Performance attribution analysis attempts to explain why a portfolio had a certain return. It does so by breaking down the performance and attributing the results based on the decisions made by the fund manager on which of the following?
Answer(s): C
Performance attribution analysis explains a portfolio's return by examining the fund manager's decisions in terms of asset allocation, sector choice, and security selection. These factors help identify which decisions added or detracted value relative to a benchmark.
Shareholder protection ensures sufficient funds are available to purchase the shareholding of a major shareholder on their death. It does this by:
Shareholder protection typically involves establishing a life insurance policy on each of the shareholding directors' lives. In the event of a shareholder's death, the proceeds provide the remaining shareholders with the funds needed to buy the deceased's shares, ensuring business continuity and fair value for the estate.
The supply curve for an industry would be expected to shift to the left if:
An increase in the price of raw materials raises production costs, leading to a decrease in supply at each price level. This causes the supply curve to shift to the left, indicating that producers are willing to supply less at any given price.
What financial principle requires an adviser to gather extensive information from a client before making a recommendation?
Answer(s): D
The "Know Your Customer" (KYC) principle requires advisers to gather extensive information about a client's financial situation, objectives, risk tolerance, and needs before making any recommendations. This ensures suitability and compliance with regulatory standards.
To minimise risk and maximise diversification, a portfolio should hold securities with:
To minimise risk and maximise diversification, a portfolio should include securities with negative correlation (so they move in opposite directions) and low standard deviation (indicating low individual volatility). This combination reduces overall portfolio risk.
Post your Comments and Discuss CISI ICWIM exam prep with other Community members:
Our website is free, but we have to fight against AI bots and content theft. We're sorry for the inconvenience caused by these security measures. You can access the rest of the ICWIM content, but please register or login to continue.