Free PDF 2026 CISI ICWIM–High-quality Pass Test Guide
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CISI International Certificate in Wealth & Investment Management Sample Questions (Q195-Q200):
NEW QUESTION # 195
A professional trader was given some price-sensitive, unpublished information in relation to a major grain supplier. As a direct result, they buy futures contracts on grain. Have they committed the offence of insider trading?
- A. No, provided the futures contract is held to expiry
- B. Yes, regardless of profit or loss
- C. No, futures on commodities are not defined as securities under insider trading regulations
- D. Only if they make a profit
Answer: C
Explanation:
Performance attribution analysis evaluates the performance of a portfolio by breaking it into components attributed to specific investment decisions. These include:
* Asset Allocation: The decision on the proportion of the portfolio allocated to different asset classes (e.
g., stocks, bonds).
* Sector Choice: Selecting specific sectors (e.g., technology, healthcare) within asset classes.
* Security Selection: Choosing individual securities within the selected sectors.
Risk analysis, while critical for investment management, is not typically part of standard performance attribution frameworks.
References:
* International Certificate in Wealth & Investment Management: Portfolio performance evaluation section.
* Standard attribution models: Brinson, Hood, and Beebower model widely used in performance attribution.
NEW QUESTION # 196
How does the inclusion of a bond fund within a portfolio provide benefits over direct investing?
- A. Bond fund charges will always be lower
- B. A bond fund is more likely to match the exact needs of the client
- C. It allows for diversification that would not otherwise be possible
- D. A bond fund provides a greater level of income
Answer: C
Explanation:
Bond funds offer greater diversification than purchasing individual bonds, reducing risk exposure.
* Why is Option B Correct?
* Broad diversification # A bond fund spreads investments across multiple issuers, reducing default risk.
* Professional management # Bond fund managers actively manage interest rate risk and credit risk.
* Why Not Other Options?
* A (Greater income) # Bond funds do not always provide higher income than direct bonds.
* C (Lower charges) # Bond funds may have management fees that individual bonds do not.
* D (Exact match to client needs) # Individual bonds may be better suited for specific income needs.
# Reference: CFA Institute (Fixed Income Investing), CISI Wealth & Investment Management.
NEW QUESTION # 197
Standard deviation is used when analysing portfolios because it:
- A. Identifies underperforming assets
- B. Allows for a comparison of volatility
- C. Makes it easier to track the performance against a benchmark
- D. Identifies profitable trades
Answer: B
Explanation:
Standard deviation measures the volatility of returns, helping investors compare the risk levels of different portfolios or assets. A higher standard deviation indicates greater uncertainty in returns, which can signify higher risk.
NEW QUESTION # 198
A stockbroking firm receives both buy and sell orders for the same security but from different clients. How can they best avoid a conflict of interest?
- A. Openly disclose all orders received to the clients
- B. Process the sell orders before the buy orders
- C. Place orders as they are received from the clients
- D. Withdraw their services for the transaction
Answer: C
Explanation:
* Avoiding Conflicts of Interest:
* By placing orders in the order they are received, the firm ensures fairness and transparency.
* This approach avoids any preferential treatment and complies with regulatory obligations.
* Elimination of Other Options:
* A: Withdrawing services would not address the conflict and is impractical.
* C: Disclosing orders breaches confidentiality agreements.
* D: Prioritizing sell orders introduces bias and conflict.
References:
* ICWIM Module 5: Discussion on ethics and conflict of interest mitigation in trading.
NEW QUESTION # 199
The difference between principal trading and agency trading is that an agent:
- A. Aims to profit from the bid-offer spread
- B. Will usually execute the order against their own trading book
- C. Does not always offer best execution
- D. Charges commission on the deal
Answer: D
Explanation:
In agency trading, the firm acts as an intermediary on behalf of the client, arranging the transaction in the market rather than trading from its own inventory. The firm's role is to execute the client's order and it is typically remunerated by a commission or explicit fee for that service. This contrasts with principal trading, where the firm trades using its own trading book and becomes the counterparty to the client. In principal trades, the firm's economic reward is commonly embedded in the price, often through the bid-offer spread or a mark-up or mark-down, and this structure can create different conflicts of interest and best execution considerations. Option A describes principal trading, not agency. Option C also aligns more with principal dealing, where the dealer's spread is the source of profit. Option B is incorrect because best execution obligations apply and the firm must take sufficient steps to obtain the best possible result for the client within the applicable execution policy. The clearest distinguishing feature for an agent in this question set is that an agent charges commission.
NEW QUESTION # 200
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