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Certified Management Accountant Free Practice Questions
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Question 1 of 30
1. Question
William Sharpe (1964) defined systematic risk as the portion of an asset’s variability that can be attributed to a common factor. It is also called?
I. Undiversifiable risk
II. Diversifiable risk
III. Market risk
IV. Chaotic riskCorrect
William Sharpe (1964) defined systematic risk as the portion of an asset’s variability that can be attributed to a common factor. It is also called undiversifiable risk or market risk.
Incorrect
William Sharpe (1964) defined systematic risk as the portion of an asset’s variability that can be attributed to a common factor. It is also called undiversifiable risk or market risk.
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Question 2 of 30
2. Question
The relationship between the movement in which of the following can be estimated statistically?
I. The currency exchange rate
II. The stock exchange
III. The market
IV. The price of an assetCorrect
The relationship between the movement in the price of an asset and the market can be estimated statistically.
Incorrect
The relationship between the movement in the price of an asset and the market can be estimated statistically.
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Question 3 of 30
3. Question
Which of the following risk(s) arises because of the variation in the value of an asset’s cash flows due to inflation?
I. Inflation risk
II. Asset value risk
III. Cash flow risk
IV. Purchasing power riskCorrect
Inflation risk, or purchasing power risk, arises because of the variation in the value of an asset’s cash flows due to inflation.
Incorrect
Inflation risk, or purchasing power risk, arises because of the variation in the value of an asset’s cash flows due to inflation.
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Question 4 of 30
4. Question
The foreign bonds may be too volatile to be attractive to an American investor as an alternative to U.S. Treasury bonds. That is even true of which of the following, that has a return of 8.1 percent and a standard deviation of 9.6 percent?
I. The Swiss franc
II. Non-U.S. Dollar World Government Bond Index
III. Hedged Foreign Bonds
IV. Diversified World IndexCorrect
The foreign bonds may be too volatile to be attractive to an American investor as an alternative to U.S. Treasury bonds. That is even true of the diversified World Index, which has a return of 8.1 percent and a standard deviation of 9.6 percent. The Sharpe ratio for the World Index is much lower than that of the medium-term U.S. Treasury bond.
Incorrect
The foreign bonds may be too volatile to be attractive to an American investor as an alternative to U.S. Treasury bonds. That is even true of the diversified World Index, which has a return of 8.1 percent and a standard deviation of 9.6 percent. The Sharpe ratio for the World Index is much lower than that of the medium-term U.S. Treasury bond.
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Question 5 of 30
5. 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 6 of 30
6. 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 7 of 30
7. Question
The IFC (and Standard & Poor’s after it took over the IFC database) refined the criteria used to distinguish emerging markets from developed markets. The criteria include which of the following?
I. The depth of the market
II. Its lack of discriminatory controls on foreign investment
III. Its transparency
IV. Its political powers over other countriesCorrect
The IFC (and Standard & Poor’s after it took over the IFC database) refined the criteria used to distinguish emerging markets from developed markets. The criteria include the depth of the market, its lack of discriminatory controls on foreign investment, and its transparency.
Incorrect
The IFC (and Standard & Poor’s after it took over the IFC database) refined the criteria used to distinguish emerging markets from developed markets. The criteria include the depth of the market, its lack of discriminatory controls on foreign investment, and its transparency.
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Question 8 of 30
8. Question
Which of the following had become the primary source of international funding for emerging economies in the 1920s?
I. The World Bank
II. The Eurobond market
III. The U.S. bond market
IV. Private international agenciesCorrect
The U.S. bond market had become the primary source of international funding for emerging economies in the 1920s.
Incorrect
The U.S. bond market had become the primary source of international funding for emerging economies in the 1920s.
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Question 9 of 30
9. Question
Which of the following assets are most important in a majority of portfolios?
I. Stocks
II. Indices
III. Bonds
IV. CommoditiesCorrect
Stocks and bonds are the most important assets in most portfolios.
Incorrect
Stocks and bonds are the most important assets in most portfolios.
