Certified Management Accountant Free Practice Questions Set 2
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CMA Practice Questions Set Two
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Question 1 of 30
1. Question
Which of the following is the risk that the investor’s return from the investment in an asset will be less than the rate of inflation?
I. Inflation risk
II. Purchasing power risk
III. Market risk
IV. Beta market riskCorrect
Inflation risk is the risk that the investor’s return from the investment in an asset will be less than the rate of inflation.
Incorrect
Inflation risk is the risk that the investor’s return from the investment in an asset will be less than the rate of inflation.
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Question 2 of 30
2. Question
Which of the following is(are) form(s) of credit risk?
I. Default risk
II. Downgrade risk
III. Spread risk
IV. Asset riskCorrect
There are several forms of credit risk: default risk, downgrade risk, and spread risk.
Incorrect
There are several forms of credit risk: default risk, downgrade risk, and spread risk.
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Question 3 of 30
3. Question
Which of the following is(are) rating agencies in the United States?
I. Moody’s Investors Service
II. Standard & Poor’s
III. Leeman Brothers
IV. FitchCorrect
There are three rating agencies in the United States: Moody’s Investors Service, Standard & Poor’s, and Fitch.
Incorrect
There are three rating agencies in the United States: Moody’s Investors Service, Standard & Poor’s, and Fitch.
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Question 4 of 30
4. Question
Hedging the currency risk does raise the correlation between which of the following?
I. the foreign bond
II. U.S. bonds
III. U.S. stocks
IV. Non U.S. Dollar Government Bond IndexCorrect
Hedging the currency risk does raise the correlation between the foreign bond and U.S. bonds and stocks.
Incorrect
Hedging the currency risk does raise the correlation between the foreign bond and U.S. bonds and stocks.
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Question 5 of 30
5. Question
The sharp downturn in inflation since the early 1980s has led to which of the following outcomes?
I. Diversified bond returns.
II. Inflated bond returns.
III. Slower bond returns.
IV. High real bond returns.Correct
The sharp downturn in inflation since the early 1980s has led to unusually high real bond returns.
Incorrect
The sharp downturn in inflation since the early 1980s has led to unusually high real bond returns.
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Question 6 of 30
6. Question
The Maastricht Treaty of 1991 set Europe on a path toward monetary union in 1999, that spurred the high-inflation countries like which of the following to reign in their monetary policies to qualify for the union?
I. Italy
II. Denmark
III. Greece
IV. SpainCorrect
the Maastricht Treaty of 1991, setting Europe on a path toward monetary union in 1999, that spurred the high-inflation countries like Italy and Spain to reign in their monetary policies to qualify for the union.
Incorrect
the Maastricht Treaty of 1991, setting Europe on a path toward monetary union in 1999, that spurred the high-inflation countries like Italy and Spain to reign in their monetary policies to qualify for the union.
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Question 7 of 30
7. Question
Which of the following was initially developed to allow U.S. and foreign companies to raise debt financing in foreign markets to fund their foreign operations?
I. The Non-U.S. Dollar Government Bond Index
II. The Luxenberg Bond
III. The international bond market
IV. The EurobondCorrect
The Eurobond or international bond market was initially developed to allow U.S. and foreign companies to raise debt financing in foreign markets to fund their foreign operations.
Incorrect
The Eurobond or international bond market was initially developed to allow U.S. and foreign companies to raise debt financing in foreign markets to fund their foreign operations.
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Question 8 of 30
8. Question
The world’s stock and bond markets are divided into which of the following?
I. Developed
II. Semi-developed
III. Emerging
IV. Under-developedCorrect
The world’s stock and bond markets are divided into developed and emerging for a good reason— emerging markets are riskier. The dividing line between the countries themselves is somewhat arbitrary, but the division between the assets of these two sets of countries is a meaningful one.
Incorrect
The world’s stock and bond markets are divided into developed and emerging for a good reason— emerging markets are riskier. The dividing line between the countries themselves is somewhat arbitrary, but the division between the assets of these two sets of countries is a meaningful one.
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Question 9 of 30
9. Question
Returns on which of the following bonds will be enhanced during periods when foreign currencies are rising against the dollar?
I. Foreign bonds
II. Parallel bonds
III. International bonds
IV. Domestic bondsCorrect
Returns on foreign bonds will be enhanced during periods when foreign currencies are rising against the dollar just as they benefit from rising bond prices within the Euro markets themselves.
