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AAFM CWM_LEVEL_2 - Chartered Wealth Manager (CWM) Certification Level II Examination

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Total 1259 questions

Section C (4 Mark)

Azhar deposits Rs. 12,500 in an account that pays a ROI of 20% p.a compounded annually on 5th. Of March 2010. Calculate the date on which the balance in his account would be Rs.35,338/-

A.

15thNovember 2015

B.

15th August 2015

C.

25th November 2015

D.

15th August 2016

Section B (2 Mark)

It was unconstitutional for the U.S. government to levy an income tax before the passage of which amendment?

A.

14th Amendment

B.

16th Amendment

C.

18th Amendment

D.

17th Amendment

Section A (1 Mark)

Mr.Gopal is working in a reputed company and earning Rs. 3,00,000/- p.a. and is now 48 years old. He has invested Rs. 3,00,000/- in an annuity which will pay him after 5 years a certain amount p.m. at the end of every month for 10 years. Rate of interest is 8% p.a. Calculate how much he will receive at the end of every month after 5 years?

A.

5,355

B.

5423

C.

5691

D.

5487

Section B (2 Mark)

As per article 12 Double Taxation Avoidance Agreement with Singapore, Royalties and fees for technical services arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.However, such royalties and fees for technical services may also be taxed in the Contracting State in which they arise and according to the laws of that Contracting State, but if the recipient is the beneficial owner of the royalties or fees for technical services, the tax so charged shall not exceed__________ per cent.

A.

10

B.

15

C.

20

D.

12

Section C (4 Mark)

Your broker recommends that you purchase XYZ Inc. at Rs.60. The stock pays a Rs.2.40 dividend which (like its per share earnings) is expected to grow annually at 8 percent. If you want to earn 12 percent on your funds, is this a good buy?

A.

Price of the stock is overvalued, so should buy

B.

Price of the stock is undervalued, so should buy

C.

Price of the stock is overvalued, so should not buy

D.

Price of the stock is undervalued, so should not buy

Section B (2 Mark)

Differences between hedge funds and mutual funds are that

A.

Hedge funds are only subject to minimal regulation.

B.

Hedge funds are typically open only to wealthy or institutional investors.

C.

Hedge funds managers can pursue strategies not available to mutual funds such as short selling, heavy use of derivatives, and leverage.

D.

All of the above

Section A (1 Mark)

A put option on a stock is said to be out of the money if

A.

The exercise price is higher than the stock price.

B.

The exercise price is less than the stock price.

C.

The exercise price is equal to the stock price.

D.

The price of the put is higher than the price of the call.

Section A (1 Mark)

Expenditure incurred by an employer on medical treatment and stay abroad of the employee shall not be taxed in the case of ___________.

A.

an employee whose gross total income before including the said expenditure does not exceed Rs. 2 lakhs.

B.

an employee whose income under the head “Salaries” exclusive of all monetary perquisites does not exceed Rs. 2 lakhs.

C.

an employee whose income under the head “Salaries” exclusive of allnon-monetary perquisites does not exceed Rs. 2 lakhs.

D.

all employees irrespective of their amount of gross total income/the amount of income under the head “Salaries”.

Section C (4 Mark)

Which of the following statements is/are correct?

A.

I and II

B.

I, II and III

C.

III and IV

D.

All of the Above

Section B (2 Mark)

NRIs are granted a special benefit by way of an option of being taxed at concessional tax rate of ________ as regards "investment income" and _______ as regards "long term capital gains" arising from "specified assets.

A.

20% and 10%

B.

15% and20%

C.

12% and 10%

D.

10% and 15%

Section B (2 Mark)

The _________ is a plot of __________.

A.

CML , individual stocks and efficient portfolios

B.

CML and both efficient and inefficient portfolios, only

C.

SML and individual securities and efficient portfolios

D.

SML and individual securities, inefficient portfolios, and efficient portfolios.

Section A (1 Mark)

The Net Operating Income (NOI) for a real estate investment is calculated as:

A.