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Question 10 of 30
10. Question
Which of the following led to consolidation of the bond markets of the 12 countries initially joining the European Union?
I. The introduction of the Euro
II. The Great Depression
III. The Financial Crisis in 1997
IV. The royal internal politics in 1999Correct
The introduction of the Euro in 1999 led to consolidation of the bond markets of the 12 countries initially joining the European Union.
Incorrect
The introduction of the Euro in 1999 led to consolidation of the bond markets of the 12 countries initially joining the European Union.
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Question 11 of 30
11. Question
East Asia provides the largest block in terms of capitalization. This region consists of all markets between Indonesia and Korea except?
I. Japan
II. Singapore
III. Hong Kong
IV. MalaysiaCorrect
East Asia provides the largest block in terms of capitalization. This region consists of all markets between Indonesia and Korea except for Japan, Singapore, and Hong Kong (the latter being measured independently of China).
Incorrect
East Asia provides the largest block in terms of capitalization. This region consists of all markets between Indonesia and Korea except for Japan, Singapore, and Hong Kong (the latter being measured independently of China).
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Question 12 of 30
12. Question
There is a composite index for the emerging markets consisting of 22 emerging markets including which of the following?
I. The Middle East
II. Latin America
III. Asia
IV. EuropeCorrect
There is a composite index for the emerging markets consisting of 22 emerging markets including five from Latin America, eight from Asia, and nine from Europe, the Middle East, and Africa.
Incorrect
There is a composite index for the emerging markets consisting of 22 emerging markets including five from Latin America, eight from Asia, and nine from Europe, the Middle East, and Africa.
-
Question 13 of 30
13. Question
Prior to the 2008 crisis, emerging markets’ returns soared more than 85 percent from?
I. from December 2005 to December 2007.
II. from December 2003 to December 2007.
III. from December 2004 to December 2007.
IV. from December 2006 to December 2007.Correct
Prior to the 2008 crisis, emerging markets’ returns soared more than 85 percent from December 2005 to December 2007.
Incorrect
Prior to the 2008 crisis, emerging markets’ returns soared more than 85 percent from December 2005 to December 2007.
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Question 14 of 30
14. Question
There was little eagerness to underwrite new bonds issued by the less developed countries during which of the following period?
I. 1935
II. Before World War II
III. After World War II
IV. 1947Correct
After World War II, there was little eagerness to underwrite new bonds issued by the less developed countries.
Incorrect
After World War II, there was little eagerness to underwrite new bonds issued by the less developed countries.
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Question 15 of 30
15. Question
Why is it possible to invest in a wide variety of foreign stocks through ADRs?
I. There are more than 4,000 ADRs for firms from every country that has n active stock market.
II. There are almost 3,000 ADRs available in the U.S. market
III. They are more reputable in caparison to other markets.
IV. They have a proven track record of other markets.Correct
There are now almost 3,000 ADRs available in the U.S. market for firms from virtually every country that has an active stock market, so it’s possible to invest in a wide variety of foreign stocks through ADRs.
Incorrect
There are now almost 3,000 ADRs available in the U.S. market for firms from virtually every country that has an active stock market, so it’s possible to invest in a wide variety of foreign stocks through ADRs.
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Question 16 of 30
16. Question
Governments like Singapore put restrictions on foreign ownership of the underlying shares in the local
market mainly becvause of which of the following?
I. So discrepancies between ADR prices and the prices of the underlying shares may remain persistently minimum.
II. So that they can prevent arbitrage from working.
III. So discrepancies between ADR prices and the prices of the underlying shares may remain persistently large.
IV. So that they can work with arbitrage themselves.Correct
Some governments like Singapore put restrictions on foreign ownership of the underlying shares in the local
market, so discrepancies between ADR prices and the prices of the underlying shares may remain persistently large. But that’s because governments prevent arbitrage from working.Incorrect
Some governments like Singapore put restrictions on foreign ownership of the underlying shares in the local
market, so discrepancies between ADR prices and the prices of the underlying shares may remain persistently large. But that’s because governments prevent arbitrage from working. -
Question 17 of 30
17. Question
Currency movements influence stocks, particularly in which of the following?