Incorrect
Returns on foreign bonds will be enhanced during periods when foreign currencies are rising against the dollar just as they benefit from rising bond prices within the Euro markets themselves.
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Question 10 of 30
10. Question
Which of the following needs to be adjusted when measuring national income?
I. Cost of living
II. Inflation
III. Market prices
IV. Economic growthCorrect
When measuring national income, it’s sensible to adjust for the cost of living. That is certainly true within a single country over time. If you want to measure the income of the average American today relative to decades ago, the only sensible way to measure income is to adjust for changes in the cost of living.
Incorrect
When measuring national income, it’s sensible to adjust for the cost of living. That is certainly true within a single country over time. If you want to measure the income of the average American today relative to decades ago, the only sensible way to measure income is to adjust for changes in the cost of living.
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Question 11 of 30
11. Question
In the past decade, emerging market bonds have become which of the following?
I. An easier alternative to diversifying investors stocks
II. An attractive asset for investors seeking international diversification
III. A major risk in investing international assets
IV. Increasingly important source of finance for emerging economiesCorrect
In the past decade, emerging market bonds have become an increasingly important source of finance for emerging economies and an attractive asset for investors seeking international diversification
Incorrect
In the past decade, emerging market bonds have become an increasingly important source of finance for emerging economies and an attractive asset for investors seeking international diversification
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Question 12 of 30
12. Question
Emerging economies have been able to expand financing through which of the following?
I. Newly issued Eurobonds
II.Bbonds syndicated and sold internationally
III. Bonds issued in traditional national bond markets
IV. Bond issued through stock exchange policy protocolsCorrect
Emerging economies have been able to expand financing through newly issued Eurobonds, bonds syndicated and sold internationally, and through bond issues in traditional national bond markets
Incorrect
Emerging economies have been able to expand financing through newly issued Eurobonds, bonds syndicated and sold internationally, and through bond issues in traditional national bond markets
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Question 13 of 30
13. Question
Which of the following is critical for investment advisors and consultants to know and understand?
I. the cash flow of investor capital
II. the sales profit margin
III. inflation
IV. the history of global financial marketsCorrect
It is critical for investment advisors and consultants to know and understand the history of global financial markets.
Incorrect
It is critical for investment advisors and consultants to know and understand the history of global financial markets.
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Question 14 of 30
14. Question
Investors have a variety of assets in which they can invest such as?
I. private equity
II. mortgages
III. real estate
IV. civil firmsCorrect
Investors have a variety of assets in which they can invest, from private equity to mortgages to real estate.
Incorrect
Investors have a variety of assets in which they can invest, from private equity to mortgages to real estate.
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Question 15 of 30
15. Question
With its rapid growth over the past two decades, which of the following economy is now larger than those of Germany, the United Kingdom, France, and Italy?
I. China
II. Argentina
III. Mexico
IV. RussiaCorrect
With its rapid growth over the past two decades, China’s economy is now larger than those of Germany, the United Kingdom, France, and Italy. China is one of the four BRIC countries highlighted in discussions of economic development, the others being Brazil, Russia, and India.
Incorrect
With its rapid growth over the past two decades, China’s economy is now larger than those of Germany, the United Kingdom, France, and Italy. China is one of the four BRIC countries highlighted in discussions of economic development, the others being Brazil, Russia, and India.
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Question 16 of 30
16. Question
Investment advisors and consultants must understand the mathematics behind the concepts in the area of which of the following?
I. Financial support
II. Time value of money
III. Equity value of money
IV. Marketing valuesCorrect
Investment advisors and consultants must understand the mathematics behind the concepts in the area of time value of money.
Incorrect
Investment advisors and consultants must understand the mathematics behind the concepts in the area of time value of money.
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Question 17 of 30
17. Question
Investment advisors and consultants should be able to perform calculations with which of the following?
I. By hand
II. With a spreadsheet
III. Computer program
IV. Financial calculatorCorrect
Investment advisors and consultants must understand the mathematics behind the
concepts in the area of time value of money. They should be able to perform calculations
by hand or with the help of a spreadsheet, computer program, or on their
financial calculator.Incorrect
Investment advisors and consultants must understand the mathematics behind the
concepts in the area of time value of money. They should be able to perform calculations
by hand or with the help of a spreadsheet, computer program, or on their
financial calculator. -
Question 18 of 30
18. Question
Which of the following form(s) the important foundation for understanding applied financial methods and formulae?
I. Statistics
II. Statistical concepts
III. Statistical calculations
IV. Statistical algorithmsCorrect
Statistical concepts and calculations form an important foundation for understanding applied financial methods and formulae.
