultant using volatility as a primary basis for allocation decisions is utilizing

Answer 48

Risk parity strategies

Question 49

An investor believes Treynor ratios should be the basis of asset allocation decisions. The strategy can be best described as

Answer 49

Risk based

Question 50

A consultant is determining the effect of adding a specific asset to a portfolio. The consultant concludes that adding this asset would not be prudent for a specific client. The consultant's process is most likely

Answer 50

risk based

Question 51

An investor believes that passive strategies are best suited for a portfolio. When it comes to asset allocation, this investor should use

Answer 51

strategic asset allocation or buy and hold

Question 52

Investors may use collars when they believe

Answer 52

The downside risk is great and they are willing to give up upside gain

Question 53

A consultant advises clients to adjust portfolio targets for short periods to capitalize on recently presented economic data. The strategy intends to revert to original allocations once the opportunity disappears. This asset allocation strategy is:

Answer 53

tactical

Question 54

A collar strategy can be effective for investor who want to what

Answer 54

reduce the cost of their downside protection

Question 55

A decrease in ratings can lead to

Answer 55

higher borrowing costs

Question 56

Commodity hedges can address

Answer 56

political and regulatory changes, seasonal variations, weather, technology, and market conditions

Question 57

An investor buys a protective put and simultaneously the stock the investor owns drops. When selling the put, this investor is

Answer 57

Subject to capital gains.

Question 58

Merger arbitrage strategies are considered to be

Answer 58

risk based

Question 59

commodity risk is the only relevant risk when

Answer 59

during production

Question 60

Traditional asset allocation strategies are based primarily on the tenets of

Answer 60

MPT

Question 61

Treasury STRIPS would not avoid

Answer 61

interest rate risk

Question 62

An investor speculating on the direction of interest rates may want to hedge a portfolio using

Answer 62

swaps

Question 63

Risk budgeting usually is accomplished using

Answer 63

passive investments

Question 64

Rising domestic currencies require a

Answer 64

hedge for international holdings

Question 65

Example of non diversifiable risk

Answer 65

interest rate risk

Question 66

Regression based analysis for performance evaluation involves attribution based on

Answer 66

CAPM

Question 67

An investor reviewing a sample population data set would want to observe

Answer 67

small standard errors

Question 68

Economists studying forces that drive price levels within segments of the economy study all of the following, except:

Answer 68

Net exports

Question 69

investments are appropriate for early cycle investing

Answer 69

consumer discretionary

Question 70

Home country bias can lead investors to

Answer 70

Miscalulate risk and return in the capital markets

Question 71

A consultant using volatility as a primary basis for allocation decisions is utilizing:

Answer 71

risk parity strategies

Question 72

Duration has an indirect relationship with

Answer 72

interest rates

Question 73

The smaller the standard error

Answer 73

the more favorable that the sample represents the population

Question 74

Shareholder equity can be found on a

Answer 74

balance sheet