NEWEST CIPM Level II Exam | ULTIMATE
EXAM WITH CORRECT ANSWERS AND
RATIONALES FOR CERTIFICATION
SUCCESS
1. The primary purpose of performance attribution is
to:
A) Calculate time-weighted return
B) Explain the sources of a portfolio's excess return
relative to a benchmark
C) Determine the risk-adjusted return
D) Calculate the Sharpe ratio
E) Measure downside deviation
Correct answer: B
Rationale: Attribution decomposes excess return into
allocation, selection, and interaction effects.
2. A portfolio has a return of 12%, and its benchmark
has a return of 10%. The excess return is:
A) 1%
B) 2%
C) 3%
,D) 4%
E) 5%
Correct answer: B
Rationale: Excess return = portfolio return -
benchmark return = 2%.
3. In a multi-period attribution, the interaction effect
measures:
A) The sum of allocation and selection
B) The combined effect of allocation and selection
decisions
C) The pure allocation effect
D) The pure selection effect
E) The currency effect
Correct answer: B
Rationale: Interaction = (weight difference) × (return
difference).
4. A portfolio manager allocates more to a sector that
outperforms the benchmark. This will result in a
positive:
A) Selection effect
B) Allocation effect
,C) Interaction effect
D) Currency effect
E) Timing effect
Correct answer: B
Rationale: Allocation effect captures sector
weighting decisions.
5. Under the Brinson, Hood, and Beebower (BHB)
model, the pure allocation effect is calculated as:
A) (w_p - w_b) × (r_b - r_b_total)
B) (w_p - w_b) × (r_p - r_b)
C) (w_p - w_b) × (r_b)
D) (w_p - w_b) × (r_p)
E) (r_p - r_b) × w_b
Correct answer: A
Rationale: Allocation = (portfolio weight - benchmark
weight) × (benchmark return - total benchmark
return).
6. A portfolio has a selection effect of +0.5% and an
allocation effect of +0.3%. The interaction effect is
+0.1%. The total excess return is:
A) 0.7%
, B) 0.8%
C) 0.9%
D) 1.0%
E) 1.1%
Correct answer: C
Rationale: Total = allocation + selection + interaction
= 0.3 + 0.5 + 0.1 = 0.9%.
7. In fixed-income attribution, the interest rate effect
is decomposed into:
A) Level, slope, and curvature
B) Credit, liquidity, and option
C) Duration, convexity, and yield curve
D) Sector, quality, and maturity
E) Country, industry, and currency
Correct answer: A
Rationale: Yield curve movements are decomposed
into level, slope, and curvature.
8. A bond portfolio has a duration of 5 years. The
benchmark duration is 4 years. Interest rates
increase by 1%. The duration contribution to excess
return is:
EXAM WITH CORRECT ANSWERS AND
RATIONALES FOR CERTIFICATION
SUCCESS
1. The primary purpose of performance attribution is
to:
A) Calculate time-weighted return
B) Explain the sources of a portfolio's excess return
relative to a benchmark
C) Determine the risk-adjusted return
D) Calculate the Sharpe ratio
E) Measure downside deviation
Correct answer: B
Rationale: Attribution decomposes excess return into
allocation, selection, and interaction effects.
2. A portfolio has a return of 12%, and its benchmark
has a return of 10%. The excess return is:
A) 1%
B) 2%
C) 3%
,D) 4%
E) 5%
Correct answer: B
Rationale: Excess return = portfolio return -
benchmark return = 2%.
3. In a multi-period attribution, the interaction effect
measures:
A) The sum of allocation and selection
B) The combined effect of allocation and selection
decisions
C) The pure allocation effect
D) The pure selection effect
E) The currency effect
Correct answer: B
Rationale: Interaction = (weight difference) × (return
difference).
4. A portfolio manager allocates more to a sector that
outperforms the benchmark. This will result in a
positive:
A) Selection effect
B) Allocation effect
,C) Interaction effect
D) Currency effect
E) Timing effect
Correct answer: B
Rationale: Allocation effect captures sector
weighting decisions.
5. Under the Brinson, Hood, and Beebower (BHB)
model, the pure allocation effect is calculated as:
A) (w_p - w_b) × (r_b - r_b_total)
B) (w_p - w_b) × (r_p - r_b)
C) (w_p - w_b) × (r_b)
D) (w_p - w_b) × (r_p)
E) (r_p - r_b) × w_b
Correct answer: A
Rationale: Allocation = (portfolio weight - benchmark
weight) × (benchmark return - total benchmark
return).
6. A portfolio has a selection effect of +0.5% and an
allocation effect of +0.3%. The interaction effect is
+0.1%. The total excess return is:
A) 0.7%
, B) 0.8%
C) 0.9%
D) 1.0%
E) 1.1%
Correct answer: C
Rationale: Total = allocation + selection + interaction
= 0.3 + 0.5 + 0.1 = 0.9%.
7. In fixed-income attribution, the interest rate effect
is decomposed into:
A) Level, slope, and curvature
B) Credit, liquidity, and option
C) Duration, convexity, and yield curve
D) Sector, quality, and maturity
E) Country, industry, and currency
Correct answer: A
Rationale: Yield curve movements are decomposed
into level, slope, and curvature.
8. A bond portfolio has a duration of 5 years. The
benchmark duration is 4 years. Interest rates
increase by 1%. The duration contribution to excess
return is:
