Cards From Failed Questions Flashcards
Do NS&I bonds have a reinvestment limit
Yes- £500 minimum
The difference between strategic and tactical asset allocation
Strategic allocation is where a suitable asset allocation is decided by the clients risk portfolio
Tactical does the same however allows a variance of about 10% so if areas of the allocation are performing well or bad they can be altered within variance, it can also refer to the selection of specific funds where strategic would not
How is property income taxed
If property income is less than £1000 per annum before expenses then it’s exempt from income tax and doesn’t have to be declared. If it is over the threshold then it is taxed as normal income
What choices do holders of options have
To sell, let expire worthless or exercise the option on its website predetermined expirey date
What are the rates of income tax
8.75%, 33.75%, 39.35%
How are discretionary trusts taxed
Pay income tax on all income however £1000 is taxed at the rate of 8.75% (low tax band)
Can OEIC’s gear?
Yes they can gear to 10% without any time restrictions and commonly use single pricing
What are the levels of protection on a return
Hard - a definite return is guaranteed
Soft - a return is only guaranteed within a specific threshold
SDLT for BTL and second properties
They carry an additional 3% surcharge added on as a whole I.E.if it was a property worth £450,000 then) (£125,000 X 0 .02) + (£200,000 X0.05) + (£450,000 X 0 .03)
What is the typical annual management charge for tracker funds
0.5%
What are the investor return objectives
Capital preservation – risk adverse who minimise risk of loss, they want return equal to inflation.
Capital appreciation - long-term who want growth from capital gains.
Current income - investors focusing on income rather than capital gains
Total return – long-term who wants growth of value from capital gains and income
What is the time horizon
The time horizon is the importance of capital preservation in relation to the time until an event, the shorter the time makes the higher importance.
How much should a rainy day fund be worth
6 - 9 months of expenditure in liquid cash deposits
Benefit offshore bonds in relation to onshore
They are not subject to UK tax and so should grow more in theory, also due to them being held in another country you can chose when to be taxed on them by bringing them over. This is a trade off for usually a higher charge
What can MWR be used to measure
It can measure single funds however because it is effected by cash-flows it is not a good measure of portfolio as cash-flows are often of no influence from the fund manager only the client
When do you pay SD or SDRT
This type of tax is paid when you purchase shares, if done online you pay SDRT as it’s operated through CREST and SD is paid any other time.
SDRT Is sounded to nearest 0.01p where as SD is rounded to £5
Which is subjective and which is fact
- risk tolerance
-capacity for loss
Risk is subjective
Capacity for loss is fact
How do the interest rates move when more people decided I invest in short term securities
The more people invest, the lower the rate of short term interest becomes
What product can trade at a discount/premium and what would it be based off
Investment trusts can trade at premiums or discounts depending on the share price per share in relation to its NAV per share. If share price is lower than NAV then it’s trading at a discount
What is real asset protection
This is when an investments value moves in line with inflation, not necessarily beating it
What is an overlay strategy to asset allocation
Overlay strategy is to hold a core structure portfolio then use derivatives to alter the currency and market exposures
Which of the following use both nonsystematic and systematic risk
Modern portfolio theory, capital asset pricing model, arbitrage pricing theory
Arbitrage pricing theory
Explain deflation and it’s effects
Deflation occurs when the supply of goods rises faster than the supply of money, leading to increased purchasing power of money and a drop in price of goods. Because of this consumers buy less as they expect more purchase power in the future.
What is stochastic modelling
This is when maths is used to generate lots of outcomes, then combine the outcomes to create a range of portfolios and their probabilities