2024 test knowledge 5-6-7-8-9

Question 1

Les is receiving Working Tax Credits and has four children: Lia, aged 14; Leo, aged 18 and in the early stages of an apprenticeship; Livvy, aged 19 and in her first year at university; and Lenny, aged 20 and in his second year at university. For how many of his children can Les claim Child Tax Credit?
a) One.
b) Two.
c) Three.
d) Four.

Answer 1

c) Three.

Question 2

Statutory Maternity Pay is payable a for a maximum of:

a) 12 weeks.
b) 26 weeks.
c) 39 weeks.
d) 52 weeks.

Answer 2

c) 39 weeks.

Question 3

Contribution-based Job Seeker’s Allowance:

a) is a tax-free benefit.
b) is paid at a variable rate, depending on contributions made.
c) is payable for a maximum of six months.
d) may be reduced if the applicant has significant savings.

Answer 3

c) is payable for a maximum of six months.

Question 4

Which of the following state benefits has not been replaced by Universal Credit?
a) Income Support.
b) Housing Benefit.
c) Statutory Sick Pay.
d) Income‑related Employment and Support Allowance.

Answer 4

c) Statutory Sick Pay.

Question 5

Which of the following state benefits is tax free?
a) Disability Living Allowance.
b) Contribution-based Employment and Support Allowance.
c) Statutory Sick Pay.
d) Carer’s Allowance.

Answer 5

a) Disability Living Allowance.

Question 6

According to government statistics, in the previous 12 months average earnings increased by 4.3% and inflation increased by 3.2%. This means that both the basic state pension and the new state pension will increase by:
a) 2.5%.
b) 3.2%.
c) 4.3%.
d) 5%.

Answer 6

c) 4.3%.

Question 7

In relation to Support for Mortgage Interest (SMI), the loan:
a) is secured by a first charge on the property.
b) must be repaid within 24 months from the end of a claim.
c) payments are made direct to the lender.
d) payments cover capital and interest on the mortgage.

Answer 7

c) payments are made direct to the lender.

Question 8

George is 85 and, having been self-employed all his working life, retired at the age of 66. He could potentially be in receipt of which state retirement benefits?
a) Basic state pension, pension credit and savings credit only.
b) Basic state pension and pension credit only.
c) Basic state pension, pension credit, savings credit and an additional state pension.
d) Basic state pension only.

Answer 8

a) Basic state pension, pension credit and savings credit only.

Question 9

Lilian is 75 and in poor health. Her daughter Alison looks after her for several hours each day. Subject to meeting the eligibility criteria, Alison will receive:
a) Personal Independence Payment.
b) Carer’s Allowance.
c) Disability Living Allowance.
d) Attendance Allowance.

Answer 9

b) Carer’s Allowance.

Question 10

Kyle has just started work at the age of 18. Which of the following is true in relation to his state retirement benefits? He must be credited with:
a) at least 15 years’ National Insurance contributions to receive any new state pension.
b) at least 1 years’ National Insurance contributions to receive any new state pension.
c) 30 years’ National Insurance contributions to receive the full basic state pension.
d) 35 years’ National Insurance contributions to receive the full new state pension.

Answer 10

d) 35 years’ National Insurance contributions to receive the full new state pension.

Question 11

A structured deposit account:
a) provides a guaranteed fixed return.
b) places the original capital at risk.
c) runs for a fixed term.
d) matches the return from an associated stock market index.

Answer 11

c) runs for a fixed term.

Question 12

Income from an offshore deposit account is tax free for a UK resident.
a) True
b) False

Answer 12

b) False

Question 13

Joanne has a basic bank account. Which feature is her account unlikely to offer?
a) Overdraft facility
b) Cash withdrawals from a Post Office.
c) ATM card.
d) Direct debits.

Answer 13

a) Overdraft facility

Question 14

Sally has an NS&I product, but her friend Sarah cannot open a similar account because new issues of the product are no longer available. This means Sally has an NS&I:
a) premium bond.
b) guaranteed growth bond.
c) direct saver.
d) income bond.

Answer 14

b) guaranteed growth bond.

Question 15

Income from a Eurobond received by a higher-rate taxpayer qualifies for:
a)the capital gains tax annual exempt amount.
b) the personal savings allowance.
c) the dividend allowance.
d) tax-free status.

Answer 15

b) the personal savings allowance.

Question 16

Amanda has a permanent interest-bearing shareholding. This means:
a) the investment is lower risk than a deposit account.
b) she has no guarantee that her original investment will be repaid.
c) she has a corporate bond holding.
d) the issuing organisation is now a bank.

Answer 16

b) she has no guarantee that her original investment will be repaid.

Question 17

Kimberley’s paid £105 for a 4% Treasury gilt with a par value of £100. What is the running yield of the gilt?
a) 2.5%.
b) 3.8%.
c) 4%.
d) 5%.

Answer 17

b) 3.8%. The running yield is the income of £4 (par value of £100 × 4%) as a percentage of the £105 price paid = 3.8%.

