Preview Questions Financial Analyst | Role Specific Skill

Question 1: Which strategy is most suitable for enhancing portfolio returns during periods of high market uncertainty?

Which action should you take?

Choose only one option

Increasing exposure to high-yield bonds

Increasing the cash position

Implementing a tactical asset allocation strategy

Maintaining a low allocation to equities

Question 2: When constructing an investment strategy for a bank, how would you assess the risk of currency fluctuations?

Which action should you take?

Choose only one option

By disregarding exchange rate risk in favor of diversification

By using hedging strategies such as currency forwards and options

By increasing exposure to foreign equities

By focusing on domestic assets only

Question 3: In assessing the effectiveness of a bank's loan portfolio, which key financial metric is most critical?

Which action should you take?

Choose only one option

Loan loss provision ratio

Loan-to-deposit ratio

Return on equity (ROE)

Net interest margin (NIM)

Question 4: For an insurer's equity portfolio managed against a liability-driven benchmark, which metric would best measure the relative effectiveness of the investment strategy in aligning assets with future insurance payouts?

Which action should you take?

Choose only one option

Tracking Error against a broad equity index

Information Ratio

Surplus Volatility relative to projected liabilities

Price-to-Book ratio of the equity portfolio

Question 5: When evaluating credit risk for a loan portfolio, what is your approach to assessing default correlation among borrowers?

Which action should you take?

Choose only one option

I use a copula model to assess the joint probability of defaults and adjust for correlation across borrowers

I rely on historical default rates without considering correlation

I use industry averages for default rates without adjusting for portfolio-specific factors

I assume that borrowers' defaults are independent of one another

Question 6: In modeling the impact of an economic downturn on a bank, which factor should be most heavily weighted in the assumptions?

Which action should you take?

Choose only one option

The change in non-performing loans (NPLs) due to reduced demand

The impact of changes in operating expenses due to inflation

The impact of changes in regulatory capital requirements

The impact of loan defaults and credit losses on the bank's profitability