PORTFOLIO MANAGEMENT TECHNIQUES - PMT Exam Prep CSI

  Topic 1: Describe an Investment Management Firm’s Basic Ownership and Explain the Differences Between Public and Privately Owned Firms Q1 : Which of the following best describes the ownership structure of a privately owned investment management firm? A. 100% ownership by external shareholders B. Ownership divided equally between employees and external investors C. Employee majority-owned with a passive external owner or 100% employee-owned D. Completely owned by a holding company Answer : C. Employee majority-owned with a passive external owner or 100% employee-owned Explanation : Privately owned firms are either fully owned by employees or are majority-owned by employees with a passive external owner. Q2 : In a publicly owned investment management firm, the firm is typically: A. Wholly owned by employees B. Structured as a subsidiary of a publicly traded holding company C. Jointly owned by regulators and employees D. Managed by shareholders directly Answer : B. Structured as a s...

  Topic 1: The Role of Financial Intermediation in the Function and Growth of Capital Markets Q1 : Which of the following is a potential consequence of a lack of efficient financial intermediation in capital markets? A. A decrease in the volume of trades on secondary markets B. An increase in market liquidity C. A reduction in the cost of capital for businesses D. Enhanced transparency and investor confidence Answer : A. A decrease in the volume of trades on secondary markets Explanation : Inefficient financial intermediation can reduce the flow of funds, which in turn lowers liquidity in secondary markets. Q2 : Financial intermediaries improve market efficiency primarily by: A. Providing direct funding to corporations from individual investors B. Eliminating the need for institutional investors in capital markets C. Reducing transaction costs and information asymmetry between borrowers and lenders D. Offering direct regulatory oversight for capital markets Answer : C. Reducing tra...

  1. Explain the Importance of Ethics in the Investment Management Industry Q1 : Why are ethics considered a foundation in the investment management industry? A. They provide legal standards for investments B. They guide behavior in situations where regulations may not apply C. They replace the need for regulatory oversight D. They focus only on profit maximization Answer : B. They guide behavior in situations where regulations may not apply Explanation : Ethics serve as a guide for appropriate behavior, especially in scenarios where formal regulations do not exist. Q2 : Ethics in the investment industry are important because: A. They eliminate all risk B. They ensure decisions are profit-driven C. They promote trust between clients and managers D. They focus solely on personal interests Answer : C. They promote trust between clients and managers Explanation : Ethical behavior helps build trust, which is crucial in maintaining strong client-manager relationships. Q3 : In which situ...