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Exam : CWM_LEVEL_2
Title : Chartered Wealth Manager
(CWM) Certification Level II
Examination
Vendor : AAFM
Version : DEMO
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QUESTION NO: 1
Section A (1 Mark)
As per ARTICLE 12 in DTTA with US , the maximum tax rate on the gross amount of the
royalties or fees for included services in the Article is:
A. 15
B. 10
C. 20
D. 12
Answer: A
QUESTION NO: 2
Section A (1 Mark)
The assessed is charged to income-tax in the assessment year following the previous year:
A. A non-resident business firm which shipped goods on 1.5.210 at Visakhapatnam Port in
Andhra Pradesh
B. An employee left India to USA on 1.8.2010 with no intention of returning
C. ABC firm which discontinued its business on 1.9.2010
D. An employee-assessed of a University who worked during 1.4.09 to 30.03.2010
Answer: D
QUESTION NO: 3
Section A (1 Mark)
The cost which the Wealth management firms would generally not be able to fully absorb the
revenue shock in the near future is known as Sticky Cost.
A. TRUE
B. FALSE
Answer: A
QUESTION NO: 4
Section A (1 Mark)
Loss of a closely held company cannot be carried and set off unless on the last day of the
previous year in which the loss was incurred and as on the last day of the previous year in
which such loss is set off, at least:
A. 51% of shares are beneficially held by the same persons
B. 50% of the shares are beneficially held by the same persons
C. 49% of the shares are beneficially held by the same persons
D. 60% of the shares are beneficially held by the same persons
Answer: A
QUESTION NO: 5
Section A (1 Mark)
Marketing relationships are:
A. Intensely personal, like human relationships
B. Intended to deliver short-term customer satisfaction
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C. Intended to deliver long-term customer satisfaction
D. The most important element of the marketing mix
Answer: D
QUESTION NO: 6
Section B (2 Mark)
The arbitrage pricing theory (APT) and the CAPM both assume all except which of the
following?
A. Investors have homogeneous beliefs.
B. Investors are risk-averse utility maximizers.
C. Borrowing and lending can be done at the rate RF.
D. Markets are perfect.
Answer: C
QUESTION NO: 7
Section A (1 Mark)
Select the correct statement regarding the market portfolio. It:
A. Is readily and precisely observable.
B. Is a risky portfolio.
C. Is the lowest point of tangency between the risk-free rate and the efficient frontier
D. Should be composed of stocks or bonds.
Answer: B
QUESTION NO: 8
Section A (1 Mark)
The steps to establishing an investment policy are to state the
A. Minimum investment and maximum fees.
B. SEBI guidelines for prudent man investing.
C. Objectives and constraints and preferences.
D. Asset allocation parameters and time horizons.
Answer: C
QUESTION NO: 9
Section A (1 Mark)
During "Teen age years" life stage, typical asset allocation should be
A. 25% equities, rest in fixed income instruments
B. 50% equities, rest in fixed income instruments
C. 75% equities, rest in fixed income instruments
D. None of the above
Answer: D
QUESTION NO: 10
Section A (1 Mark)
A rapidly growing GDP indicates a(n) ______ economy with ______ opportunity for a firm to
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increase sales.
A. Stagnant; little
B. Stagnant; ample
C. Expanding; little
D. Expanding; ample
Answer: D
QUESTION NO: 11
Section B (2 Mark)
Basic Idea of retirement benefit plan is
A. To meet lump sum needs immediately at retirement
B. Provide regular income during retirement plan
C. Take care of inflation
D. All of the above
Answer: D
QUESTION NO: 12
Section A (1 Mark)
Which of the following is not true about traditional defined benefit plans?
A. A defined benefit plan provides a specified retirement benefit, and is funded based on
actuarial assumptions
B. A defined benefit plan provides higher proportionate benefits for key employees when key
employees as a group are older than rank and file employees
C. A defined benefit plan provides an individual account for each participant employee
D. A defined benefit plan can provide benefits for service prior to establishment of the plan
Answer: C
QUESTION NO: 13
Section A (1 Mark)
The cumulative number of futures contracts that are not offset at any point in time is called:
A. Margin
B. Open interest.
C. Hedged position.
D. MARKED to the market position.
Answer: B
QUESTION NO: 14
Section A (1 Mark)
The price that the buyer of a call option pays for the underlying asset if she executes her
option is called the
A. Strike price
B. Exercise price
C. execution price
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D. A or B
Answer: D
QUESTION NO: 15
Section A (1 Mark)
An individual is said to be a resident in India in the previous year (in which the Feb month has
29 days) if he is in India in that year for a period of ______days or more.
