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CISI ICWIM Exam
International Certificate in Wealth and Investment Management (Page 2 )

Updated On: 7-Feb-2026
Page 2 of 21
PDF with 100 Questions

The Arbitrage Pricing Theory (APT) assumes investors can sell short. This involves:

  1. not selling the whole of your shareholding in one trade
  2. selling something you do not own, intending to buy it back at a lower price later
  3. selling your shares and buying them back a short time later
  4. selling lots of securities over a short time frame

Answer(s): B

Explanation:

Short selling refers to selling a security that the investor does not currently own, with the intention of buying it back later at a lower price to profit from the decline in value. The Arbitrage Pricing Theory (APT) assumes that investors can take both long and short positions to exploit pricing inefficiencies. This is fundamental for arbitrage opportunities under APT.



If a company's Economic Value Added is negative, this means that:

  1. the rate of growth in the company's value is slowing down
  2. the company's value is being destroyed
  3. the rate of growth in the company's value is below that of the sector average
  4. the company's value is nil

Answer(s): B

Explanation:

Economic Value Added (EVA) is a measure of a company's financial performance based on residual wealth, calculated by deducting the cost of capital from its net operating profit after taxes (NOPAT). A negative EVA indicates that the company is not generating returns above its cost of capital, meaning it is destroying shareholder value rather than creating it.



Which of the following would cause a coffee producer's supply curve to shift to the right?

  1. Improved harvesting methods
  2. Reduced crop yield
  3. Consumers switching to other drinks
  4. Reduction in competition

Answer(s): A

Explanation:

Improved harvesting methods increase production efficiency and reduce costs, enabling the coffee producer to supply more at each price level. This causes the supply curve to shift to the right, reflecting an increase in supply.



Which term is used to describe a dividend payment made by a company with insufficient earnings to do so?

  1. An ex-dividend payment
  2. A proxy dividend payment
  3. A scrip dividend payment
  4. An uncovered dividend payment

Answer(s): D

Explanation:

An uncovered dividend payment occurs when a company pays dividends despite having insufficient earnings to cover the payment. This typically indicates that the dividend is being paid from reserves or through borrowing, which may raise concerns about the company's financial sustainability.



The return on a whole-of-life unit-linked policy is:

  1. directly related to the performance of the insurance company's fund
  2. related to the consumer price index (CPI)
  3. linked to the rate of inflation
  4. dependent on prevailing interest rates

Answer(s): A

Explanation:

A whole-of-life unit-linked policy is an insurance product where the value of the policy is directly tied to the performance of investment funds chosen by the policyholder. Therefore, the return is directly related to the performance of the insurance company's fund in which the premiums are invested.






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