Pass the AAFM Chartered Wealth Manager CWM_LEVEL_2 Questions and answers with ExamsMirror

Section A (1 Mark)

----------- shifts the weights of securities in the portfolio to take advantage of areas that are expected to do relatively better than other areas.

Section A (1 Mark)

_______________ reveals that people often focus on short-term financial events to the detriment of their long-term needs.

Section C (4 Mark)

Mudra Financial is a large financial firm which owns several mutual funds. The funds are managed individually by portfolio managers but it has an investment committee that overseas all of the funds. This committee is responsible for evaluating the performance of the funds relative to the appropriate benchmark and relative to stated investment objectives of each individual fund. During a recent investment committee meeting, the poor performance of Its Equity Funds were discussed. In particular, the inability of the portfolio managers to outperform their benchmarks was highlighted. The net conclusion of the committee was to review the performance of the manager responsible for each fund and dismiss those managers whose performance had lagged substantially behind the appropriate benchmark.

The fund with the worst relative performance is the Mudra Large Cap Fund which invests in large cap stocks. A review of the operations of the fund found the following:

• The turnover of the fund was almost double that of other similar style mutual funds

• The fund’s portfolio manager solicited input from her entire staff prior to making any decision to sell an existing holding

• The beta of the Mudra Large Cap Fund’s portfolio was 65% higher than the beta of other similar style mutual funds

• The portfolio manager refuses to increase the Capital Goods sector weighting because of past losses the fund incurred in the sector

• The portfolio manager sold all the fund’s Oil Marketing Companies stocks as the price per barrel of oil rose above $105. He expects oil prices to fall back to the $80 to $85 per barrel

• No stock is considered for purchase in the Large Cap Fund unless the portfolio manager has 10 years of financial information on that company.

The underweighting of the Capital Goods sector and selling off Oil Marketing Stocks could be best described as an example of:

Section B (2 Mark)

A bank recently loaned you Rs15,000 to buy a car. The loan is for five years (60 months) and is fully amortized. The nominal rate on the loan is 12 percent, and payments are made at the end of each month. What will be the remaining balance on the loan after you make the 30th payment?

Section B (2 Mark)

Both __________ depend on electronic information that has been collected about customers, in place of human knowledge, to build and manage relationships.

Section A (1 Mark)

The basic competitive factors facing industries include all of the following except:

Section C (4 Mark)

The expected return for the market is 12 percent, with a standard deviation of 20 percent. The expected risk-free rate is 8 percent. Information is available for three mutual funds, all assumed to be efficient, as follows:

Calculate the expected return on each of these portfolios respectively.

Section A (1 Mark)

Generally speaking, high severity of losses will be accompanied by

Section A (1 Mark)

Select the INCORRECT statement regarding the CML

Section A (1 Mark)

Assessing client’s level of risk tolerance is done while

Section B (2 Mark)

Rule of 72 is used for

Section B (2 Mark)

An employee benefit plan can generally help in accomplishing all of the following items except:

Section A (1 Mark)

A document that is executed by the sellor of the flat so that the Cooperative Society to which the flat belongs and the purchaser is completely indemnified against any claims that any other person may make on the rights of ownership of the flat or other any that is yet unpaid by the seller ( eg. taxes) is known as_________

Section B (2 Mark)

Mr. Patel expects the stock of A to sell for Rs. 70/- a year from now and to pay Rs. 4/- dividend. If the stock’s correlation with the Market is –0.3, and the standard deviation of A is 40% and standard deviation of the Market is 20% and the risk free rate of return is 5% and the market risk premium is 5%, what would be the price of stock A be now ?

Section A (1 Mark)

Which of the following act is done by the most dissatisfied customers?

Section C (4 Mark)

Read the senario and answer to the question.

Pallavi’s marriage is expected by the end of December, 2010 with an expected present cost of Rs. 24,00,000. He is expected to realize from his Tatanagar Flat 18, 00,000 by that time. Calculate what additional amount is required for his daughter’s marriage. With 8% pa. risk free rate compounding monthly what amount he has to save per month (BEGIN) in a debt fund?

Section C (4 Mark)

Read the senario and answer to the question.

In order to provide for Medical Education Expenses of Navneet he will be transferring whole of Equity share portfolio to Debt MF. And for Yogita’s PG degree he is ready to use his Equity MF portfolio. Balance to be met by SIP in equity MF. Starting from today. You are required to guide Keshav whether he will be able to meet Navneet’s Education Expand what is the surplus or deficit in Debt MF (today value). And what should be the SIP amount for Yogita’s Education goal?

Section B (2 Mark)

Which of the following Statements are correct?

Section A (1 Mark)

The subscription paid into PPF account enjoys the tax benefit under

Section B (2 Mark)

Shiva Industries Ltd. earns Rs. 2 per share and distributes 40% of its earnings as cash dividends. Its dividends grew annually at 7%. What will be the stock’s price if the required rate is 10%?