Gross potential income + vacancy and collection loss rate – insurance- real estate taxes-utility expenses- estimated maintenance expenses

B.

Gross potential income-vacancy and collection loss rate – insurance- real estate taxes-utility expenses- estimated maintenance expenses

C.

Gross potential income - vacancy and collection loss rate + insurance- real estate taxes-utility expenses- estimated maintenance expenses-financing cost

D.

Gross potential income + vacancy and collection loss rate - insurance + real estate taxes-utility expenses- estimated maintenance expenses-depreciation

Section C (4 Mark)

A portfolio consists of 3 securities.

What is the standard deviation of the portfolio?

A.

2.5

B.

3.5

C.

7.7

D.

6.9

Section C (4 Mark)

Which of the following application of Options Strategy is correct?

A.

I, II and III

B.

IV and V

C.

II, IV and V

D.

All of the Above

Section B (2 Mark)

Which of the following statement is/are correct?

A.

(i) only

B.

(ii) only

C.

Both are correct

D.

Both are incorrect

Section A (1 Mark)

A loan where the borrower pays interest each period, and repays some or all of the principal of the loan over time is called a(n) _________ loan.

A.

Amortized

B.

Continuous

C.

Balloon

D.

Pure discount

Section A (1 Mark)

Mr. X’s minor daughter earned Rs. 50000 from his special talent. This income will be clubbed with

A.

It will not be clubbed

B.

The income of Mrs. X

C.

The income of Mr. X

D.

Mr. X or Mrs. X, whoever’s income is higher

Section A (1 Mark)

AUM stands for

A.

Asset Utilization Model

B.

Asset Under Management

C.

Area Under Management

D.

None of the above

Section A (1 Mark)

Mr. Raghav is now 40 years old. He has invested some amount in an annuity which will pay him after 10 years Rs. 30,000/- p.a. at the end of every year for 10 years. Rate of interest is 6% p.a. Calculate how much he has invested today?

A.

123295

B.

220803

C.

121826

D.

127252

Section A (1 Mark)

The first step of portfolio management is:

A.

To assess market conditions.

B.

To determine objectives, constraints and preferences.

C.

To develop strategies and implement them.

D.

To adjust the portfolio as necessary.

Section A (1 Mark)

Which of the following can be the underlying for a commodity derivative contract?

A.

Interest Rate

B.

Euro-Indian Rupee

C.

Gold

D.

NIFTY

Section A (1 Mark)

The subscription paid into PPF account enjoys the tax benefit under

A.

Sec 80D

B.

Sec 10

C.

Sec 80C

D.

Sec 80G

Section B (2 Mark)

All of the following are assumptions made by technical analysts except:

A.

Changes in trend are caused by shifts in supply and demand relationships.

B.

Stock price movements are independent.

C.

Security prices tend to move in trends.

D.

Supply and demand of securities are determined by various factors.

Section A (1 Mark)

CRM as a discipline that depends on people, process, information and __________

A.

Technology

B.

Innovation

C.

Discovery

D.

All of the given options

Section A (1 Mark)

The income received by the approved superannuation fund on the investments made by the fund is

A.

Exempt from income tax

B.

Taxed as the concession rate of 10% of the income

C.

Taxed at the hands of employees concerned based on the share of each employee

D.

Taxed under Capital Gains Tax depending upon the nature of investment

Section A (1 Mark)

Financial Independence usually occurs between _______

A.

40-55

B.

55-70

C.

70-85

D.

None of the above

Section A (1 Mark)

________ bias means that investors are too slow in updating their beliefs in response to evidence.

A.

Framing

B.

Regret avoidance

C.

Overconfidence

D.

Conservatism

Section B (2 Mark)

Which of the above statements is/are correct?

A.

(i) only

B.

(ii) only

C.

(i) and (ii) both are correct

D.

