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IFC Final Exam Questions and Answers
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IFC Final Exam Questions and Answers Types of risk 1. inflation rate risk 2. business (unsystematic/unique) 3. political risk 4. liquidity risk 5. interest rate risk 6. foreign exchange risk 7. default risk what is the difference between nominal and real rate of inflation? nominal: ...

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  • December 17, 2024
  • 8
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

Subjects

  • ifc final exam questions and answers
  • types of risk 1 inflation rate risk 2 business
  • what is the difference between nominal and real ra

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  • IFPC
  • IFPC

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IFC Final Exam Questions and Answers
Types of risk - answer 1. inflation rate risk
2. business (unsystematic/unique)
3. political risk
4. liquidity risk
5. interest rate risk
6. foreign exchange risk
7. default risk

what is the difference between nominal and real rate of inflation? - answer nominal:
return not adjusted for inflation. generally higher than real

real: adjusted for inflation

real return= nominal - inflation

3 asset class - answer 1. fixed income securities
2. equities
3. money market instruments

standard deviation - answer the likelihood that returns will deviate away from
expected value.

higher = riskier

Beta - answer the degree to which an investment moves in relation to the market. (-1
to +3)

Alpha - answer excess returns generated beyond the beta

systematic risk vs unsystematic risk - answer systematic risk: market risk. can't
eliminate through diversification

unssystematic: specific/business/unique risk. can be diversified away

Positively correlated vs negatively correlated - answer positive: usually same type of
industry. very high risk, very volatile

negative: diversifies and decreases risk

passive vs. active investor - answer passive: feel the market is efficient

active: feel the market is inefficient, try to beat the market

, Asset Allocation - answer selection of security classes to be held in a certain
proportion

Fundamental analysis - answer top-down approach (funnel)
• looking for intrisic value and economic indicators
1. leading: indexes, housing
2. coincidal: GDP, retail sales, incomes
3. lagging: unemployment, inventory

Technical analysis - answer patterns
•the psychology of the market
•heavily based on supply and demand

3 common measure of risk - answer beta, variance, standard deviation

inflation - answer sustained trend of rising prices, reduces purchasing power

4 types of financial statements - answer 1. statement of financial position (balance
sheet) ALE

2. statement of comprehensive income
revenue, expenses and depreciation

3. statement of cash flow (change)
comparison of the companies status year over year

4. statement of changes in equity retained earnings, dividends issued

advantages of mutual funds - answer 1. professional management
2. diversification
3. variety
4. automatic reinvestment
5. liquidity
6. collateral
7. ease of estate planning

disadvantages of mutual funds - answer 1. high fees
2. market risk
3. professional mgmt isn't infallible
4. sold as LT product
5. tax consequences

2 types of mutual fund structures - answer 1. trusts:
most common
board of trustees

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