Incorrect
Statistical concepts and calculations form an important foundation for understanding applied financial methods and formulae.
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Question 19 of 30
19. Question
Investment advisors and consultants should have a firm grasp on quantitative concepts in order to do which of the following?
I. Analyze historical data
II. Calculate and analyze investment risk and returns
III. Draw accurate conclusions
IV. Make appropriate recommendations to clientsCorrect
Investment advisors and consultants should have a firm grasp on quantitative concepts in order to analyze historical data, calculate and analyze investment risk and returns, draw accurate conclusions, and make appropriate recommendations to clients.
Incorrect
Investment advisors and consultants should have a firm grasp on quantitative concepts in order to analyze historical data, calculate and analyze investment risk and returns, draw accurate conclusions, and make appropriate recommendations to clients.
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Question 20 of 30
20. Question
A time series is an equation or set of equations describing which of the following?
I. How variables evolves over time.
II. How a random variable evolves over time.
III. How certain assumptions evolves over time.
IV. How equation variables evolves over time.Correct
A time series is an equation or set of equations describing how a random variable or variables evolves over time.
Incorrect
A time series is an equation or set of equations describing how a random variable or variables evolves over time.
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Question 21 of 30
21. Question
the most popular statistic for describing linear regressions is
I. The coefficient of determination
II. The R-squared
III. The T-Squared
IV. The casio regressionCorrect
Probably the most popular statistic for describing linear regressions is the coefficient of determination, commonly known as R-squared, or just R2. R2 is often described as the goodness of fit of the linear regression.
Incorrect
Probably the most popular statistic for describing linear regressions is the coefficient of determination, commonly known as R-squared, or just R2. R2 is often described as the goodness of fit of the linear regression.
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Question 22 of 30
22. Question
Investment advisors and consultants are subject to numerous laws and regulations that apply to the activities in which they engage in which of the following?
I. The products they provide.
II. The services they provide.
III. The relationships they have with specific clientele.
IV. The relationships they have with specific shareholders.Correct
Investment advisors and consultants are subject to numerous laws and regulations that apply to the activities in which they engage, the products and services they provide, and the relationships they have with specific clientele they serve.
Incorrect
Investment advisors and consultants are subject to numerous laws and regulations that apply to the activities in which they engage, the products and services they provide, and the relationships they have with specific clientele they serve.
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Question 23 of 30
23. Question
Investment professionals may be subject to oversight by the following regulators except?
I. The Securities and Exchange Commission
II. The Financial Industry Regulatory Authority
III. The state securities boards
IV. The Department of Finance CommissionCorrect
Investment professionals may be subject to oversight by the following regulators: the SEC (Securities and Exchange Commission), FINRA (Financial Industry Regulatory Authority), and state securities boards or agencies among others.
Incorrect
Investment professionals may be subject to oversight by the following regulators: the SEC (Securities and Exchange Commission), FINRA (Financial Industry Regulatory Authority), and state securities boards or agencies among others.
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Question 24 of 30
24. Question
Which of the following are recommended additional reporting and disclosures for compliance with the IMCA Performance Reporting Guidelines regarding manager search and analysis?
I. If sufficient history exists, one-, five-, and ten-year cumulative returns should be presented.
II. Performance composites presented to clients should be shown on a gross basis (before deduction of the investment manager’s fee).
III. Cumulative returns should be shown for each manager from inception of the firm, inception of the investment product, or 10 years—whichever is shorter.
IV. Performance composites presented to clients should be shown on a net basis (after deduction of the investment manager’s fee).Correct
Listed below are recommended additional reporting and disclosures for
compliance with the IMCA Performance Reporting Guidelines regarding manager
search and analysis.
A. If sufficient history exists, one-, five-, and ten-year cumulative returns should be
presented.
B. Cumulative returns should be shown for each manager from inception of the
firm, inception of the investment product, or 10 years—whichever is shorter.
C. Performance composites presented to clients should be shown on both a gross
basis (before deduction of the investment manager’s fee) and a net basis (after
deduction of the investment manager’s fee).Incorrect
Listed below are recommended additional reporting and disclosures for
compliance with the IMCA Performance Reporting Guidelines regarding manager
search and analysis.
A. If sufficient history exists, one-, five-, and ten-year cumulative returns should be
presented.
B. Cumulative returns should be shown for each manager from inception of the
firm, inception of the investment product, or 10 years—whichever is shorter.
