AAFM Chartered Wealth Manager (CWM) Global Examination (GLO_CWM_LVL_1)

✅

Reasoning: Jensen's Alpha (Risk-Adjusted Return) is calculated as Portfolio Return - [Risk-free Rate + Beta * (Market Return - Risk-free Rate)]. For Reliance: 14% - [6% + 1.1 * (10% - 6%)] = 14% - 10.4% = 3.60%. For HDFC: 12% - [6% + 0.9 * (10% - 6%)] = 12% - 9.6% = 2.40%. For Franklin Templeton: 17% - [6% + 1.2 * (10% - 6%)] = 17% - 10.8% = 6.20%. ❌ Why the other choices are incorrect:

• Option A is incorrect: The calculated values of 3.45%, 7.78%, 4.38% do not match the correct Jensen's Alpha calculations for the respective funds.
• Option B is incorrect: The calculated values of 2.50%, 8.50%, 6.60% are inconsistent with the Jensen's Alpha formula using the provided data.
• Option D is incorrect: The values 3.65%, 8.88%, 9.36% are significantly different from the accurate Jensen's Alpha calculations for the given funds.

✅

Reasoning: In certain financial regulations governing the initial launch of investment schemes, the maximum permissible initial issue expenses—encompassing setup, legal, underwriting, and distribution costs—is capped at 9% of the funds raised. This limit aims to prevent excessive upfront charges to investors. ❌ Why the other choices are incorrect:

• Option A is incorrect: 5% is often a cap for ongoing operating expenses or specific entry loads, but generally too low for the aggregate initial issue expenses, including comprehensive setup and distribution costs.
• Option B is incorrect: 3% is typically a very restrictive limit for overall initial issue expenses, rarely covering all necessary launch costs in most regulatory frameworks for investment schemes.
• Option D is incorrect: While 6% may be a specific cap in certain jurisdictions or for particular scheme types, 9% represents the established maximum for initial issue expenses as per the specific regulatory standard referenced by the CWM curriculum.

✅ **Red herring **

Reasoning: A red herring prospectus is a preliminary document filed before an IPO, intentionally omitting final details like the issue price and number of shares. Its primary purpose is to gauge investor interest and test the market demand to inform the final pricing and size of the offering. ❌ Why the other choices are incorrect:

• Option A is incorrect: A deemed prospectus refers to documents that are legally treated as prospectuses, even if not explicitly titled as such (e.g., offer letters). This classification is not related to testing the market for issue price/size.
• Option B is incorrect: A shelf prospectus allows a company to register securities that can be issued over a period of time from a single registration. It provides flexibility for future offerings but is not used to test the market for initial pricing of a new issue.

✅

Reasoning: Current accounts are specifically designed for businesses, enabling high-volume, frequent transactions without withdrawal limits. They facilitate daily operational cash flow management, often include overdraft facilities, and do not typically earn interest, aligning perfectly with business banking needs. ❌ Why the other choices are incorrect:

• Option B is incorrect: Savings accounts are primarily for individuals to accumulate funds, typically have transaction limits, and are not suitable for the high-frequency, unrestricted operations of a business.
• Option C is incorrect: Fixed Deposit accounts involve locking a lump sum for a predetermined period to earn higher interest, rendering the funds illiquid and unsuitable for daily business transactions.
• Option D is incorrect: Recurring Deposit accounts involve regular, fixed installments over time, designed for systematic savings rather than providing accessible funds for immediate, frequent business operations.

✅

Reasoning: The Public Provident Fund (PPF) Scheme rules explicitly state that the 15-year maturity period commences from the end of the financial year during which the account was initially opened, not from the specific opening date or first deposit date. ❌ Why the other choices are incorrect:

• Option B is incorrect: The duration is not calculated from the exact date of the first deposit but from the end of the financial year.
• Option C is incorrect: A 30-day period following the first installment deposit is not a component of PPF account duration calculation.
• Option D is incorrect: A 12-month period after the first installment deposit is not the reference point for PPF maturity.