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2025 Dumps ICWIM PDF: International Certificate in Wealth & Investment Management - Trustable CISI ICWIM Top Exam Dumps

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CISI International Certificate in Wealth & Investment Management Sample Questions (Q36-Q41):

NEW QUESTION # 36
A fund manager would be keen to improve the alpha of a fund because:

A. As alpha improves, so does beta
B. It will become more attractive to risk-averse clients
C. It has not outperformed the benchmark
D. The fund will be easier to manage

Answer: C

Explanation:
Alpha (#) measures a fund's excess return relative to its benchmark. A positive alpha indicates outperformance, while a negative alpha means underperformance.
* Why is Option A Correct?
* A fund manager aims to improve alpha to outperform the benchmark (e.g., S&P 500, FTSE
100).
* If a fund's alpha is negative, it has not beaten the benchmark, indicating poor active management.
* Why Not Other Options?
* B (Easier to manage) # A high-alpha strategy often requires active management, which can be complex.
* C (Improves beta) # Alpha is independent of beta (systematic risk).
* D (Attractive to risk-averse clients) # High alpha does not necessarily mean low risk.
# Reference: CFA Institute (Alpha & Beta), CISI Wealth & Investment Management.

NEW QUESTION # 37
Which of the following is used to establish an investor's total return from a bond?

A. Annual coupon
B. Running yield
C. Price-to-book ratio
D. Yield to maturity

Answer: D

Explanation:
* Yield to Maturity (YTM)
* YTM is the total return an investor can expect from a bond if held to maturity, consideringannual coupon paymentsand any difference between the purchase price and the bond's face value.
* Why the Answer is D
* YTM incorporates all cash flows, providing a comprehensive measure of total return.
* Why Other Options are Incorrect
* A. Running Yield: Considers only current income relative to price, not total return.
* B. Annual Coupon: Ignores price changes and reinvestment potential.
* C. Price-to-Book Ratio: Unrelated to bonds, applies to equities.
* ICWIM Study Guide, Chapter on Fixed Income: Details YTM and its role in total return calculations.
* Bond Investment Literature: Highlights the comprehensive nature of YTM.
References

NEW QUESTION # 38
If a hedge fund is engaging in equity arbitrage, it is likely that they are pursuing:

A. A market-neutral strategy
B. An absolute return strategy
C. An event-driven strategy
D. A non-directional strategy

Answer: A

Explanation:
* Equity Arbitrage and Hedge Funds:
* Equity arbitrage involves taking offsetting positions in related equity securities to profit from price differentials.
* A market-neutral strategy eliminates overall market risk by balancing long and short positions, focusing on relative price movements rather than market direction.
* Elimination of Other Options:
* A: Absolute return aims for consistent returns regardless of market conditions but is not specific to equity arbitrage.
* C: Event-driven strategies target corporate events (e.g., mergers), not arbitrage.
* D: Non-directional is a general description but lacks specificity compared to market-neutral.
References:
* ICWIM Module 3: Coverage of hedge fund strategies and market neutrality.

NEW QUESTION # 39
Which of the following investments is most suitable for a customer who desires income rather than capital gain and who is risk-averse?

A. Convertible preference shares
B. Deferred shares
C. High coupon short-dated gilts
D. Low coupon long-dated gilts

Answer: C

Explanation:
A risk-averse income-seeking investor needs stable, predictable returns with low volatility.
* Why is Option B Correct?
* Short-dated gilts (government bonds) have lower interest rate risk.
* High coupon bonds provide regular income payments.
* Why Not Other Options?
* A (Low coupon long-dated gilts) # Long-dated gilts are highly sensitive to interest rate changes, making them riskier.
* C (Deferred shares) # Offer no immediate income, only potential future returns.
* D (Convertible preference shares) # Convertibles have market risk and may offer lower yields.
# Reference: UK Debt Management Office (Gilts Market), CISI Wealth & Investment Management.

NEW QUESTION # 40
When analysing rates of return, why is a short-dated government bond considered to be the risk-free rate?

A. Investors can buy short-dated government bonds without risk
B. There is no tracking error when measuring the performance of government bonds
C. Government bonds are free from all types of risk
D. Governments are considered unlikely to default

Answer: D

Explanation:
* Risk-Free Rate
* The rate of return on an investment with virtually no risk of financial loss.
* Short-dated government bonds are considered risk-free because governments, especially in developed economies, are deemed highly unlikely to default.
* Why the Answer is A
* Short-dated bonds minimize risks associated with duration (interest rate risk).
* Governments can typically print money or increase taxes to meet debt obligations, reducing default risk.
* Why Other Options are Incorrect
* B. Without risk: Investors still face inflation risk and currency risk.
* C. Free from all risks: No investment is completely risk-free; risk is minimized, not eliminated.
* D. No tracking error: Irrelevant to the definition of a risk-free rate.
* ICWIM Study Guide, Chapter on Risk Management: Defines the risk-free rate and its attributes.
* Economic Theory: Short-dated government bonds as benchmarks for risk-free rates.
ReferencesThus, the correct answer isA. Governments are considered unlikely to default.

NEW QUESTION # 41
......

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