Preview Questions Portfolio Manager | Role Specific Skill

Question 1: In market analysis, what is the most common method for measuring the diversification of a portfolio?

Which action should you take?

Choose only one option

By using beta coefficients to measure the market risk of individual assets

By assessing the portfolio's turnover rate, indicating how frequently assets are traded

By calculating the correlation between assets to assess how different assets move in relation to each other

By determining the variance of each asset in relation to the portfolio's total risk

Question 2: In the case of portfolio diversification, which of the following risk factors should be considered when allocating across different asset classes in the BFSI sector?

Which action should you take?

Choose only one option

Liquidity risk and currency risk

Market risk, interest rate risk, and credit risk

Company-specific risk and inflation risk only

Operational risk and default risk only

Question 3: How does liquidity risk impact the decision-making process in asset allocation?

Which action should you take?

Choose only one option

Higher liquidity risk encourages investing heavily in illiquid assets

Higher liquidity risk requires a reduction in illiquid asset allocation

Liquidity risk has no impact on asset allocation decisions

Illiquid assets should be favored for high return potential

Question 4: What is the purpose of using a risk parity strategy in portfolio management?

Which action should you take?

Choose only one option

To balance the risk contribution of each asset class rather than allocating based on expected returns

To create a diversified portfolio by investing equally in all asset classes

To ensure that the portfolio's risk is minimized by holding only low-volatility assets

To target a fixed risk level for the portfolio and adjust allocations accordingly

Question 5: In the context of market analysis, what is the key advantage of using fundamental analysis over technical analysis when evaluating long-term investments?

Which action should you take?

Choose only one option

It focuses on quantitative metrics rather than qualitative factors

It allows portfolio managers to predict short-term price fluctuations based on historical data

It helps portfolio managers time market entry and exit points effectively

It provides insight into the intrinsic value of an asset, helping to determine its future growth potential

Question 6: When conducting sector rotation in portfolio management, which of the following is most important when analyzing market cycles?

Which action should you take?

Choose only one option

Understanding the growth phase of the business cycle and allocating assets accordingly

Analyzing the government policies that affect individual sectors

Monitoring interest rate changes to predict sector performance

Identifying the most volatile sectors and investing in them for short-term profits