Section C (4 Mark)

Read the senario and answer to the question.

Saxena bought agricultural land in notified urban limits of Mumbai on 15-June-1996 for Rs. 6 lakh and had been using the same for agricultural purposes. However the land was compulsorily acquired by the Government on 15-July-2003 and the compensation fixed was Rs. 25 lakh. Out of this, Rs 10 lakh was received by Saxena on 15-Jan-2005 and the balance on 06-Apr-2005. Saxena was not satisfied with the compensation and filed a suit in the court. The compensation was enhanced by Rs 8 lakh which was received on 25-Mar-2008. Which one of the following statement regarding capital gains arising from these transactions is correct:

Section A (1 Mark)

The "lockup" problem involved in rebalancing refers to the:

Section A (1 Mark)

The principle that people do not buy or rent real estate, but judge properties as different sets of benefits and costs is called

Section C (4 Mark)

As a CWM you are required to calculate the tax liability of an individual whose taxable income is:

• $321500 in SGD and he is a Singapore citizen

• £ 35214p.a (only dividends) and he is a UK citizen

Section A (1 Mark)

_________________ is a method to evaluate a large volume of consumer loans quickly with minimum labor. This method is a statistical model which predicts whether the consumer will repay the loan or not.

Section A (1 Mark)

Employees Provident Fund is applicable to firms employing over _______________ employees

Section B (2 Mark)

Ram and Mrs. Ram hold 20% and 30% equity shares in Anand Ltd. respectively. They are employed in Anand Ltd. (monthly salary being Rs.20000 and Rs. 30000 respectively) without any technical / professional qualification.

Other incomes of Ram and Mrs. Ram are Rs. 70000 and Rs. 100000 respectively. The net income of Ram and Mrs. Ram for the assessment year 2013-14 shall be.

Section B (2 Mark)

The expected market return is 16 percent. The risk-free rate of return is 7 percent, and BC Co. has a beta of 1.1. Their required rate of return is

Section B (2 Mark)

A taxpayer has taxable income for 2011-12 (after deducting the personal allowance) of £75,200. None of the income is derived from savings or dividends. The income tax liability for the year is:

Section B (2 Mark)

Which of the following statements are correct with regard to Bailard, Biehl, and Kaiser Five-Way Model?

Section A (1 Mark)

Rapid accumulation stage suggests that the net worth is ________

Section C (4 Mark)

Which of the following application of Options Strategy is correct?

Section B (2 Mark)

Babu Lal sold his residential house on 28-06-2010 and made a long term capital gain of Rs. 372229. He purchased a new house on 22-10-2010 for Rs. 360000 which is again sold for Rs.620000 on 16-6-2011. He purchased another house on 20-12-2011 for Rs.786000. Calculate the exemption available u/s 54 for the assessment year 2012-13. [CII-12-13: 852,11-12: 785,10-11:711]

Section A (1 Mark)

__________ is the most important investment decision because it determines the risk-return characteristics of the portfolio.

Section A (1 Mark)

Loss of a closely held company cannot be carried and set off unless on the last day of the previous year in which the loss was incurred and as on the last day of the previous year in which such loss is set off, at least:

Section B (2 Mark)

Payment of Gratuity Act 1972 is applicable to

Section A (1 Mark)

Deduction under section 80QQB is allowed in respect of royalty income to:

Section C (4 Mark)

Which of the following statements is/are correct?

Section B (2 Mark)

You have Rs. 5 Lacs available to invest. The risk free rate as well as the borrowing rate is 8%. The return on the risky portfolio is 16%. If you wish to earn 22% return, you should:

Section B (2 Mark)

The Motor Vehicle Insurance Policy has inbuilt cover for death/disability of driver/owner caused by accident during the use of the insured motor vehicle up to Rs. __________ in case of car/commercial vehicle and Rs. _________ in case of two wheelers.

Section B (2 Mark)

Which of the following statements are true?

Section A (1 Mark)

A European put option can be exercised

Section A (1 Mark)

In order to have confirmation of a major market trend under the Dow Theory, the

Section A (1 Mark)

______________represents the corollary effect—the irrational denial of responsibility for failure.

Section B (2 Mark)

____________compares the price charged for property or services transferred in a controlled transaction to the price charged for property or services transferred in a comparable uncontrolled transaction in comparable circumstances

Section B (2 Mark)

If a portfolio manager has a good ability to forecast overall market but a poor ability to select undervalued securities, the following makes sense for him.

Section A (1 Mark)

Data for five comparable income properties that sold recently are shown below:

What is the indicated overall rate (RO)?

Section A (1 Mark)

The proposed Fair Tax would change the U.S. tax system and instead:

Section A (1 Mark)

In terms of the risk/return relationship

Section A (1 Mark)

Which of the following is an element of an organization’s internal-environment?