C. Performance composites presented to clients should be shown on both a gross
basis (before deduction of the investment manager’s fee) and a net basis (after
deduction of the investment manager’s fee). -
Question 25 of 30
25. Question
The Professional Review Board(PRB) is empowered to do which of the following?
I. Investigate alleged infractions of the Code, Standards of Practice, and Rules and issue orders regarding private or public censure, the suspension or termination of the right to use an IMCA Designation by Licensees, or termination of Candidates who are found to have violated the Code, Standards of Practice, Rules, or other orders as may be appropriate.
II. Report to the IMCA Board with respect to the operations of the PRB.
III. Consider and propose amendments to the Code, Standards of Practice, and Rules for action by the IMCA Board.
IV. Develop and adopt procedures for the fair and expeditious hearing of matters that come after it.Correct
The PRB is empowered
to:
a. Investigate alleged infractions of the Code, Standards of Practice, and Rules
and issue orders regarding private or public censure, the suspension or termination
of the right to use an IMCA Designation by Licensees, or termination
of Candidates who are found to have violated the Code, Standards of Practice,
Rules, or other orders as may be appropriate.
b. Report to the IMCA Board with respect to the operations of the PRB.
c. Consider and propose amendments to the Code, Standards of Practice, and
Rules for action by the IMCA Board.
d. Develop and adopt procedures for the fair and expeditious hearing of matters
that come before it.Incorrect
The PRB is empowered
to:
a. Investigate alleged infractions of the Code, Standards of Practice, and Rules
and issue orders regarding private or public censure, the suspension or termination
of the right to use an IMCA Designation by Licensees, or termination
of Candidates who are found to have violated the Code, Standards of Practice,
Rules, or other orders as may be appropriate.
b. Report to the IMCA Board with respect to the operations of the PRB.
c. Consider and propose amendments to the Code, Standards of Practice, and
Rules for action by the IMCA Board.
d. Develop and adopt procedures for the fair and expeditious hearing of matters
that come before it. -
Question 26 of 30
26. Question
Which of the following risk(s) is(are) important for portfolio managers that must mark to market positions periodically?
I. Asset risk
II. Periodic risk
III. Liquidity risk
IV. Credit riskCorrect
Liquidity risk is also important for portfolio managers that must mark to market positions periodically. For example, the manager of a mutual fund is required to report the market value of each holding at the end of each business day. This means accurate price information must be available. Some assets do not trade frequently and are therefore difficult to price.
Incorrect
Liquidity risk is also important for portfolio managers that must mark to market positions periodically. For example, the manager of a mutual fund is required to report the market value of each holding at the end of each business day. This means accurate price information must be available. Some assets do not trade frequently and are therefore difficult to price.
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Question 27 of 30
27. Question
The cash flows in the investor’s domestic currency are dependent on which of the following?
I. The exchange rate at the time the payments are received from the asset.
II. The asset whose payments are not in the domestic currency.
III. The credit ratings assigned to issues by rating companies.
IV. The true value indicated by a recent transaction.Correct
The cash flows in the investor’s domestic currency are dependent on the exchange rate at the time the payments are received from the asset.
Incorrect
The cash flows in the investor’s domestic currency are dependent on the exchange rate at the time the payments are received from the asset.
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Question 28 of 30
28. Question
Which of the following is the return earned from holding an asset for a single specified period of time?
I. Geometric Mean return
II. A holding period return
III. A mean return
IV. An arithmetic ReturnCorrect
A holding period return is the return earned from holding an asset for a single specified period of time.
Incorrect
A holding period return is the return earned from holding an asset for a single specified period of time.
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Question 29 of 30
29. Question
The holding period return can be computed for which of the following period(s)?
I. Periods longer than one year
II. Periods within a year
III. Periods longer than one year but less than two years
IV. Periods within 30 daysCorrect
The holding period return can be computed for a period longer than one year.
Incorrect
The holding period return can be computed for a period longer than one year.
-
Question 30 of 30
30. Question
Investment advisors and consultants are responsible for following laws and standards enforced by which of the following?
I. Government agencies
II. Industry self-regulatory bodies
III. The firms at which they are employed
IV. Corporate private regulatorsCorrect
Investment advisors and consultants are responsible for following laws and standards enforced by numerous government agencies, industry self-regulatory bodies, and the firms at which they are employed.
Incorrect
Investment advisors and consultants are responsible for following laws and standards enforced by numerous government agencies, industry self-regulatory bodies, and the firms at which they are employed.
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