A. 70
B. 183
C. 182
D. 150
Answer: C
QUESTION NO: 16
Section C (4 Mark)
Rate of 15% p.a compounded annually will be equal to ---------------- % per month.
A. 1.25% per month
B. 1.7149% per month
C. 1.17149% per month
D. 1.117% per month
Answer: C
QUESTION NO: 17
Section A (1 Mark)
Limited growth prospects are indicated by
A. High dividend
B. High P/E ratio
C. Low dividend
D. High dividend and low P/E ratio
Answer: D
QUESTION NO: 18
Section B (2 Mark)
Consider these two investment strategies:
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Strategy ___ is the dominant strategy because __________.
A. 1, it is riskless
B. 1, it has the highest reward/risk ratio
C. 2, its return is at least equal to Strategy 1 and sometimes greater
D. 2, it has the highest reward/risk ratio
Answer: C
QUESTION NO: 19
Section B (2 Mark)
Miss Femina aged 17, is married to Mr. Masculine. Her mother alone is alive income by way
of interest on loans, of Miss Femina will be:-
A. Assessed to tax in the hands of her mother
B. Exempt from tax
C. Taxable in her own hands
D. Assessed to tax in the hands of Mr. Musciline
Answer: A
QUESTION NO: 20
Section C (4 Mark)
Read the senario and answer to the question.
Mr. Bhatia thinks he would require 50 lacs in today's terms for Neena's wedding at 25 years
of age. What amount he has to save at the end of every month for Neena's wedding
requirement with a 7% inflation rate and investment earning minimum 12% p.a.
A. Rs. 25,389
B. Rs. 24,315
C. Rs. 25,643
D. Rs. 26,956
Answer: C
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QUESTION NO: 21
Section A (1 Mark)
When the sponsored entities creates CMOs they often use different _____________ which
each promise a different coupon rate and which have different maturity and risk
characteristics.
A. Branches
B. Tranches
C. Products
D. Methods
Answer: B
QUESTION NO: 22
Section A (1 Mark)
A _________ portfolio is a well-diversified portfolio constructed to have a beta of 1 on one of
the factors and a beta of 0 on any other factor.
A. Factor
B. Market
C. Index
D. A and B
Answer: A
QUESTION NO: 23
Section B (2 Mark)
Pranoy is entitled to a basic salary of Rs. 5,000 p.m. and dearness allowance of Rs. 1,000
per month, 40% of which forms the part of the retirement benefits. He is also entitled to HRA
of Rs. 2,000 p.m. He actually pays Rs. 2,000 p.m. as rent for a house in Delhi. Compute the
taxable HRA.
A. Rs. 17,520
B. Rs. 32,400
C. Rs. 18,000
D. Rs. 24,000
Answer: A
QUESTION NO: 24
Section B (2 Mark)
Which of the following statements regarding a buy and hold strategy are true?
A. There are no selection choices to be made under this strategy.
B. This strategy is applicable only to large portfolios.
C. There is no reinvestment decision to make under this strategy.
D. This strategy produces lower transactions and search costs.
Answer: D
QUESTION NO: 25
Section C (4 Mark)
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Amit an industrialist wants to buy a flat in a housing society presently costing Rs. 35,00,000/-
after 6 years.
The cost of the house is expected to increase by 15% p.a for the first 3 years and by 10% in
the remaining years. Amit wants to start a SIP with monthly contributions in Birla Front Line
Equity Mutual Fund to pay for the down payment of the house which would be 25% of the
house value at that time. You as a CWM expect that the fund would give ROI of 14% p.a.
compounded monthly in the next 10 years. Please advise Amit the monthly SIP amount
starting at the beginning of every month for the next 6 years to fulfill his goal of buying the
Flat he desires.
A. 63422.72
B. 65185.55
C. 16537.56
D. 15883.32
Answer: D
QUESTION NO: 26
Section B (2 Mark)
Ram born in 1950 has a life expectancy at birth of 65 years. Sita his wife born in 1955 has a
life expectancy at birth of 70 years. Assuming that the life expectancies have not changed.
Ram is planning to buy an annuity to be paid to him or his wife till anyone of them is alive.
Assuming Ram will retire on attaining age 58 i.e. in
2008, what should be the time period of the annuity?
