Preview Questions Portfolio Manager | Role Specific Skill

Question 1: What is the primary purpose of using a Value at Risk (VaR) model in risk management for a portfolio?

Which action should you take?

Choose only one option

To determine the probability of a portfolio achieving a specific return in the future

To measure the potential loss in the value of the portfolio under normal market conditions over a specific time frame

To identify the expected return of a portfolio under extreme market conditions

To forecast the long-term performance of a portfolio under various market scenarios

Question 2: What is the most effective method to handle a client's dissatisfaction with portfolio performance?

Which action should you take?

Choose only one option

Ignore their concerns and focus on long-term strategy

Engage in active listening, understand their concerns, and adjust the strategy if necessary

Focus on making short-term gains to appease the client

Deflect the blame to market conditions and avoid making changes

Question 3: How can a portfolio manager assess the impact of rising commodity prices, such as oil, on the BFSI portfolio and adjust accordingly?

Which action should you take?

Choose only one option

Focus on maintaining current portfolio allocations

Ignore commodity prices, as they don't affect financial markets

Assess inflationary pressure and adjust equity and fixed income exposure

Increase exposure to commodity stocks and related sectors

Question 4: How does sector rotation align with market cycles?

Which action should you take?

Choose only one option

Favor defensive sectors during peaks

Allocate to bonds in rising equity markets

Allocate more to equities in bear markets

Favor cyclical sectors during downturns

Question 5: What is the significance of a "fund of funds" in asset allocation?

Which action should you take?

Choose only one option

It offers a single asset class for the portfolio

It provides access to a diversified range of hedge funds and private equity

It is an asset class that is exclusively composed of fixed-income securities

It limits exposure to only one geographic region

Question 6: What is the primary reason to include international equities in a portfolio's asset allocation?

Which action should you take?

Choose only one option

To boost liquidity in the portfolio by including widely traded international stocks

To increase potential returns by focusing on high-growth markets in emerging economies

To diversify and reduce the overall risk by including assets from different regions that may not be correlated

To reduce currency risk, as international assets provide natural hedges against domestic currency volatility