Preview Questions Financial Analyst | Role Specific Skill

Question 1: When assessing an investment portfolio, which ratio is most critical for determining the risk-adjusted return?

Which action should you take?

Choose only one option

Sharpe ratio

Price-to-earnings ratio (P/E)

Return on equity (ROE)

Dividend yield

Question 2: How would you adjust the forecasted financials when there is a sudden economic shock affecting the entire market?

Which action should you take?

Choose only one option

Increase the discount rate in DCF models

Reduce the cost of capital assumptions

Maintain the original forecast assumptions

Revise the forecast using sensitivity analysis

Question 3: How would you evaluate the risk and return profile of a potential investment portfolio in the current market environment?

Which action should you take?

Choose only one option

I perform Monte Carlo simulations to assess various risk scenarios and analyze returns under different market conditions

I use a simple risk-return ratio without considering the correlation between assets

I rely solely on historical return data and ignore market volatility

I focus on fixed income securities and ignore the broader market

Question 4: In the context of investment analysis, what does "beta diversification" refer to within a financial institution's portfolio management strategy?

Which action should you take?

Choose only one option

Diversifying investments to reduce unsystematic risk

Investing in high-beta stocks to maximize returns

Allocating assets solely based on their historical performance

Balancing the portfolio's exposure to different market factors to optimize beta

Question 5: How do you factor in changes in loan default rates when forecasting a bank's loan income?

Which action should you take?

Choose only one option

I incorporate scenario analysis and stress testing, adjusting loan income based on varying default rates

I adjust the forecast only if defaults exceed a predetermined threshold

I exclude loan default rates from the forecast and focus on gross income

I assume loan default rates remain consistent with historical trends

Question 6: How does an external audit affect the financial reporting of a bank?

Which action should you take?

Choose only one option

It ensures that the financial statements are free from material misstatements

It results in the revaluation of non-performing assets

It leads to the recalculation of key financial ratios and profit margins

It primarily focuses on internal controls rather than financial statements