A. 10 years
B. 12 years
C. 7 years
D. 17 years
Answer: D
QUESTION NO: 27
Section B (2 Mark)
Conventional theories presume that investors ____________ and behavioral finance
presumes that they
____________.
A. are irrational; are irrational
B. are rational; may not be rational
C. are rational; are rational
D. may not be rational; may not be rational
Answer: B
QUESTION NO: 28
Section B (2 Mark)
Which of the following is true with regard to wealth planner's liability?
A. A disclaimer removes all liability
B. A principal advisor is responsible for actions of representative
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C. Advice is distinguishable from a recommendation
D. An advisor may not be held liable for failure to predict economic changes
Answer: D
QUESTION NO: 29
Section A (1 Mark)
Which of the following is/are the challenges of Private Banking?
A. I, II and III
B. I,III and IV
C. I, II and IV
D. All of Them
Answer: D
QUESTION NO: 30
Section C (4 Mark)
Vikas has an investment portfolio of Rs.100000, and a multiplier of 2. The initial portfolio mix
is Rs. 50000 in stocks and Rs. 50000 in bonds. If stock market goes up by 20%, what should
Vikas do under the constant mix policy?
A. He should sell Rs.5000 of stocks and invest it into bonds
B. He should sell Rs.10000 of bonds and invest it into stocks
C. He should buy Rs.20000 of bonds and invest it into stocks
D. He should sell his portfolio equally
Answer: A
QUESTION NO: 31
Section B (2 Mark)
Ramesh living in Kolkata is a trustee for Brijesh living in Mumbai, Ramesh remits trust funds
to Brijesh by bills drawn by a person of high creditworthiness in favor of the trustee as such
and payable at Mumbai. The bills later got dishonored. Is Ramesh bound to make good the
loss?
A. Yes
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B. No
Answer: B
QUESTION NO: 32
Section A (1 Mark)
An American call option can be exercised
A. Any time on or before the expiration date.
B. Only on the expiration date.
C. Any time in the indefinite future.
D. Only after dividends are paid.
Answer: A
QUESTION NO: 33
Section B (2 Mark)
How much loan can be given from PPF account in the year 2006-07?
A. 25% of the PPF balance in the year 2004-05
B. 25% of the PPF balance in the year 2005-06
C. 25% of the opening balance as on 01-04-06
D. None of the above
Answer: A
QUESTION NO: 34
Section B (2 Mark)
Suppose that Chicken Express, Inc. has a ROA of 7% and pays a 6% coupon on its debt.
Chicken Express has a capital structure that is 70% equity and 30% debt. Relative to a firm
that is 100% equity-financed, Chicken Express's Net Profit will be ________ and its ROE will
be ________.
A. Lower, lower
B. Higher, higher
C. Higher, lower
D. Lower, higher
Answer: D
QUESTION NO: 35
Section B (2 Mark)
Which of the following statements is/are correct?
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A. I, II and III
B. III and IV
C. I, II and IV
D. All of the above
Answer: C
QUESTION NO: 36
Section A (1 Mark)
Which of the following is true regarding the resistance level?
A. It tends to develop due to profit taking.
B. It is the level at which a significant decrease in demand is expected.
C. It is the level at which a significant increase in supply is expected.
D. It usually develops after a stock reaches a new low.
Answer: C
QUESTION NO: 37
Section B (2 Mark)
Rajiv's company was just surprised by a new competitor in their field. Rajiv wants to plan a
way for his business to retake the lead. For this purpose, Rajiv offered a plan to compete in
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the market. Which one of the following parts of the strategic landscape has been described?
A. Strategy initiation
B. Strategy formulation
C. Strategy implementation
D. Strategy assessment
Answer: B
QUESTION NO: 38
Section B (2 Mark)
Payback period is
A. Time required to recover the operating cost
B. Time required for cash flows to recover cost of investment and opportunity cost
C. Time required for cash flows to recover the cost of investment
D. None of the above
Answer: C
QUESTION NO: 39
Section A (1 Mark)
In US which of the following is classified as passive income?
A. Bonus income
B. Gain on the sale of real estate
C. Interest income
D. Income from a limited partnership
Answer: D
QUESTION NO: 40
Section B (2 Mark)
The following parameters are available for two mutual funds:
Calculate Treynor's performance index for Fund A & Fund B respectively
A. 8, 1.66
B. 10, 3.33
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C. 9, 2.50
D. 18, 4.25
Answer: B
QUESTION NO: 41
Section B (2 Mark)
Which of the following statements are true?