Both are incorrect

Section B (2 Mark)

You are considering the purchase of a quadruplex apartment. Effective gross income (EGI) during the first year of operations is expected to be Rs33,600 (Rs700 per month per unit). First-year operating expenses are expected to be Rs. 13,440 (at 40 percent of EGI). Ignore capital expenditures. The purchase price of the quadruplex is Rs. 200,000. The acquisition will be financed with Rs60,000 in equity and a Rs. 140,000 standard fixed-rate mortgage. The interest rate on the debt financing is eight percent and the loan term is 30 years. Assume, for simplicity, that payments will be made annually and that there are no up-front financing costs.

What is the overall capitalization rate?

A.

9.47

B.

10.56

C.

10.08

D.

12.5

Section B (2 Mark)

What are the two strategies that have the broadest mandate across financial, commodity, and futures markets?

A.

I & V

B.

II & IV

C.

IV & V

D.

I & III

Section A (1 Mark)

A Wealth Management model in which private client and Institutional Asset Management are kept entirely separate is known as

A.

Private Client Integrated Model

B.

Sovereign Model

C.

Asset Management Integrated Model

D.

Manufacturing distribution Model

Section A (1 Mark)

A cognitive heuristic in which a decision-maker relies upon knowledge that is readily available rather than examining other alternatives or procedures. Which of the following is most likely consistent with this bias?

A.

Anchoring and Adjustment Bias

B.

Availability Bias

C.

Confirmation bias

D.

Overconfidence Bias

Section C (4 Mark)

Read the senario and answer to the question.

Assume Neeraj bought a second hand car in June 2007. Since the insurance premium was due, Neeraj paid it in the old owner’s name.Neeraj didn’t receive the original policy despite repeated requests. The car later met with an accident causing damages worth Rs. 10000. Neeraj had not transferred the car in his name, as Neeraj did not have the original documents. Can the insurer reject his claim?

A.

Claim will be entertained only to the amount of the insurance premium paid.

B.

The claim will be entertained after Neeraj convert the vehicle in his name

C.

The insurance company is well within its right not accepting the claim from Neeraj

D.

No, as Neeraj has paid the insurance premium

Section A (1 Mark)

In Working Capital Finance, what should be the minimum current ratio the borrower needs to ensure the compliance under the first method of lending.

A.

1.50:1

B.

1.33:1

C.

1.17:1

D.

1.25:1

Section B (2 Mark)

According to the efficient markets view, value stocks earn higher expected return than growth stocks because:

A.

Value stocks are riskier than growth stock

B.

Value stocks are less risky than growth stock

C.

Value stocks have higher expected future payoffs than growth stock

D.

Value stocks have lower expected future payoffs than growth stock

Section B (2 Mark)

In US which form tells your employer all they need to know about your tax-related allowance information?

A.

W-2

B.

W-4

C.

W-10

D.

W-7

Section C (4 Mark)

Pinnacle India Ltd, reported a net profit of Rs1.085 billion on sales of Rs7.425 billion in 1993. The sales/book value ratio in 1993 was approximately 1.2, and the dividend payout ratio was 20%. The book value per share was Rs19 in 1993. The firm is expected to maintain high growth for ten years, after which the growth is expected to drop to 6%, and the dividend payout ratio is expected to increase to 65%. The beta of the stock is 1.05. (The treasury bill rate is 7%.)

Estimate the price/sales ratio for the company.

A.

42.57

B.

44.93

C.

35.15

D.

45.5

Section B (2 Mark)

The______________ recognizes the commercial reality that even when a transfer pricing adjustment is made under that sub-section the amount represented by the adjustment would not actually have been received in India or would have actually gone out of the country.

A.

First proviso to section 92 C(4)

B.

Second proviso to section 92C(4)

C.

First proviso to section 91 C(4)

D.

Second proviso to section 91C(4)

Section C (4 Mark)

Mr. A bought XYZ Ltd. For Rs. 3850 and simultaneously sells a call option at an strike price of Rs. 4000. Which means Mr. A does not think that the price of XYZ Ltd. will rise above Rs. 4000. However, incase it rises above Rs. 4000, Mr. A does not mind getting exercised at that price and exiting the stock at Rs. 4000 (Target Sell Price = 3.90% return on the stock purchase price). Mr. A receives a premium of Rs. 80 for selling the call. Thus net outflow to Mr. A is (Rs. 3850 – Rs. 80) = Rs. 3770. He reduces the cost of buying the stock by this strategy.

