Last-mile IMT Exam 2 review: case workflow and decision tables plus high-yield formulas for allocation, equities, fixed income, managed products, international/tax, monitoring/performance—ending with a glossary.
Use this as your best-next-step playbook alongside the Guide Home, the Study Plan, the FAQ, the Official Resources, and exact IMT Exam 2 practice on MasteryExamPrep.
| If the case feels like… | Think… |
|---|---|
| too much information | extract the controlling objective and constraints first |
| two answers both look technically possible | choose the stronger next step and client protection sequence |
| the math is tempting but the facts are incomplete | missing facts may be the real test |
| a product answer looks sophisticated | confirm it survives liquidity, tax, risk-capacity, and mandate checks |
| If you mainly need… | Better first instinct |
|---|---|
| the case-based second half of the IMT route | IMT Exam 2 |
| the first multiple-choice half and formula base first | IMT Exam 1 |
| later discretionary portfolio-management operations | PMT |
| broader advanced wealth or portfolio judgment | AIS |
flowchart TD
A["Read the ask (last line)"] --> B["Extract constraints (horizon/liquidity/tax/risk capacity)"]
B --> C["Identify domain (allocation / equity / FI / products / monitoring)"]
C --> D["Eliminate constraint-violators"]
D --> E["Pick best next action (clarify → document → act within IPS)"]
| Item | Official value |
|---|---|
| Question format | Multiple cases with multiple-choice questions |
| Questions per exam | 50 |
| Exam duration | 3 Hours |
| Passing grade | 60% |
| Attempts allowed per exam | 3 |
| Exam topic | Weighting |
|---|---|
| Investment Policy and Understanding Risk Profile | 16% |
| Asset Allocation and Investment Management | 14% |
| Equity Securities | 14% |
| Debt Securities | 18% |
| Managed Products | 14% |
| International Investing, Investment Risk and Impediments to Wealth Accumulation | 16% |
| Portfolio Monitoring and Performance Evaluation | 8% |
| If you see… | It’s probably testing… | High-scoring move |
|---|---|---|
| Missing facts | process discipline | gather facts, don’t guess; document |
| Constraint conflict | suitability/IPS | resolve constraints first; adjust plan |
| Two “right” answers | prioritization | choose the one that protects client + improves process |
| Too complex product | suitability + disclosure | simplify; ensure understanding; document |
| Performance question | measurement/benchmark | pick correct return metric + benchmark |
Holding period return:
\[ HPR = \frac{P_1 - P_0 + D}{P_0} \]
What it tells you: Total return over a period = price change plus distributions, relative to the starting price.
Symbols (what they mean):
Vignette cue: If the case mentions distributions, include \(D\) (don’t compute “price-only” return by mistake).
Real return (inflation-adjusted):
\[ 1+r_{real} = \frac{1+r_{nom}}{1+\pi} \]
What it tells you: Return after inflation (purchasing-power return).
Exam shortcut: for small rates, \(r_{real} \approx r_{nom}-\pi\) (approximation).
Expected portfolio return:
\[ E[R_p]=\sum_{i=1}^{n} w_i E[R_i] \]
What it tells you: Expected portfolio return is the weighted average of component expected returns.
Vignette cue: If an answer violates constraints by “reaching for return,” check whether it assumes unrealistic \(E[R]\).
Covariance link:
\[ \sigma_{ij}=\rho_{ij}\,\sigma_i\,\sigma_j \]
What it tells you: Covariance equals correlation × the two volatilities.
Why it matters in cases: It explains why a “diversifier” stops diversifying when correlations rise.
Two-asset variance:
\[ \sigma_p^2 = w_1^2\sigma_1^2 + w_2^2\sigma_2^2 + 2w_1w_2\sigma_{12} \]
What it tells you: Portfolio risk depends on the covariance term \(\sigma_{12}\) (which is driven by correlation).
How to connect it: \(\sigma_{12}=\rho_{12}\sigma_1\sigma_2\).
CAPM:
\[ E[R_i] = R_f + \beta_i\,(E[R_m]-R_f) \]
What it tells you: Required/expected return increases with market exposure (beta).
Vignette cue: If a case mentions “higher risk than market,” expect higher required return and more drawdown risk.
Sharpe ratio:
\[ Sharpe = \frac{E[R_p]-R_f}{\sigma_p} \]
What it tells you: Risk-adjusted performance (excess return per unit of volatility).
Case use: Prefer the portfolio with higher Sharpe when constraints allow and assumptions are consistent (same horizon, same net/gross basis).
Bond price:
\[ P = \sum_{t=1}^{n} \frac{C}{(1+y)^t} + \frac{F}{(1+y)^n} \]
What it tells you: Bond price is the PV of coupons plus principal.
Vignette cue: Yield up → price down; longer maturity/lower coupon → more sensitivity.
Duration approximation:
\[ \frac{\Delta P}{P} \approx -D_{mod}\,\Delta y \]
What it tells you: Approximate % price move for a yield change.
Common trap: \(\Delta y\) is in decimals (1% = 0.01).
Convexity adjustment:
\[ \frac{\Delta P}{P} \approx -D_{mod}\,\Delta y + \frac{1}{2}Cvx(\Delta y)^2 \]
What it tells you: Adds curvature so large rate moves are estimated more accurately.
Vignette cue: Callable bonds can show reduced/negative convexity—upside may be capped when yields fall.
Equity valuation shapes:
\[ P_0 = \frac{D_1}{r-g} \]
What it tells you: Constant-growth dividend discount model (Gordon growth) for stable dividend growers.
Critical constraint: must have \(r>g\) or the model breaks.
\[ V_0 = \sum_{t=1}^{n} \frac{CF_t}{(1+r)^t} + \frac{TV_n}{(1+r)^n} \]
What it tells you: DCF valuation = PV of forecast cash flows + PV of terminal value.
Case use: Terminal value assumptions often dominate—focus on sensitivity and realism.
Time-weighted return:
\[ TWR = \prod_{k=1}^{m} (1+r_k) - 1 \]
What it tells you: Investment performance independent of external cash flows (manager skill measure).
Money-weighted return (IRR definition):
\[ 0 = \sum_{t=0}^{n} \frac{CF_t}{(1+r)^t} \]
What it tells you: Investor-experience return that depends on timing/size of contributions and withdrawals.
Vignette cue: If the case emphasizes “when the client added money,” IRR is the relevant concept.
The fastest way to win vignette questions is to write a 1–2 line IPS summary from the case:
Then ask: does the proposed action fit, and is it allowed?
You don’t need heavy math, but you must have directional certainty:
Strategy cues:
In a vignette, eliminate options that ignore:
If a case asks “what should you do now?” after performance moves:
Sources: https://www.csi.ca/en/learning/courses/imt/curriculum and https://www.csi.ca/en/learning/courses/imt/exam-credits