A. Only I
B. Only II
C. Both of the above
D. Neither of the above
Answer: C
QUESTION NO: 42
Section A (1 Mark)
According to the __________________ if irrational traders cause deviations from fundamental
value, rational traders will often be powerless to do anything about it.
A. Theory of Limited Arbitrage
B. Equity premium puzzle
C. Present-biased preferences
D. Inter Temporal Consumption
Answer: A
QUESTION NO: 43
Section B (2 Mark)
Fifteen Year ago, Sandeep set up his initial allocation in her defined contribution plan by
placing an equal amount in each asset class and never changed it. Over time, he increased
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his contribution by 3 % per year until he reached maximum amount allowed by law. Which of
the following biases that Sandeep suffers from?
A. Representativeness Bias
B. Status Quo Bias
C. Availability Bias
D. Confirmation Bias
Answer: B
QUESTION NO: 44
Section A (1 Mark)
As per Hindu succession Act 1956 following person is not considered as a class I heir of the
person who dies intestate
A. Widow
B. Mother
C. Father
D. Son/Daughter
Answer: C
Section C (4 Mark)
Mr. Saxena, age 45 years, is a software engineer and promoter of an Indian MNC. His family
comprises his wife Anupama, age 43 years, who is a house wife, elder son Arup, 16 years
(studying in 10th standard) and daughter Aarti, 14 years (studying in 8th standard). The
family resides in their self owned residential house in Mumbai. Most of their life amenities
such as cars, abroad vacations and full education cost of both kids are provided by Mr.
Saxena's company, as he is the Managing Director of his company. The company is growing
consistently and is on way to become a global legend in its field of operations. As such the
future prospects of Mr. Saxena are generous and progressive.
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Mr. Saxena is now planning to allocate his resources in the right fashion with your help as a
Chartered Wealth Manager.
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For this, he has disclosed his current personal financial details as follows:
Other details for FY 2007-08
1.Mr. Saxena has made investments worth Rs. 1.50 Lakh qualified U/S 80C.
2.He has donated Rs. 50,000 to Prime Ministers National Relief Fund.
3.He has transferred interest received by him on debentures to his wife's bank account the
same date he received it.
4.Mr. Saxena's minor son, Arup, is a recognized child artist in children cinema and
documentary films. Arup earned a sum of Rs. 1,50,000 from his assignments.
Mr. Saxena wants to resolve all estate bequeathing matters in his life time so that there
should be no dispute after his death. For this purpose he has prepared a "Holograph Will".
Current estimates of economy are positive and interest rates are not likely to increase further
in near future.
The family has a health cover provided by the company of Mr. Saxena. Also his house with
all its contents is insured adequately.
QUESTION NO: 45
Section C (4 Mark)
Suppose that an investor makes an investment in Stock ABC and that over the next 12
months ABC appreciates by 10 percent. He then thinks of selling ABC for normal portfolio
rebalancing purposes, but then come across an item in the, The Economic Times that sparks
new optimism: Could ABC climb even higher?
Which answer describes the likeliest response from an investor with regard to exhibiting
Regret Aversion Bias, given ABC's recent performance and this new information?
A. I and II
B. I or II
C. II and III
D. All of the Above
Answer: B
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QUESTION NO: 46
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
Answer: A
QUESTION NO: 47
Section A (1 Mark)
EMH frequently include, among others, assumptions such as:
A. I and II
B. II and III
C. I and III
D. All of the Above
Answer: D
QUESTION NO: 48
Section C (4 Mark)
Find out the effective quarterly rate for 18% per annum compounded half yearly.
A. 4.403% per Quarter
B. 4.50% per Quarter
C. 9.00% per Quarter
D. 4.44% per Quarter
Answer: A
QUESTION NO: 49
Section C (4 Mark)
The returns of 2 shares are as follows
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Calculate the covariance of returns.
A. 220.32
B. -420.11
C. 162.08
D. 270.36
Answer: C
QUESTION NO: 50
Section B (2 Mark)
In 2011-12, Steven has business profits of £34,125, net bank interest of £1,240 and net
dividends of £9,000.
He claims the personal allowance of £7,475. What is the income tax payable for the year
after subtracting tax deducted at source?
A. £7,360
B. £6,050
C. £8,280
D. £6,290
Answer: B
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