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

QUESTION NO: 1
Section C (4 Mark)
Read the senario and answer to the question.
Harish wants a monthly investment to achieve the goal of his children's higher education. For accumulation of fund you recommend Harish to invest in an investment vehicle which invests in the ratio of 20:80 in Debt and Equity. If Harish starts investing from 1st Dec 2010, what approximate amount should he set aside every month for each child to achieve the goal? Harish maintains separate investment accounts for Chirag and Vishesh and invests till they individually turn 21 years of age.

Correct Answer: B
QUESTION NO: 2
Section A (1 Mark)
A(n) _____________ is related to the credit option and is usually aimed at lenders able to handle comparatively limited declines in value but wants insurance against serious losses.

Correct Answer: D
QUESTION NO: 3
Section A (1 Mark)
How many types of power of attorney are there?

Correct Answer: D
QUESTION NO: 4
Section A (1 Mark)
Convertible bond arbitrage is to event driven as _________ is to corporate restructuring.

Correct Answer: A
QUESTION NO: 5
Section B (2 Mark)
A project should be considered if the Profitability Index is

Correct Answer: A
QUESTION NO: 6
Section B (2 Mark)
Payback period is

Correct Answer: B
QUESTION NO: 7
Section B (2 Mark)
If an investor strongly believes that the stock market is going to have a sharp decline shortly, he or she could maximize profit by

Correct Answer: C
QUESTION NO: 8
Section A (1 Mark)
Which of the following is an assumption of the CMT?

Correct Answer: B
QUESTION NO: 9
Section B (2 Mark)
If the currency of your country is appreciating, the result should be to ______ exports and to _______ imports.

Correct Answer: C
QUESTION NO: 10
Section A (1 Mark)
An option which gives the holder the right to sell a stock at a specified price at some time in the future is called a

Correct Answer: C
QUESTION NO: 11
Section B (2 Mark)
On 1st January 2011, Mr. Dutt took a personal loan of Rs.1,00,000/- for a period of 3 years at an 21% rate of interest. The loan is to be on monthly EMI on monthly reducing balance method.
What about be interest and principal amount to be paid in October 2013?

Correct Answer: B
QUESTION NO: 12
Section B (2 Mark)
Rahul decides to deposit Rs. 5,000/- every month into an account yielding 12 % per annum compounded monthly for 20 years. What will be the accumulated value in this account after 20 years and how much amount can be withdrawn from this account every month for a further period of 20 years of ROI is 8 % per annum compounded monthly?

Correct Answer: B
QUESTION NO: 13
Section C (4 Mark)
Read the senario and answer to the question.
Compute Expanded Liquidity Ratio before his retirement as (beginning of October 2007) and find out for how many months of expenses, his liquid assets are sufficient enough to cover?

Correct Answer: A
QUESTION NO: 14
Section B (2 Mark)
What an employee should check in his retirement benefit plan offered by the employer?

Correct Answer: B
QUESTION NO: 15
Section A (1 Mark)
Shyam invests in a plan in which he has to pay Rs. 10,000/- per year Starting from the end of 5th year till the end of 12th. How much amount Should he invest today in order to meet his objective. If the interest rate is
10%p.a.?

Correct Answer: B
QUESTION NO: 16
Section C (4 Mark)
Pizer Drugs, a large drugstore chain, had sales per share of Rs122 in 1993, on which it reported earnings per share of Rs2.45 and paid a dividend per share of Rs1.12. The company is expected to grow 6% in the long term, and has a beta of 0.90. The current Risk Free Rate is 7%.
Estimate the appropriate Price for Pizer Drug and what would the profit margin need to be to justify the price per share if the stock is currently trading for Rs34 per share, assuming the growth rate is estimated correctly,

Correct Answer: A
QUESTION NO: 17
Section A (1 Mark)
Dividend received by a shareholder from an Indian company the whole of whose income is agricultural income shall be treated as:

Correct Answer: A
QUESTION NO: 18
Section A (1 Mark)
Which of the following statements least accurately describes a form of risk associated with investing in fixed income securities?

