1|Page
Accredited Investment Fiduciary (AIF) Exam|| Verified
Questions and Correct Answers||Newest Exam!!.pdf
Legislation underlying the Practices indicates that U.S.
Courts should have access to investment assets in the
event there are egregious violations of fiduciary
responsibility. T or F - Answer-True - Practice 1.6 reads,
"Clients assets are protected from theft and
embezzlement." Because all of the Practices are
substantiated by legislation, you can infer that the
statement is correct.
A fiduciary or co-fiduciary cannot be held responsible for a
breach of their fiduciary responsibility if they can
demonstrate they were not aware of a particular duty or
requirement. T or F - Answer-F - Ignorance is not a viable
defense.
Expected returns are uncertain. Under the normal
distribution curve, approximately 95% of the expected
returns fall within one standard deviation of the mean. T or
F. - Answer-False - Under the normal distribution curve,
one standard deviation encompasses 66% of the sample
and two standard deviations encompass 95% of the
sample. Thus , a portfolio with an expected return of 8%
,2|Page
and standard deviation of 17% could be expected to have
a return of less than -9% or more than 25% in
approximately 3 years out of 9.
The most widely used estimate of absolute risk is? -
Answer-Standard deviation - Alpha and the Sharpe Ratio
are measures of risk-adjusted return. Beta is a measure of
market risk. Standard deviation is the most widely
accepted measure of absolute risk.
All of the following are true of the policy portfolio EXCEPT:
1. It relates to asset allocation based upon efficient
markets
2. It should always be reflected in the Investment Policy
Statement (IPS)
3. Ideally, it is used to model a portfolio that will allow
portfolio principal and returns to meet projected liabilities.
4. It is focused on Alpha - Answer-4. The policy portfolio is
contrasted with the pricing portfolio. The policy portfolio
establishes the asset allocation that should be reflected in
all Investment Policy Statements. Ideally, a well crafter
policy portfolio is effective in meeting projected liabilities.
The policy portfolio does not address the possibility that
managers can outperform on risk adjusted return bases;
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therefore, Alpha is not considered in the policy portfolio.
Risk, as measured by Beta, is a focal point of the policy
portfolio. Alpha is the focus of the pricing portfolio.
All of the following are decisive factors to consider when
analyzing the number of asset classes to include in a
portfolio EXCEPT:
1. Portfolio size
2. Investment expertise of decision-makers
3. Existing brokerage platform limitations
4. Ability of decision-makers to properly monitor
investments - Answer-3. All else being equal: the larger
the portfolio size, the more asset classes that should be
available; the greater the investment expertise of the
decision makers, the more asset classes that should be
available; and lastly, the greater the ability to monitor the
investments, the more assets classes that should be
available. Brokerage platform should not be a deciding
factor on the number of asset classes because if a
particular platform cannot accommodate the required
asset classes, it is likely that another platform could. The
fiduciary should assure the platform meets the needs of
the participants, rather than fail to meet the participants'
investment needs because of platform limitations
, 4|Page
The investment policy statement should be specific
enough that a ________ could implement the plan. -
Answer-The investment policy statement should be
specific enough that a competent third party could
implement the plan. In the event the investment advisor is
unable to perform his or her duties, the IPS must be used
to replicate the process the investment manager was
following. An investment professional, CPA, or Broker
implies that a level of professional expertise is required,
which is not the case.
The best way to rebalance a particular asset class is to: -
Answer-Resampled efficiency optimization takes into
account uncertainty regarding the accuracy of the input
values to the optimizer: asset class expected returns,
risks, and correlations. As a result, the resampled
efficiency approach results in more conservative expected
returns for the portfolio as evidenced by a lower efficient
frontier line.
Which of the following is a reason to prepare an
investment policy statement:
Select one:
Accredited Investment Fiduciary (AIF) Exam|| Verified
Questions and Correct Answers||Newest Exam!!.pdf
Legislation underlying the Practices indicates that U.S.
Courts should have access to investment assets in the
event there are egregious violations of fiduciary
responsibility. T or F - Answer-True - Practice 1.6 reads,
"Clients assets are protected from theft and
embezzlement." Because all of the Practices are
substantiated by legislation, you can infer that the
statement is correct.
A fiduciary or co-fiduciary cannot be held responsible for a
breach of their fiduciary responsibility if they can
demonstrate they were not aware of a particular duty or
requirement. T or F - Answer-F - Ignorance is not a viable
defense.
Expected returns are uncertain. Under the normal
distribution curve, approximately 95% of the expected
returns fall within one standard deviation of the mean. T or
F. - Answer-False - Under the normal distribution curve,
one standard deviation encompasses 66% of the sample
and two standard deviations encompass 95% of the
sample. Thus , a portfolio with an expected return of 8%
,2|Page
and standard deviation of 17% could be expected to have
a return of less than -9% or more than 25% in
approximately 3 years out of 9.
The most widely used estimate of absolute risk is? -
Answer-Standard deviation - Alpha and the Sharpe Ratio
are measures of risk-adjusted return. Beta is a measure of
market risk. Standard deviation is the most widely
accepted measure of absolute risk.
All of the following are true of the policy portfolio EXCEPT:
1. It relates to asset allocation based upon efficient
markets
2. It should always be reflected in the Investment Policy
Statement (IPS)
3. Ideally, it is used to model a portfolio that will allow
portfolio principal and returns to meet projected liabilities.
4. It is focused on Alpha - Answer-4. The policy portfolio is
contrasted with the pricing portfolio. The policy portfolio
establishes the asset allocation that should be reflected in
all Investment Policy Statements. Ideally, a well crafter
policy portfolio is effective in meeting projected liabilities.
The policy portfolio does not address the possibility that
managers can outperform on risk adjusted return bases;
,3|Page
therefore, Alpha is not considered in the policy portfolio.
Risk, as measured by Beta, is a focal point of the policy
portfolio. Alpha is the focus of the pricing portfolio.
All of the following are decisive factors to consider when
analyzing the number of asset classes to include in a
portfolio EXCEPT:
1. Portfolio size
2. Investment expertise of decision-makers
3. Existing brokerage platform limitations
4. Ability of decision-makers to properly monitor
investments - Answer-3. All else being equal: the larger
the portfolio size, the more asset classes that should be
available; the greater the investment expertise of the
decision makers, the more asset classes that should be
available; and lastly, the greater the ability to monitor the
investments, the more assets classes that should be
available. Brokerage platform should not be a deciding
factor on the number of asset classes because if a
particular platform cannot accommodate the required
asset classes, it is likely that another platform could. The
fiduciary should assure the platform meets the needs of
the participants, rather than fail to meet the participants'
investment needs because of platform limitations
, 4|Page
The investment policy statement should be specific
enough that a ________ could implement the plan. -
Answer-The investment policy statement should be
specific enough that a competent third party could
implement the plan. In the event the investment advisor is
unable to perform his or her duties, the IPS must be used
to replicate the process the investment manager was
following. An investment professional, CPA, or Broker
implies that a level of professional expertise is required,
which is not the case.
The best way to rebalance a particular asset class is to: -
Answer-Resampled efficiency optimization takes into
account uncertainty regarding the accuracy of the input
values to the optimizer: asset class expected returns,
risks, and correlations. As a result, the resampled
efficiency approach results in more conservative expected
returns for the portfolio as evidenced by a lower efficient
frontier line.
Which of the following is a reason to prepare an
investment policy statement:
Select one:
