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Advanced Wealth Management Course (IIBF) - Paper 3
Part III: Ch 1: Investment Decision Making Process
Q1.
(I) The higher the uncertainty of future payments, the lower would be the return sought by an investor. (II) The longer the time period for which the funds are committed, the higher will be the return expectations.
Q2.
Understanding of investment decision making process requires analysis of:
Q3.
(I) In an inflation-free economy, for zero-risk investments, an investor would require the real risk free rate. (II) In an inflationary economy, an investor would require the nominal risk-free rate.
Q4.
Nominal risk-free rate of return depends on:
Q5.
Assuming the RRFR in the economy is 6% in a given year, and the inflation rate during the year was 3 per cent. What would be the NRFR in the economy?
Q6.
Assuming the nominal return on the government T-Bills was 5 per cent in a given year, and the inflation rate during the year was 3 per cent. What would be the RRFR?
Q7.
(I) In Investment, risks that are uncontrollable, external and broad in their effect are called unsystematic risk. (II) In Investment, risks that are controllable and internal sources of risk, which are peculiar to the companies and/or industries, are called systematic risk.
Q8.
The sources of systematic risk are:
Q9.
(I) Lower the risk in an investment, the higher would be the Variance for an expected rate of return. (II) Standard Deviation is the square root of Variance.
Q10.
Assume Investment A has an expected rate of return of 7% and standard deviation of 0.014. What would be the coefficient of variation?
Q11.
Risk tolerance of a person would depend on:
Q12.
(I) Capital preservation generally adopted by more aggressive risk taking investors. (II) Capital appreciation generally adopted by strongly risk-averse investors.
Q13.
Total Return generally adopted by those investors whose risk profile lies between the investors seeking capital appreciation and current income.
Q14.
(I) Coefficient of variation essentially gives the risk per unit of expected return. (II) Total Return generally adopted by investors who want to supplement their earnings with income generated by their portfolio to meet their regular living needs.
Q15.
(I) Stating investment policy is the first step in creating an investment portfolio for an investor. (II) Capital appreciation means that the investors want to minimize the risk of loss, usually in real terms.

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