Correct Answer: D
QUESTION NO: 19
Section A (1 Mark)
Holistic advisory services which cater to specific client segments such as entrepreneurs, professionals are known as____________________.

Correct Answer: A
QUESTION NO: 20
Section B (2 Mark)
Vikash has following portfolio with related details given below:

Calculate the portfolio beta?

Correct Answer: B
QUESTION NO: 21
Section B (2 Mark)
Behavioral finance argues that ____________.

Correct Answer: B
QUESTION NO: 22
Section C (4 Mark)

Sajan Mathews, aged 29 years (as on 2nd April, 2010), is working with a Multi National Company since December 2004. He has approached you, a CWM for preparing his wealth plan. He is staying in his own house at Ahmedabad. His wife Jennifer, aged 31 years, is a fashion designer. She has earned a net profit of Rs.
4 lakh in FY 2008-09. They have a son, Mark of age 4 years (born on 12.02.2006), and a daughter, Stephanie (born on of 23.09.2009). Sajan is also supporting his parents staying in their own house at Surat to whom he sends Rs. 10,000 p.m. His monthly house hold expenses are Rs. 30000 p.m. (excludes his investments, payment of premia and EMIs). Sajan normally gets 5% increase in his gross salary year-on-year in the beginning of every financial year, apart from bonus. The effect for this year is yet to take place, though he has received a bonus of Rs. 3,31,680 for the year 2009-10. He has taken a family floater policy for health insurance involving an annual premium of Rs. 16268 and a total cover of Rs. 15 lakh.
Current Assets & Liabilities of the Family (As on 31st March, 2010 unless otherwise specified in foot notes)


____________
1.Purchased on 25th October, 2006, annual premium paid Rs. 14,798
2.Purchased on Mark's 2nd birthday for a term of 15 years; annual premium Rs. 41,374
3.Subscribed on 01.09.2008 @ 10% p.a., with interest credited quarterly to his savings account; renewed at same rate for one year on 01.09.2009 without penal provision for premature withdrawal
4.Home loan of Rs. 17 lakh taken on 1st November, 2004 at a fixed interest of 7.5% p.a. for a 15 year term.
5.Car loan of Rs. 4.50 lakh taken on 1st April, 2008 at a fixed interest of 11.25% p.a. for a 4-year term.
Goals:
1.To provide for higher education of Mark and Stephanie. Initial expenses at their respective age of 18 years, Rs. 3 lakh (current cost), and subsequently Rs. 2 lakh p.a. for the next two years, and Rs. 3.5 lakh p.a. for the following 2 years.
2.Marriage expenses of Rs. 15 lakh (current cost) for each child at their respective age of 27 years.
3.Retirement corpus at the age of 58 years to sustain 70% of pre-retirement household expenses till his lifetime and 50% till stephanie's expected life.
4.A Bigger house valued at Rs. 50 lakh today, a year from now.
5.To build a separate fund for vacation expenses of Rs. 2 lakh (at current cost) every year 10 years from now so that the corpus so built is self-sustaining till the marriage of Stephanie.
Assumptions:

Correct Answer: B
QUESTION NO: 23
Section A (1 Mark)
Mr. Naresh is working in a reputed company and earning Rs. 5,00,000/- p.a. and is now 50 years old. He has invested Rs. 2,50,000/- in an annuity which will pay him after 5 years a certain amount p.a. at the end of every year for 10 years. Rate of interest is 8% p.a. Calculate how much he will receive at the end of every year after
5 years?

Correct Answer: B
QUESTION NO: 24
Section A (1 Mark)
Unabsorbed depreciation can be carried forward for ____________.