Question 18

Which of the following is true? Peer-to-peer lending is:
a) regulated by the Prudential Regulation Authority.
b) not protected by the Financial Services Compensation Scheme.
c) a direct contract between one lender and one borrower.
d) co-ordinated by banks and building societies.

Answer 18

b) not protected by the Financial Services Compensation Scheme.

Question 19

Jerry has a corporate bond secured on the company’s assets. This is referred to as:
a) a debenture.
b) loan stock.
c) a perpetual subordinated bond.
d) an investment bond.

Answer 19

a) a debenture.

Question 20

An investor has bought a gilt ‘cum dividend’. This means they:
a) and the seller will each receive 50% of the next due interest payment.
b) will not receive any of the next due interest payment.
c) will be entitled to a bonus dividend on the next due interest date.
d) will receive 100% of the next due interest payment.

Answer 20

d) will receive 100% of the next due interest payment.

Question 21

A share’s price/earnings ratio is:
a) the share’s dividend as a percentage of the share price.
b) the company’s net profit divided by the number of shares.
c) the share price divided by the earnings per share.
d) the number of times the dividend is covered by the company’s profits.

Answer 21

c) the share price divided by the earnings per share.

Question 22

A preference share:
a) receives interest payments rather than dividends.
b) always carries voting rights.
c) is guaranteed to receive a dividend every year.
d) ranks ahead of ordinary shares for repayment if the company is wound up.

Answer 22

d) ranks ahead of ordinary shares for repayment if the company is wound up.

Question 23

Today is the ex-dividend date for Acme Ltd shares. The share price is most likely to:
a) decrease slightly.
b) remain stable.
c) increase slightly.
d) become more volatile.

Answer 23

a) decrease slightly.

Question 24

Buy-to-let property has the advantage of liquidity.
a) True
b) False

Answer 24

b) False. Property is an illiquid asset.

Question 25

Market capitalisation is a key factor when analysing shares. It represents the:
a) value of the company’s assets and reserves.
b) annual profit figure shown in the company’s last annual accounts.
c) number of shares the company has issued.
d) current share value multiplied by the number of shares issued.

Answer 25

d) current share value multiplied by the number of shares issued.

Question 26

Karen is a higher-rate taxpayer who owns a buy-to-let flat. What is the position with tax relief on her mortgage? She will:
a)receive tax relief at her marginal income tax rate.
b) not qualify for any tax relief.
c) receive a basic-rate income tax credit.
d) receive higher-rate tax relief.

Answer 26

c) receive a basic-rate income tax credit.

Question 27

Certificates of deposit:
a) are bearer securities.
b) have a minimum 12-month term.
c) pay interest monthly.
d) allow penalty-free access at any time.

Answer 27

a) are bearer securities.

Question 28

Bow Ltd has just issued three free shares for every one share a shareholder owns. This is referred to as a:
a) proportional share issue.
b) scrip issue.
c) rights issue.
d) dividend share issue.

Answer 28

b) scrip issue.

Question 29

What percentage of a company’s share capital must be in public hands for its shares to have a full listing on the main London Stock Exchange?
a) 10%.
b) 25%.
c) 33%.
d) 49%.

Answer 29

b) 25%.

Question 30

The FTSE 350 Index includes companies listed on the London Stock Exchange. It comprises:
a) the largest 350 companies by capitalisation outside the FTSE 100.
b) the largest 350 companies by capitalisation outside the FTSE 100 and 250 indices.
c) 350 smaller companies who do not meet AIM criteria.
d) the largest 350 companies by capitalisation.

Answer 30

d) the largest 350 companies by capitalisation.

Question 31

Alan has an investment that guarantees a specific return over a five-year period, but some of his initial capital could be lost if the FTSE 100 fails to achieve a certain level by the end of the term. His investment is a:
a) structured capital‑at‑risk product.
b) structured deposit.
c) structured derivative product.
d) non-structured capital‑at‑risk product.

Answer 31

a) structured capital‑at‑risk product.

Question 32

What percentage of a unit trust’s fund must be in cash or fixed-interest investments for distributions to be treated as interest payments?
a) At least 50%.
b) Up to 60%.
c) More than 60%.
d) At least 75%.

Answer 32

c) More than 60%.

Question 33

Which function is responsible for overseeing the operation of an open-ended investment company and safeguarding investor interests?
a) The manager.
b) The authorised corporate director.
c) The trustee.
d) The depositary.

Answer 33

d) The depositary.

Question 34

Which of the following is true in relation to unit trusts?
a) Distribution unit trusts pay regular capital amounts to investors from profits.
b) The manager can create units to meet demand.
c) The trustee decides on appropriate investments for the trust.
d) The manager is responsible for holding and controlling the fund’s assets.

Answer 34

b) The manager can create units to meet demand

Question 35

In relation to investment trusts, which of the following is true?
a) The trust can borrow for investment purposes.
b) The trust deed outlines the trust’s investment objectives.
c) Shares trading at a premium can be bought at below their net asset value.
d) The net asset value is the price shares are trading at.

Answer 35

a) The trust can borrow for investment purposes.

Question 36

Jason wishes to cash in his unit trust holding. Which unit price will he receive in normal market conditions?
a) Bid price.
b) Offer price.
c) Creation price.
d) Cancellation price.