I. In the majority of every situation.
II. When an unexpected event occurs.
III. In the long run.
IV. In the short run.Correct
Currency movements influence stocks, particularly in the short run. The most dramatic example is found during the first and second terms of the Reagan administration when the dollar first soared, then fell back to earth.
Incorrect
Currency movements influence stocks, particularly in the short run. The most dramatic example is found during the first and second terms of the Reagan administration when the dollar first soared, then fell back to earth.
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Question 18 of 30
18. Question
If the method of calculating interest is not stated, you should assume that the interest is?
I. Simple interest
II. Compound interest
III. Complex interest
IV. Diverse interestCorrect
If the method of calculating interest is not stated, you should assume that the interest is compound interest.
Incorrect
If the method of calculating interest is not stated, you should assume that the interest is compound interest.
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Question 19 of 30
19. Question
If you invest $1,000 today in an account that pays 9 percent interest, compounded continuously. What will be the value in this account at the end of 10 years?
I. $2,460.60
II. $2,457.60
III. $2,458.60
IV. $2,459.60Correct
FV = $1,000 e0.09×10 = $1,000 e0.9
= $1,000 (2.4596) = $2,459.60Incorrect
FV = $1,000 e0.09×10 = $1,000 e0.9
= $1,000 (2.4596) = $2,459.60 -
Question 20 of 30
20. Question
Suppose you deposit $1,000 in an account that earns 5 percent interest per year. If you do not make any withdrawals, how much will you have in the account at the end of 20 years?
I. $2,653.30
II. $2,654.30
III. $2,655.30
IV. $2,652.30Correct
Amount on deposit = $1,000 (1 + 0.05)20 = $2,653.30
Incorrect
Amount on deposit = $1,000 (1 + 0.05)20 = $2,653.30
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Question 21 of 30
21. Question
As the number of discount periods, n, becomes larger, what happens to the discount factor and the present value?
I. The discount factor becomes smaller
II. The discount factor becomes larger
III. The present value becomes less
IV. The present value becomes moreCorrect
As the number of discount periods, n, becomes larger, the discount factor becomes smaller and the present value becomes less.
Incorrect
As the number of discount periods, n, becomes larger, the discount factor becomes smaller and the present value becomes less.
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Question 22 of 30
22. Question
A perpetuity is a security that pays a fixed coupon for eternity. Determine the present value of a perpetuity, which pays a $5 coupon annually. Assume a constant 4 percent discount rate.
I. $120
II. $125
III. $120.25
IV. $130Correct
V =∞Σi=1$5/(1.04)i
V = $5∞Σi=1
( 1/1.04)i = $5∞Σi=1 0.96i = $5 0.96/1 − 0.96
= $5 ⋅ 25V = $125
Incorrect
V =∞Σi=1$5/(1.04)i
V = $5∞Σi=1
( 1/1.04)i = $5∞Σi=1 0.96i = $5 0.96/1 − 0.96
= $5 ⋅ 25V = $125
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Question 23 of 30
23. Question
If the level of the index can be any real number between zero and infinity, then the return of the index can be any real number that is?
I. lesser than 0.
II. greater than 0.
III. lesser than -1.
IV. greater than –1.Correct
If the level of the index can be any real number between zero and infinity, then the return of the index can be any real number greater than –1.
Incorrect
If the level of the index can be any real number between zero and infinity, then the return of the index can be any real number greater than –1.
-
Question 24 of 30
24. Question
In regards to probability, when two coins are tossed, what is the probability that two heads are obtained?
I. 25%
II. 50%
III. 75%
IV. 85%Correct
The sample space D is given by.
D = {(H,T),(H,H),(T,H),(T,T)}
Let F be the event “two heads are obtained”.
F = {(H,H)}
We use the formula of the classical probability.
P(F) = n(F) / n(D) = 1 / 4 = 25%
Incorrect
The sample space D is given by.
D = {(H,T),(H,H),(T,H),(T,T)}
Let F be the event “two heads are obtained”.