Correct Answer: D
QUESTION NO: 25
Section A (1 Mark)
In The CAMPARI model of Credit evaluation 'C' stands for:

Correct Answer: B
QUESTION NO: 26
Section C (4 Mark)
Your company had the following balance sheet and income statement information for 2003:


The industry average inventory turnover is 5. You think you can change your inventory control system so as to cause your turnover to equal the industry average, and this change is expected to have no effect on either sales or cost of goods sold. The cash generated from reducing inventories will be used to buy tax-exempt securities which have a 7 percent rate of return. What will your profit margin be after the change in inventories is reflected in the income statement?

Correct Answer: C
QUESTION NO: 27
Section B (2 Mark)
Compulsory maintenance of account is required u/s 44AA of IT, if the gross receipt/ total sales exceed
_______

Correct Answer: A
QUESTION NO: 28
Section A (1 Mark)
A market timing approach that increases the proportion of funds in stocks when the stock market is expected to be rising, and increases cash when the stock market is expected to be falling is a:

Correct Answer: B
QUESTION NO: 29
Section A (1 Mark)
The principle in real estate valuation which acknowledges limitation on growth in market value, not ably in the case of improvements is known as:

Correct Answer: B
QUESTION NO: 30
Section B (2 Mark)
Mr. Ram buys 100 calls on a stock with a strike of Rs.1,200. He pays a premium of Rs.50/call. A month later the stock trades in the market at Rs.1,300. Upon exercise he will receive __________.

Correct Answer: C
QUESTION NO: 31
Section A (1 Mark)
The eligibility Criteria for Self Employed Professionals & Businessman for minimum annual income of the applicant in case of personal loan is:

Correct Answer: B
QUESTION NO: 32
Section A (1 Mark)
A document which is used to hand over the legal powers to sign on legal documents pertaining to the property to someone other than the owner is called_____________

Correct Answer: C
QUESTION NO: 33
Section C (4 Mark)
Which of the following firms is likely to have the same value from both models?

Correct Answer: B
QUESTION NO: 34
Section B (2 Mark)
Which of the following statement is/are correct?

Correct Answer: C
QUESTION NO: 35
Section A (1 Mark)
Which of the following characteristics are unique to real estate that differ from other asset classes?

Correct Answer: C
QUESTION NO: 36
Section A (1 Mark)
Which of the following is a challenge of making a consumer loan?

Correct Answer: D
QUESTION NO: 37
Section A (1 Mark)
The principle that people do not buy or rent real estate, but judge properties as different sets of benefits and costs is called

Correct Answer: B
QUESTION NO: 38
Section B (2 Mark)
Mr. Manish purchased a residential house for Rs.3 lakh on 1-4-1972. Its market value on 1-4-1981 was, however, Rs.12 lakh. He sells the house during the financial year 2011-12 for Rs.98 lakh. Calculate the taxable long term capital gain.[CII-12-13: 852,11-12: 785,10-11:711]

Correct Answer: A
QUESTION NO: 39
Section A (1 Mark)
After originally investing Rs10,000 and selling your investment for Rs 12,000, you reinvest the total amount and tell yourself that you will not be concerned if you lose Rs 2,000 in this new investment. You are likely demonstrating which type of judgment error?

Correct Answer: B
QUESTION NO: 40
Section C (4 Mark)
Read the senario and answer to the question.
Which types(s) of investment(s), would be consistent with their retirement goal?

Correct Answer: C
QUESTION NO: 41
Section C (4 Mark)
Read the senario and answer to the question.
Calculate the Net Worth of Mr. Adhikari as on 31/03/2009.

Correct Answer: B
QUESTION NO: 42
Section A (1 Mark)
If the intrinsic value of a stock is greater than market value, which of the following is a reasonable conclusion?

Correct Answer: D
QUESTION NO: 43
Section B (2 Mark)
To maximize this benefit a bank must:

Correct Answer: B
QUESTION NO: 44
Section A (1 Mark)
Manish is thinking of acquiring some shares of ABC Ltd. The rate of returns is as follows:

Calculate the expected return on the investments

Correct Answer: A

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