CEBS RPA 2 ALL 2026 QUESTIONS AND ANSWERS
RATED A+
✔✔Variance vs Standard Deviation - ✔✔Standard deviation easier to interpret because
same units as returns
✔✔Investment Manager Selection Criteria - ✔✔Performance history strategy references
and decision process
✔✔DC Plan Communication Requirement - ✔✔Participants must receive enough
information to make informed choices
✔✔Lifecycle Fund - ✔✔Portfolio adjusted automatically as retirement nears
✔✔Target-Date Fund - ✔✔Investment mix becomes more conservative over time
✔✔GIC - ✔✔Insurance contract guaranteeing principal and interest
✔✔Exclusive Benefit Rule - ✔✔Plan assets must benefit employees and beneficiaries
only
✔✔Pension Plan Tax Advantage - ✔✔Qualified plan investment income is tax-exempt
✔✔Bond Price Relationship - ✔✔Interest rates and bond prices move inversely
✔✔Market Risk Cannot Be Eliminated - ✔✔Diversification cannot remove systematic
risk
✔✔Firm-Specific Risk Can Be Eliminated - ✔✔Diversification reduces unsystematic risk
✔✔Most Tested Fiduciary Concept - ✔✔Fiduciaries must prudently select AND monitor
investments/providers
, ✔✔Best Manager Evaluation Metric - ✔✔Time-weighted return
✔✔Best Long-Term Growth Metric - ✔✔Geometric mean
✔✔Most Important Diversification Concept - ✔✔Correlation drives portfolio risk
reduction
✔✔ Purchasing Power Risk - ✔✔Inflation reduces real return
✔✔Business Risk - ✔✔Risk company earnings decline and cannot pay obligations
✔✔Interest Rate Risk - ✔✔Rates ↑ cause bond prices ↓
✔✔Market Risk - ✔✔Market-wide risk that cannot be diversified away
✔✔Specific Risk - ✔✔Firm-specific risk that CAN be diversified away
✔✔Liquidity Risk - ✔✔Risk investment cannot be sold quickly without loss
✔✔Financial Risk - ✔✔Risk caused by use of debt/leverage
✔✔Currency Risk - ✔✔Risk from exchange rate fluctuations
✔✔Country Risk - ✔✔Political/economic instability risk in foreign investing
✔✔Yield - ✔✔Income portion of investment return
✔✔Capital Gain/Loss - ✔✔Increase or decrease in asset price
✔✔Total Return - ✔✔Income + price change divided by purchase price
✔✔Return Relative - ✔✔Total return + 1
✔✔Cumulative Wealth Index - ✔✔Measures compounded growth over time
✔✔Arithmetic Mean - ✔✔Average single-period return
✔✔Geometric Mean - ✔✔True compound growth rate over multiple periods
✔✔Alpha - ✔✔Return attributable to manager skill
✔✔Beta - ✔✔Measure of market/systematic risk
RATED A+
✔✔Variance vs Standard Deviation - ✔✔Standard deviation easier to interpret because
same units as returns
✔✔Investment Manager Selection Criteria - ✔✔Performance history strategy references
and decision process
✔✔DC Plan Communication Requirement - ✔✔Participants must receive enough
information to make informed choices
✔✔Lifecycle Fund - ✔✔Portfolio adjusted automatically as retirement nears
✔✔Target-Date Fund - ✔✔Investment mix becomes more conservative over time
✔✔GIC - ✔✔Insurance contract guaranteeing principal and interest
✔✔Exclusive Benefit Rule - ✔✔Plan assets must benefit employees and beneficiaries
only
✔✔Pension Plan Tax Advantage - ✔✔Qualified plan investment income is tax-exempt
✔✔Bond Price Relationship - ✔✔Interest rates and bond prices move inversely
✔✔Market Risk Cannot Be Eliminated - ✔✔Diversification cannot remove systematic
risk
✔✔Firm-Specific Risk Can Be Eliminated - ✔✔Diversification reduces unsystematic risk
✔✔Most Tested Fiduciary Concept - ✔✔Fiduciaries must prudently select AND monitor
investments/providers
, ✔✔Best Manager Evaluation Metric - ✔✔Time-weighted return
✔✔Best Long-Term Growth Metric - ✔✔Geometric mean
✔✔Most Important Diversification Concept - ✔✔Correlation drives portfolio risk
reduction
✔✔ Purchasing Power Risk - ✔✔Inflation reduces real return
✔✔Business Risk - ✔✔Risk company earnings decline and cannot pay obligations
✔✔Interest Rate Risk - ✔✔Rates ↑ cause bond prices ↓
✔✔Market Risk - ✔✔Market-wide risk that cannot be diversified away
✔✔Specific Risk - ✔✔Firm-specific risk that CAN be diversified away
✔✔Liquidity Risk - ✔✔Risk investment cannot be sold quickly without loss
✔✔Financial Risk - ✔✔Risk caused by use of debt/leverage
✔✔Currency Risk - ✔✔Risk from exchange rate fluctuations
✔✔Country Risk - ✔✔Political/economic instability risk in foreign investing
✔✔Yield - ✔✔Income portion of investment return
✔✔Capital Gain/Loss - ✔✔Increase or decrease in asset price
✔✔Total Return - ✔✔Income + price change divided by purchase price
✔✔Return Relative - ✔✔Total return + 1
✔✔Cumulative Wealth Index - ✔✔Measures compounded growth over time
✔✔Arithmetic Mean - ✔✔Average single-period return
✔✔Geometric Mean - ✔✔True compound growth rate over multiple periods
✔✔Alpha - ✔✔Return attributable to manager skill
✔✔Beta - ✔✔Measure of market/systematic risk
