Chartered Investment Manager (CIM) Practice Exam · Question
A Canadian portfolio contains a significant holding in US equities. The Canadian dollar is expected to appreciate against the US dollar. What is the primary risk this currency movement poses to the portfolio?
If the Canadian dollar appreciates, fewer Canadian dollars will be needed to buy US dollars, meaning the value of US dollar-denominated assets will decrease whe
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Question: A Canadian portfolio contains a significant holding in US equities. The Canadian dollar is expected to appreciate against the US dollar. What is the primary risk this currency movement poses to the portfolio?
Answer options:
- Increased value of the US equity holdings when converted back to CAD. ✅ Decreased value of the US equity holdings when converted back to CAD.
- Higher dividend income from US equities.
- Reduced volatility of the overall portfolio.
Correct answer: Decreased value of the US equity holdings when converted back to CAD.
Explanation: If the Canadian dollar appreciates, fewer Canadian dollars will be needed to buy US dollars, meaning the value of US dollar-denominated assets will decrease when converted to Canadian dollars.
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