F = {(H,H)}
We use the formula of the classical probability.
P(F) = n(F) / n(D) = 1 / 4 = 25%
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Question 25 of 30
25. Question
What is the present value of an offer of $14,000 one year from now if the opportunity cost of capital (discount rate) is 11% per year simple interest?
I. $12,613.3
II. $12,689.1
III. $15,877.5
IV. $13,758.1Correct
Answer: 14000/1.11=$12,613.3
Incorrect
Answer: 14000/1.11=$12,613.3
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Question 26 of 30
26. Question
The fiduciary relationship for a consultant and client can be established with which of the following?
I. Individuals
II. Trusts
III. Foundations
IV. ERISA plansCorrect
The fiduciary relationship for a consultant and client can be established with individuals, trusts, foundations, endowments, ERISA plans, and many other circumstances. In each case, certain duties are expected to be performed at a minimum on behalf of the client or clients.
Incorrect
The fiduciary relationship for a consultant and client can be established with individuals, trusts, foundations, endowments, ERISA plans, and many other circumstances. In each case, certain duties are expected to be performed at a minimum on behalf of the client or clients.
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Question 27 of 30
27. Question
A consultant who holds himself or herself out as a fiduciary for ERISA plans and pensions may be held to fiduciary standards. In these cases, consultants must be prepared to do the following except?
I. Define the scope of their relationship with the entity for which they are consulting.
II. Define the nature of their relationship with the entity for which they are consulting.
III. Memorise all standard protocols in dealing with clients.
IV. Act in accordance to the relationship requirements of the entity for which they are consulting.Correct
A consultant who holds himself or herself out as a fiduciary for ERISA plans and pensions may be held to fiduciary standards. In these cases, consultants must be prepared to define the scope and nature of their relationship with the entity for which they are consulting.
Incorrect
A consultant who holds himself or herself out as a fiduciary for ERISA plans and pensions may be held to fiduciary standards. In these cases, consultants must be prepared to define the scope and nature of their relationship with the entity for which they are consulting.
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Question 28 of 30
28. Question
According to Publication 560, disqualified individuals include which of the following?
I. A fiduciary of the plan
II. A person providing services to the plan
III. An employer, any of whose employees are covered by the plan
IV. An employee organization, any of whose members are covered by the planCorrect
According to Publication 560, disqualified individuals include the following
1. A fiduciary of the plan
2. A person providing services to the plan
3. An employer, any of whose employees are covered by the plan
4. An employee organization, any of whose members are covered by the plan
5. Any direct or indirect owner of 50 percent or more of any of the following:
a. The combined voting power of all classes of stock entitled to vote, or the total value of shares of all classes of stock of a corporation
b. that is an employer or employee organization described in (3) or (4)
c. the capital interest or profits interest of a partnership that is an employer or employee organization described in (3) or (4)
d. the beneficial interest of a trust or unincorporated enterprise that is an employer or an employee organization described in (3) or (4)
6. A member of the family of any individual described in (1), (2), (3), or (4) (i.e., the individual’s spouse, ancestor, lineal descendant, or any spouse of a lineal descendant)
7. A corporation, partnership, trust, or estate of which (or in which) any direct or indirect owner described in (1) through (5) holds 50 percent or more of any of the following:
a. The combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of a corporation
b. The capital interest or profits interest of a partnership
c. The beneficial interest of a trust or estate
8. An officer, director (or an individual having powers or responsibilities similar to those of officers or directors), a 10 percent or more shareholder, or highly compensated employee (earning 10 percent or more of the yearly wages of an employer) of a person described in (3), (4), (5), or (7)
9. A 10-percent or more (in capital or profits) partner or joint venture of a person described in (3), (4), (5), or (7)
10. Any disqualified person, as described in (1) through (9) above, who is a disqualified person with respect to any plan to which a multiemployer plan trust is permitted to make payments under section 4223 of ERISAIncorrect
