2019 - February Flashcards
A period of negative savings where income does not meet the required level of expenditures could also be regarded as a(n):
a) Negative gearing.
b) Operating deficit.
c) Overdraft.
The family car would appear where on the family’s private balance sheet, if they prepare one?
a) Equity.
b) Fixed assets.
c) Assets neither fixed nor current.
Which of the following is generally true about the calculation of an individual’s equity or net worth ratio?
a) For a young person or couple, it is expected that their equity ratio would be relatively low as they are likely to have a relatively high level of debt.
b) For a young person or couple, it is expected that their equity ratio would be relatively high as they are likely to have a relatively low level of debt.
c) For anyone at all, the ratio shows the percentage of net equity to gross assets.
Cash investments provide:
a) A capital guarantee.
b) Returns that fully offset the investor from the impacts of inflation.
c) Income, liquidity and stable returns.
Market forces are the primary determinant of share prices in the secondary market with price increases arising from:
a) Excess levels of buying pressure over selling pressure.
b) Excess levels of selling pressure over buying pressure.
c) More buyers than sellers active at the time.
The aggressive investor is characterised by?
a) Speculative gambling and excessive debt levels.
b) Willingness to take bigger risks in the hope of getting bigger returns than the average investor.
c) Hostile takeover bids.
All forms of debt from credit cards to mortgages on property and margins with brokers have the common characteristic:
a) They all carry bankruptcy risk and interest costs.
b) They all enable expenditure beyond the borrower’s income to occur systematically.
c) They all increase the risk of insolvency.
A normal investor is usually presumed to be?
a) Risk neutral.
b) Entrepreneurial and willing to take a gamble.
c) Risk averse.
The relationship between nominal rates and real rates of return on investments in shares in times of rising inflationary levels results in:
a) Real rates exceeding nominal rates of return.
b) Nominal rates exceeding real rates of return.
c) Both nominal and real rates of return being equal.
The yield curve typically
a) has a shape which always slopes downward to the right.
b) is a graph of interest rates relative to all aspects of their risk.
c) may be flat when short-term and long-term rates are virtually the same, and a humped yield curve may occur when medium-term rates are higher.
Taking a fixed rate rather than a variable rate mortgage carries the risk that
a) actual rates in future will be more volatile.
b) actual rates in future rise above the fixed rate.
c) when the fixed rate period ends, the variable rate which succeeds it may be unaffordable.
When considering buying funeral insurance it is important to calculate
a) the payback period when the cumulative cost of the insurance begins to exceed the cost of the funeral itself.
b) the probability that funeral costs will increase at a faster rate than the rate of increase, if any, in the premiums.
c) the relative size of the commission that the salesperson will make from your insurance relative to that taken by companies with whom s/he is in competition.
A defined benefit pension or superannuation fund is one in which
a) the final earnings of the beneficiary are a major factor determining the size of the regular super payout after retirement.
b) the exact amount the beneficiary is to receive on retirement is defined exactly.
c) the present pay of the beneficiary determines the retirement payout precisely.
Where the value of secured assets falls below an agreed debt-to-asset ratio for a margin loan, what action must be taken?
a) The lender must make a margin call on the loan.
b) The borrower must meet a margin call on the loan.
c) The lender must call in the whole margin loan.
Negative gearing on property investments are investments for which
a) the interest outflows exceed the rental inflows.
b) the tax shield effect converts net operating losses into profits.
c) the capital value of the property is below the borrowed amount financing it.