CWM_LEVEL_2 Exam Dumps - Chartered Wealth Manager (CWM) Certification Level II Examination
Section C (4 Mark)
Zenith Finance is a big financial firm which owns several mutual funds. The funds are managed individually by portfolio managers but it has an investment committee that oversees all of the funds. This committee is responsible for evaluating the performance of the funds relative to the appropriate benchmark and relative to stated investment objectives of each individual fund. During a recent investment committee meeting, the poor performance of its Equity Funds were discussed. In particular, the inability of the portfolio managers to outperform their benchmarks was highlighted. The net conclusion of the committee was to review the performance of the manager responsible for each fund and dismiss those managers whose performance had lagged substantially behind the appropriate benchmark.
The fund with the worst relative performance is the Zenith Large Cap Fund which invests in large cap stocks. A review of the operations of the fund found the following:
• The turnover of the fund was almost double that of other similar style mutual funds
• The fund’s portfolio manager solicited input from her entire staff prior to making any decision to sell an existing holding
• The beta of the Zenith Large Cap Fund’s portfolio was 65% higher than the beta of other similar style mutual funds
• The portfolio manager refuses to increase the Capital Goods sector weighting because of past losses the fund incurred in the sector
• The portfolio manager sold all the fund’s Oil Marketing Companies stocks as the price per barrel of oil rose above $105. He expects oil prices to fall back to the $80 to $85 per barrel
• No stock is considered for purchase in the Large Cap Fund unless the portfolio manager has 10 years of financial information on that company.
A committee member made the following 2 comments:
Comment 1: “One reason for the poor performance of Large Cap Mutual Fund is that the portfolio lacks recognizable companies. I believe that good companies make good investments
Comment 2: “The portfolio manager of the Large Cap Fund refuses to acknowledge his mistakes. He seems to sell stocks that appreciate, but she holds stocks that have declined in value
The two behavioral biases exhibited respectively in the above 2 comments from the committee are:
Section A (1 Mark)
…………………. Is implied in favor of the party creating it
Section C (4 Mark)
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.
Section B (2 Mark)
An asset may be purchased for Rs 10,00,000. It is expected to generate Rs 10,000 annual income for 10 years after which it is expected to sell for Rs. 1,20,000. What is the rate of return expected from this investment?
Section A (1 Mark)
CRM as a discipline that depends on people, process, information and __________
Section A (1 Mark)
Minimum number of employees in an establishment for it to come under the purview of the Payment of Gratuity act is ______
Section B (2 Mark)
Which of the following statements is TRUE concerning zero coupon bonds?
Section A (1 Mark)
Companies can build interest and enthusiasm by using databases to remember customer preferences. This strategy helps to which of the following?