ICWIM Exam Dumps : International Certificate in Wealth & Investment Management

Global Currency Trading

The US dollar dominates the foreign exchange market due to its status as the global reserve currency.

It is heavily used in international trade, financial transactions, and as a benchmark currency.

Market Share

The US dollar is involved in approximately88% of all forex trades.

Other currencies like the euro, Japanese yen, and British pound have significant market shares but are far behind the US dollar.

ICWIM Study Guide, Chapter on Global Financial Markets: Highlights the US dollar as the most traded currency.

Bank for International Settlements (BIS)Forex Market Surveys: Confirms trading dominance of the US dollar.

References

Sharpe Ratio Defined

The Sharpe ratio measuresrisk-adjusted return, specifically the excess return over the risk-free rate per unit of volatility.

Formula: Sharpe Ratio=Portfolio Return - Risk-Free RateStandard Deviation of Portfolio Returns\text{Sharpe Ratio} = \frac{\text{Portfolio Return - Risk-Free Rate}}{\text{Standard Deviation of Portfolio Returns}}Sharpe Ratio=Standard Deviation of Portfolio ReturnsPortfolio Return - Risk-Free Rate​

Why the Answer is B

The ratio quantifies the return generated for each unit of risk taken, relative to the risk-free rate.

Why Other Options are Incorrect

A. Benchmark performance: The Sharpe ratio does not measure performance relative to a benchmark.

C. Annual charge effect: Unrelated to fund expenses.

D. Manager ability: Focuses on risk-adjusted returns, not managerial skill.

ICWIM Study Guide, Chapter on Risk-Adjusted Metrics: Explains the Sharpe ratio.

Portfolio Management Literature: Highlights its use in assessing performance.

ReferencesThus, the correct answer isB. Return above a risk-free rate.

Why Affordability is the Major Constraint

A client’s ability to mitigate risks is directly limited by their financial resources.

Even the most sophisticated risk strategies, such as diversification, derivatives, or insurance, require financial capacity.

Other Options Analyzed

Age: Impacts risk tolerance but does not constrain the financial ability to manage risks.

Risk aversion: A behavioral factor, not a financial constraint.

Tax implications: Important but secondary compared to affordability.

ICWIM Textbook, Chapter on Investment Constraints: Highlights affordability as the top financial constraint.

Wealth Planning Principles: Discusses practical limitations of risk mitigation strategies.

ReferencesThus, the answer isB. Affordability.