CIMA Exam Preparation 2025: Detailed Guide
to BA1, BA2, BA3, and BA4 with Practice Tools
1. Question: What statistical measure represents the average squared difference between the mean
and each item in a population or sample?
A. Standard deviation
B. Skewness
C. Variance
D. Kurtosis
Correct Answer: C. Variance
2. Question: Which measure of dispersion is expressed as the square root of the variance and is
used to quantify volatility and dispersion from an average?
A. Variance
B. Skewness
C. Standard deviation
D. Covariance
Correct Answer: C. Standard deviation
3. Question: The term that describes the asymmetry of data points from a normal distribution is:
A. Kurtosis
B. Standard deviation
C. Skewness
D. Variance
Correct Answer: C. Skewness
,4. Question: What statistical measure quantifies the peakedness of a probability distribution or
normal distribution curve, where a positive value indicates a more slender, high peak/fat tails,
and a negative value indicates thinner tails and a flatter peak?
A. Skewness
B. Kurtosis
C. Variance
D. Standard deviation
Correct Answer: B. Kurtosis
5. Question: Which statistical modeling technique is used to approximate the probability of future
outcomes through multiple simulations?
A. Regression analysis
B. Monte Carlo
C. Time series analysis
D. Factor analysis
Correct Answer: B. Monte Carlo
6. Question: What investment analysis concept graphically shows how portfolio risk decreases over
time due to the clustering of returns around a long-term average, suggesting risk diminishes over
time due to diversification?
A. Samuelson's and Merton's Graph
B. Efficient Frontier
C. Investment consultant fallacy
D. Capital Asset Line
Correct Answer: C. Investment consultant fallacy
7. Question: Which concept suggests that the expected terminal value of an investment is much
wider with more potential outcomes due to uncertainty over time?
A. Investment consultant fallacy
, B. Modern Portfolio Theory
C. Samuelson's and Merton's Graph
D. Efficient Market Hypothesis
Correct Answer: C. Samuelson's and Merton's Graph
8. Question: What measures how two variables are related and the degree to which they move
together, where a negative value means variables move inversely, and a high positive value
indicates they do not offer much diversification?
A. Correlation
B. Covariance
C. Variance
D. Standard deviation
Correct Answer: B. Covariance
9. Question: Which metric gives the proportion of variation in one variable that can be explained by
another variable, indicating the level of diversification in a portfolio and the closeness of fit?
A. Beta
B. Alpha
C. R-squared (R2) or coefficient of determination
D. Correlation coefficient
Correct Answer: C. R-squared (R2) or coefficient of determination
10. Question: What is the interest rate before taking inflation into account?
A. Real rate of interest
B. Effective interest rate
C. Nominal rate of interest
D. Discount rate
Correct Answer: C. Nominal rate of interest
, 11. Question: Which interest rate measure takes the compounding period into account, providing a
more accurate measure of interest charges?
A. Nominal interest rate
B. Real interest rate
C. Effective interest rate
D. Discount rate
Correct Answer: C. Effective interest rate
12. Question: Which equation correctly represents the nominal rate?
A. (1 - real rate) * (1 + inflation rate)
B. (1 + real rate) / (1 + inflation rate)
C. (1 + real rate) * (1 + inflation rate)
D. Real rate + inflation rate
Correct Answer: C. (1 + real rate) * (1 + inflation rate)
13. Question: What is the sum of the present value of all cash flows, used to help analyze
profitability?
A. Internal Rate of Return (IRR)
B. Payback Period
C. Net Present Value (NPV)
D. Profitability Index
Correct Answer: C. Net Present Value (NPV)
14. Question: The discount rate that makes the Net Present Value (NPV) of an investment zero is
known as the:
A. Discount rate
B. Required rate of return
C. Internal Rate of Return (IRR)
to BA1, BA2, BA3, and BA4 with Practice Tools
1. Question: What statistical measure represents the average squared difference between the mean
and each item in a population or sample?
A. Standard deviation
B. Skewness
C. Variance
D. Kurtosis
Correct Answer: C. Variance
2. Question: Which measure of dispersion is expressed as the square root of the variance and is
used to quantify volatility and dispersion from an average?
A. Variance
B. Skewness
C. Standard deviation
D. Covariance
Correct Answer: C. Standard deviation
3. Question: The term that describes the asymmetry of data points from a normal distribution is:
A. Kurtosis
B. Standard deviation
C. Skewness
D. Variance
Correct Answer: C. Skewness
,4. Question: What statistical measure quantifies the peakedness of a probability distribution or
normal distribution curve, where a positive value indicates a more slender, high peak/fat tails,
and a negative value indicates thinner tails and a flatter peak?
A. Skewness
B. Kurtosis
C. Variance
D. Standard deviation
Correct Answer: B. Kurtosis
5. Question: Which statistical modeling technique is used to approximate the probability of future
outcomes through multiple simulations?
A. Regression analysis
B. Monte Carlo
C. Time series analysis
D. Factor analysis
Correct Answer: B. Monte Carlo
6. Question: What investment analysis concept graphically shows how portfolio risk decreases over
time due to the clustering of returns around a long-term average, suggesting risk diminishes over
time due to diversification?
A. Samuelson's and Merton's Graph
B. Efficient Frontier
C. Investment consultant fallacy
D. Capital Asset Line
Correct Answer: C. Investment consultant fallacy
7. Question: Which concept suggests that the expected terminal value of an investment is much
wider with more potential outcomes due to uncertainty over time?
A. Investment consultant fallacy
, B. Modern Portfolio Theory
C. Samuelson's and Merton's Graph
D. Efficient Market Hypothesis
Correct Answer: C. Samuelson's and Merton's Graph
8. Question: What measures how two variables are related and the degree to which they move
together, where a negative value means variables move inversely, and a high positive value
indicates they do not offer much diversification?
A. Correlation
B. Covariance
C. Variance
D. Standard deviation
Correct Answer: B. Covariance
9. Question: Which metric gives the proportion of variation in one variable that can be explained by
another variable, indicating the level of diversification in a portfolio and the closeness of fit?
A. Beta
B. Alpha
C. R-squared (R2) or coefficient of determination
D. Correlation coefficient
Correct Answer: C. R-squared (R2) or coefficient of determination
10. Question: What is the interest rate before taking inflation into account?
A. Real rate of interest
B. Effective interest rate
C. Nominal rate of interest
D. Discount rate
Correct Answer: C. Nominal rate of interest
, 11. Question: Which interest rate measure takes the compounding period into account, providing a
more accurate measure of interest charges?
A. Nominal interest rate
B. Real interest rate
C. Effective interest rate
D. Discount rate
Correct Answer: C. Effective interest rate
12. Question: Which equation correctly represents the nominal rate?
A. (1 - real rate) * (1 + inflation rate)
B. (1 + real rate) / (1 + inflation rate)
C. (1 + real rate) * (1 + inflation rate)
D. Real rate + inflation rate
Correct Answer: C. (1 + real rate) * (1 + inflation rate)
13. Question: What is the sum of the present value of all cash flows, used to help analyze
profitability?
A. Internal Rate of Return (IRR)
B. Payback Period
C. Net Present Value (NPV)
D. Profitability Index
Correct Answer: C. Net Present Value (NPV)
14. Question: The discount rate that makes the Net Present Value (NPV) of an investment zero is
known as the:
A. Discount rate
B. Required rate of return
C. Internal Rate of Return (IRR)
