Preview Questions Financial Analyst | Role Specific Skill

Question 1: How would you analyze the impact of credit risk on the valuation of a fixed-income security?

Which action should you take?

Choose only one option

Evaluate the Macaulay Duration

Use the Fisher equation for inflation adjustment

Use a credit spread adjustment model

Apply the Modified Duration formula

Question 2: When performing an analysis of a high-risk, high-reward investment, which factor should be the primary focus in the risk management process?

Which action should you take?

Choose only one option

Liquidity of the asset

Sensitivity to changes in interest rates

Credit risk and volatility

Tax implications

Question 3: In a financial institution, what is the most effective way to incorporate risk management into the budgeting process?

Which action should you take?

Choose only one option

Set aside contingency funds for potential risks

Incorporate risk-adjusted discount rates in budgeting assumptions

Base budget projections on the most conservative estimates

Use historical loss data to forecast potential risks

Question 4: What is a key indicator of operational efficiency in BFSI financial reporting?

Which action should you take?

Choose only one option

Net profit margin

Non-performing assets to total loans

Cost-to-income ratio

Return on average assets

Question 5: How would you evaluate the performance of a private equity investment compared to publicly traded stocks?

Which action should you take?

Choose only one option

I treat private equity investments the same as publicly traded stocks

I calculate the internal rate of return (IRR), compare it to benchmarks, and adjust for illiquidity and risk premiums

I avoid comparing private equity to stocks due to their complexity

I compare historical stock price movements without adjusting for risk

Question 6: When constructing an equity portfolio, how does an analyst determine whether a stock is undervalued relative to its market price?

Which action should you take?

Choose only one option

By evaluating the company's market share

By comparing the stock's P/E ratio to its historical average

By considering the company's debt-to-equity ratio

By analyzing changes in dividends