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

Credit spreads only

Answer

Equity market volatility

Answer

Currency exchange rates

Question 2

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

Accepted Answer

Portfolio insurance

Answer

Immunization

Answer

Asset-liability matching

Answer

Dollar-cost averaging

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

Dollar invested

Answer

Unit of total risk (standard deviation)

Answer

Percentage point of inflation

Question 4

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

Accepted Answer

Callable bonds paying high coupons

Answer

Zero-coupon bonds

Answer

Treasury STRIPS

Answer

Inflation-linked bonds

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

The risk that interest rates will rise

Answer

The risk of default by the bond issuer

Answer

The risk that inflation will erode purchasing power

Question 6

In the context of the CIC exam, 'tracking error' refers to:

Accepted Answer

The standard deviation of the difference between portfolio returns and benchmark returns

Answer

Errors made in recording client trades

Answer

The difference between stated and actual management fees

Answer

A compliance violation in client reporting