CEMAP 1 - ITFS Flashcards
David has been particularly attracted to investment trusts because of their ability to benefit from gearing. This indicates that David believes that the market will:
fall.
favour income stocks.
remain stable.
rise
rise.
The ability of an investment trust to borrow (gearing) is considered favourable in a rising market.
Walter and Winnie own their house on a joint tenancy basis. If Walter dies:
his share of the property will pass automatically to Winnie.
his share will pass to whoever is nominated as his beneficiary in his will.
Winnie will need to purchase Walter’s share of the property from his estate.
Winnie will own 50% of the property and retain an interest in the other 50%.
his share of the property will pass automatically to Winnie.
Where a property is held on a joint tenancy basis and one party dies, the deceased’s share of the property automatically transfers to the survivor.
Which of the following is an example of the process of disintermediation?
A bank offering savings accounts.
A building society agreeing to offer a mortgage.
An insurance company underwriting an application for term assurance.
Crowdfunding.
Crowdfunding.
Mandy is pregnant with her first baby. She has been a full-time self-employed graphic designer since leaving university four years ago. What state benefit might Mandy be able to claim before her baby is born?
Child Benefit.
Maternity Allowance.
Statutory Maternity Pay.
Maternity Allowance.
Mandy cannot claim Statutory Maternity Pay as she is not an employee.
Which of the following is a feature of a typical 25-year term repayment mortgage?
Repayments will be unchanged throughout the term of the mortgage.
The borrower will have to take out an investment policy to cover any shortfall at the end of the mortgage.
The capital amount does not reduce over the term of the mortgage.
The proportions of capital and interest making up the payment change over the term of the mortgage.
The proportions of capital and interest making up the payment change over the term of the mortgage.
Repayments will not be fixed throughout the term, as they may vary with interest rate movements.
A limited company will pay which type of tax on their profits?
Capital Gains Tax.
Corporation tax.
Internal tax.
VAT.
Corporation tax.
VAT may be payable but not on its profits.
A key difference between a debenture and a loan stock issued by a company is that a debenture:
can be converted to ordinary shares in the company.
holder has the right to vote at the company’s annual general meeting.
is secured on the assets of the company.
pays a fixed rate of interest.
is secured on the assets of the company.
Debentures and loan stock are both forms of corporate bonds. The key difference is that former is secured, latter is unsecured. Both pay a fixed rate of interest.
On a with-profits policy, what is a reversionary bonus?
A payment made on maturity, reflecting the investment performance over the term of the policy.
A payment that is declared regularly and, once allocated to the policy, cannot be removed.
A payment that is pre-set at an anticipated bonus rate, but is reduced if investment performance is less than anticipated.
An irregular payment, made at the discretion of the insurance company from orphan funds.
A payment that is declared regularly and, once allocated to the policy, cannot be removed.
A reversionary bonus is not pre-set; it is dependent on investment performance.
Brian is reviewing a range of investment products before selecting the most appropriate solution for his client, Claire. Which factor is Brian least likely to take into account when selecting an appropriate solution?
Claire’s desire to access her investments in five years to purchase a property in Portugal.
Claire’s existing portfolio of investment products.
The fact that she has recently moved into a higher-rate tax bracket.
The possibility of Claire getting married in the future and having children.
The possibility of Claire getting married in the future and having children.
When deciding on investments, accessibility, existing holdings and tax position are all factors that need to be considered.
An investment trust is best described as:
a public limited company that invests in the stocks and shares of other companies.
a trust that invests solely in commercial property.
a trust that is owned by its members.
an open-ended investment company that invests in shares of other companies.
a public limited company that invests in the stocks and shares of other companies.
An investment trust is a public limited company whose sole purpose is to invest in other companies.
The tax payable on the purchase of shares via an electronic method is called?
Corporation tax.
Stamp Duty.
Stamp Duty reserve tax.
Withholding tax.
Stamp Duty reserve tax.
Stamp Duty applies to paper transactions only.
Gains from which of the following are not exempt from capital gains tax in the hands of the investor?
Authorised unit trust.
Gilts.
NS&I Income Bonds.
Stocks and shares ISA
Authorised unit trust.
NS&I products are exempt from capital gains tax.
The Financial Services Compensation Scheme (FSCS) provides protection for those with deposit-based savings and investments in the event that:
incorrect advice is given in respect of the most suitable type of account to use.
interest rates are reduced.
investment returns fail to match expectations.
the account provider becomes insolvent.
the account provider becomes insolvent.
The Financial Services Compensation Scheme (FSCS) provides protection in the event that an institution becomes insolvent.
A useful tool to investigate if an investment opportunity is a scam or not, called ScamSmart, is available from:
the FCA.
MoneyHelper.
the PRA.
the National Crime Agency.
FCA
ScanSmart tool is available from the FCA.
Under what circumstances, if any, does an EU regulation laid down by the European Parliament and Council of Ministers not directly apply to a member state?
None.
Only if a specific dispensation has been granted.
Only if an alternative approach has been agreed.
Only if the member has joined within the previous three years.
Only if a specific dispensation has been granted.
An alternative approach is allowed under directives, but not under regulations.