Answer 36

a) Bid price.

Question 37

Which of the following is true in relation to real estate investment trusts?
a) At least 80% of the profit must result from property rentals.
b) At least 90% of profits must be distributed to shareholders.
c) They cannot be held in an ISA.
d) Corporation tax is payable on profits from property rentals.

Answer 37

b) At least 90% of profits must be distributed to shareholders.

Question 38

Which of the following is false in relation to qualifying life assurance policies?
a) Premiums must be payable at least annually.
b) They must have a minimum term of 10 years.
c) Premiums cannot vary beyond specified limits.
d) The death benefit must be at least 101% of the bid value of the policy.

Answer 38

d) The death benefit must be at least 101% of the bid value of the policy.

Question 39

A friendly society tax-exempt savings plan:
a) is offered by proprietary organisations.
b) offers similar taxation benefits to endowment policies.
c) has a maximum annual savings limit of £270.
d) has a term between 10 and 25 years.

Answer 39

c) has a maximum annual savings limit of £270.

Question 40

The aim of investment diversification is to:
a) increase investment performance.
b) reduce investment administration and documentation.
c) reduce investment risk.
d) increase income from investments.

Answer 40

c) reduce investment risk.

Question 41

Mansour has a flexible cash ISA, having invested £15,000 of the £20,000 annual limit in July. The following December he withdrew £8,000 in an emergency to replace his car. How much, if anything, could Mansour invest in the ISA before the end of the tax year?
a) He cannot make a further investment in the tax year.
b) £5,000.
c) £8,000.
d) £13,000.

Answer 41

d) £13,000.

Question 42

Jamal is contributing to a Help-to-Buy ISA and is now thinking of starting a Lifetime ISA. He wants to use government bonuses to help him buy his first home. Which of the following is true?
a) He can invest in both types of ISA and use the government bonus from just one of them to help buy his first home.
b) He can invest in both types of ISA but cannot claim any government bonus.
c) He can invest in both types of ISA and use the government bonus from both to help buy his first home.
d) He cannot invest in both types of ISA.

Answer 42

a) He can invest in both types of ISA and use the government bonus from just one of them to help buy his first home.

Question 43

When Adrian died, he had £140,000 invested in a stocks and shares ISA. What is the position with the ISA?
a) Adrian’s executor can make a further investment in the ISA on Adrian’s behalf to top up the current year’s subscription.
b) Adrian’s spouse or civil partner can make an additional subscription of up to £140,000.
c) The ISA trustees have discretion about how to distribute the fund.
d) Adrian’s ISA must cease and the proceeds become part of his estate.

Answer 43

b) Adrian’s spouse or civil partner can make an additional subscription of up to £140,000

Question 44

Sashin wishes to invest into a venture capital trust (VCT). Which one of the following statements is false?
a) VCT gains are exempt from capital gains tax.
b) Income tax relief is available at 30%.
c) The maximum investment for tax relief is £500,000.
d) VCT dividends are tax free.

Answer 44

c) The maximum investment for tax relief is £500,000.

Question 45

At what minimum age can funds be taken from a Child Trust Fund?
a) At any age.
b) 16.
c) 18.
d) 21.

Answer 45

c) 18.

Question 46

Which of the following is untrue regarding ISAs?
a) The minimum age for a cash ISA is 16.
b) It is not possible to have a joint ISA.
c) Subject to the annual contribution limit, it is possible to invest in different ISAs in the same year.
d) Shares from an all‑employee savings‑related share option scheme can be held in an ISA.

Answer 46

a) The minimum age for a cash ISA is 16.

Question 47

Aisling, aged 32, has a Lifetime ISA fund worth £3,600, having invested £3,000. She is now in some financial difficulties and needs to withdraw the funds. How much would Aisling receive if she did cash in the fund?
a) £2,250.
b) £2,700.
c) £3,000.
d) £3,600.

Answer 47

b) £2,700. There is a 25% penalty applied if funds are withdrawn for reasons other than the purchase of a first home, the holder reaching age 60 or the holder suffering a terminal illness. £3,600 × 25% = £900. £3,600 − £900 = £2,700.

Question 48

Janine is 35 and has a Help-to-Buy ISA. She is now about to buy her first property. In total she has been informed that her ISA will provide £3,600 towards the purchase. This means her current fund, without including the government bonus, is worth:
a) £2,400.
b) £2,880.
c) £3,000.
d) £4,000, because she will not qualify for a bonus due to her age.

Answer 48

b) £2,880. The government bonus is 25% of the fund

Question 49

Which of the following cannot be held in a stocks and shares ISA?
a) UK open ended investment companies.
b) Gilts.
c) Residential property.
d) UK investment trusts.

Answer 49

c) Residential property.

Question 50

With an Enterprise Investment Scheme (EIS), which of the following are true?
a) Gains are exempt from capital gains tax if shares are held for five years.
b) Tax relief is available on up to £1m investment per tax year.
c) Investment is made through a collective investment scheme.
d) Tax relief is available at the investor’s marginal rate.

Answer 50

b) Tax relief is available on up to £1m investment per tax year.