CACS Paper 2 Set A (Client Advisor Competency Standards)

This is the 1 out of 3 sets of CACS Paper 2 Mock Exam Questions. This paper is to be done in 2 hours as per actual IBF CACS Paper 2 Exam.

This set of CACS Paper 2 consist of 101 questions inclusive of case studies similar to the format of CACS Paper 2 and covers the following topics:

Paper 2 : Industry & Product Knowledge 
- Investment Concepts
- Risk and Return - Portfolio Management
- Fixed Income and Equity Securities
- Options, Futures, Foreign Exchange and Swaps Contracts
- Structured Products
- Unit Trust and Fund Products
- Alternative Investment Products and Services - Using Credit and Leverage

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5 Sample Questions

The yield-to-maturity is greater than the current yield when:

  • A. The bond is trading above par value
  • B. The coupon rate is greater than the yield-to-maturity
  • C. The coupon rate is less than the yield-to-maturity
  • D. The bond is a zero coupon bond

When measuring investment returns over several time periods, especially when used to compare the performance of more than one investment vehicle, investment performance is best represented by:

  • A. The total return on investment
  • B. The arithmetic average return per year
  • C. The dollar-weighted rate of return
  • D. The latest return, based on the annual return of the most recent year

How does the Security Market Line (SML) differ from the Capital Market Line (CML) in explaining the expected return of his portfolio?

  • A. The CML depicts the relationship between the expected returns of efficient portfolios and their total risk while the SML depicts the relationship between a security’s return and its beta
  • B. The risk-free rate is relevant in the CML but not in the SML
  • C. The SML only explains the expected return of an individual security but cannot be used to explain the expected return of a portfolio
  • D. The SML is relevant only for an investor who does not have a diversified portfolio

A client started to invest with $500,000. At the end of the tenure of this investment, value has increased to $550,000 and in the interim, the investor received distributions from the investment of $10,000. What is the return on this investment?

  • A. 2%
  • B. 8%
  • C. 10%
  • D. 12%

Which of the following is not a reason why a portfolio underperforms its benchmark?

  • A. High transaction costs
  • B. The portfolio deviates too much from the benchmark
  • C. Wrong investment decisions of the portfolio manager
  • D. Special investment constraints of the client