What would be the Net Payoff of the Strategy?

• If XYZ closes at 3350

• If XYZ closes at 4800

A.

-420 and 230

B.

-240 and 130

C.

220 and 145

D.

520 and 170

Section A (1 Mark)

With the______________, the buyer gets no protection from encumbrances. This deed type has very specialized uses.

A.

General Warranty Deed

B.

Bargain and Sale deed

C.

The Special Warranty Deed

D.

The Quitclaim Deed

Section A (1 Mark)

Which of the following statements is/are correct with respect to naïve diversification?

A.

Only I

B.

Only II

C.

Both of the above

D.

None of the Above

Section A (1 Mark)

Marketing relationships are:

A.

Intensely personal, like human relationships

B.

Intended to deliver short-term customer satisfaction

C.

Intended to deliver long-term customer satisfaction

D.

The most important element of the marketing mix

Section A (1 Mark)

Under which of the following categories of General Warranty Deed does the Grantor warrants that the property is free of any liens or encumbrances unless they're specifically stated in the deed?

A.

Covenant of seisin

B.

Covenant against encumbrances

C.

Covenant of quiet enjoyment

D.

Covenant of further assurance

Section B (2 Mark)

You have been asked to estimate the market value of an apartment complex that is producing annual net operating income of Rs44,500. Four highly similar and competitive apartment properties within two blocks of the subject property have sold in the past three months. All four offer essentially the same amenities and services as the subject. All were open-market transactions with similar terms of sale. All were financed with 30-year fixed-rate mortgages using 70 percent debt and 30 percent equity. The sale prices and estimated first-year net operating incomes were as follows:

What is the indicated value of the property using direct capitalization?

A.

Rs 3,30,000

B.

Rs 3,90,351

C.

Rs3,75,000

D.

Rs 3,57,000

Section C (4 Mark)

As an investor you have a required rate of return of 14 percent for investments in risky stocks. You have to analyze three risky firms and must decide which (if any) to purchase. Your information is

What is the maximum price? Which (if any) should buy?

A.

Rs. 23/-, Rs. 47/-, Rs.70/- , Share- C

B.

Rs. 15.29, Rs. 43.71, Rs. 63.64, No buy

C.

Rs. 15.29, Rs. 22.50, Rs. 49.50, Share B and C

D.

Rs. 16.36, Rs. 49.67, Rs. 69.75, Share B only

Section B (2 Mark)

Sudhir has invested Rs. 60,000, 30% of which is invested in Company A, which has an expected rate of return of 15%, and 70% of which is invested in Company B, with an expected return of 12%. What is the return on Sudhir’s portfolio?

A.

Rs. 6750/-

B.

Rs. 7740/-

C.

Rs. 6350/-

D.

Rs. 6875/-

Section B (2 Mark)

What is the correlation coefficient between the companies A and B, if their covariance is 23 and their standard deviation is 8 and 7 respectively?

A.

0.78

B.

0.72

C.

0.41

D.

0.67

Section B (2 Mark)

As per Double Taxation Avoidance Agreement, the Royalties in Mauritius is charged at:

A.

10

B.

15

C.

20

D.

Nil

Section B (2 Mark)

The lesson from the credit crisis of 2007-2009 is that securitized assets and credit swaps are:

A.

Complex financial instruments

B.

Difficult to correctly value and measure in terms of risk exposure

C.

Possible to set in motion a financial contagion that cannot be easily stopped without active government intervention

D.

All of the above are correct

Section B (2 Mark)

Calculate Gross Annual Value where Gross Municipal Value is Rs.120, Fair Rent is Rs.105. Actual rent receivable is Rs.100& Standard Rent is Rs.125

A.

Rs.120

B.

Rs.100

C.

Rs.105

D.

Rs.125