According to Publication 560, disqualified individuals include the following
1. A fiduciary of the plan
2. A person providing services to the plan
3. An employer, any of whose employees are covered by the plan
4. An employee organization, any of whose members are covered by the plan
5. Any direct or indirect owner of 50 percent or more of any of the following:
a. The combined voting power of all classes of stock entitled to vote, or the total value of shares of all classes of stock of a corporation
b. that is an employer or employee organization described in (3) or (4)
c. the capital interest or profits interest of a partnership that is an employer or employee organization described in (3) or (4)
d. the beneficial interest of a trust or unincorporated enterprise that is an employer or an employee organization described in (3) or (4)
6. A member of the family of any individual described in (1), (2), (3), or (4) (i.e., the individual’s spouse, ancestor, lineal descendant, or any spouse of a lineal descendant)
7. A corporation, partnership, trust, or estate of which (or in which) any direct or indirect owner described in (1) through (5) holds 50 percent or more of any of the following:
a. The combined voting power of all classes of stock entitled to vote or the total value of shares of all classes of stock of a corporation
b. The capital interest or profits interest of a partnership
c. The beneficial interest of a trust or estate
8. An officer, director (or an individual having powers or responsibilities similar to those of officers or directors), a 10 percent or more shareholder, or highly compensated employee (earning 10 percent or more of the yearly wages of an employer) of a person described in (3), (4), (5), or (7)
9. A 10-percent or more (in capital or profits) partner or joint venture of a person described in (3), (4), (5), or (7)
10. Any disqualified person, as described in (1) through (9) above, who is a disqualified person with respect to any plan to which a multiemployer plan trust is permitted to make payments under section 4223 of ERISA -
Question 29 of 30
29. Question
Investment Management Consultants Association (IMCA) staff shall be responsible which of the following?
I. Receiving and maintaining the confidentiality of complaints and other information received by IMCA from Clients.
II. Providing periodic summaries to the PRB of all such complaints.
III. Conducting investigations of complaints at the direction of the PRB.
IV. Preparing and submitting disciplinary petitions to the PRB after review by Legal Counsel.Correct
IMCA staff shall be responsible for:
a. Receiving and maintaining the confidentiality of complaints and other information
received by IMCA from Clients or other parties with respect to Licensees’
alleged violations of the Code, Standards of Practice, and/or Rules.
b. Providing periodic summaries to the PRB of all such complaints.
c. Conducting investigations of complaints at the direction of the PRB.
d. Preparing and submitting disciplinary petitions to the PRB after review by Legal
Counsel.
e. Preparing and submitting disciplinary recommendations by a Hearing Panel to
the PRB.
f. Preparing draft orders for review and approval by a Hearing Panel, the PRB,
the IMCA Appeals Board, and/or any member of any of the aforementioned
bodies.
g. Obtaining all necessary confidentiality and/or conflict of interest agreements by
members of the PRB, the IMCA Appeals Board, and/or Hearing Panel members.Incorrect
IMCA staff shall be responsible for:
a. Receiving and maintaining the confidentiality of complaints and other information
received by IMCA from Clients or other parties with respect to Licensees’
alleged violations of the Code, Standards of Practice, and/or Rules.
b. Providing periodic summaries to the PRB of all such complaints.
c. Conducting investigations of complaints at the direction of the PRB.
d. Preparing and submitting disciplinary petitions to the PRB after review by Legal
Counsel.
e. Preparing and submitting disciplinary recommendations by a Hearing Panel to
the PRB.
f. Preparing draft orders for review and approval by a Hearing Panel, the PRB,
the IMCA Appeals Board, and/or any member of any of the aforementioned
bodies.
g. Obtaining all necessary confidentiality and/or conflict of interest agreements by
members of the PRB, the IMCA Appeals Board, and/or Hearing Panel members. -
Question 30 of 30
30. Question
A bond may include a provision that allows the issuer to do which of the following before the maturity date?
I. Retire
II. Call all of the issue
III. Call part of the issue
IV. ReturnCorrect
A bond may include a provision that allows the issuer to retire or call all or part of the issue before the maturity date.
Incorrect
A bond may include a provision that allows the issuer to retire or call all or part of the issue before the maturity date.
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