Collective Investments Flashcards
Unit trusts, investment trusts and open ended investment companies are most suitable for which type of investor?
A) a long term investor who would like reasonably easy access to their funds.
B) a long term investor who is happy to give notice to withdraw funds.
C) a low risk investor who requires a guaranteed income.
D) a high risk investor who likes to play the stock market
A) correct
B) is in incorrect as funds can not be withdrawn easily from these investments.
C and D are wrong as these types of investment are considered medium risk.
With regard to unit trusts, what does the term ‘open-ended’ mean?
A) clients can buy more units.
B) the fund manager can create an unlimited amount of units according to demand.
C) the fund manager does not need to value the units.
D) there is flexibility in the taxation of units.
B) the fund manager can create an unlimited amount of units according to demand.
A unit trust funds assets are owned and controlled by the fund manager. True or false?
False
They are owned and controlled by the trustees
Who is responsible for payment of capital gains tax on any gain realised on the encashment of a unit trust?
A) the unit holder.
B) the trustees.
C) the unit trust company.
D) the fund manager.
A) the unit holder
An investment trust is best descibed as
A) a unit linked, single premium whole of life policy investing soley in shares.
B) a trust that invests in the shares of other companies.
C) a company that invests in the shares of other conpanies.
D) a partnership that invests in gilts
C) a company that invests in the shares of other conpanies
How can a private individual invest in an investment trust?
A) the investment trust manager creates more units.
B) by purchasing shares of the investment company trust company on the stock exchange.
C) the fund manager issues more shares.
D) by completing an application form for a share account and submitting it to the investment trust trustees.
B) by purchasing shares of the investment company trust company on the stock exchange.
What potential benefit does gearing offer to an investment trust that is not available to a unit trust or OEIC?
An investment trust can borrow money in order to take advantage of investment opportunities. Unit trusts and OEICs can not do this.
How are shares in an OEIC priced?
A) there is a bid and offer price based on the underlying value of the shares.
B) shares are based on historic valuation.
C) there is one price, based on the value of the assets divided by the number of shares.
D) there is a cancellation price which at which all shares are traded.
C) there is one price, based on the value of the assets divided by the number of shares.
What rate of tax is deemed to ahve beem deducted from the investment fund underlying an investment bond?
A) 0 per cent
B) 10 per cent
C) 20 per cent
D) 40 percent
C)
20 per cent is deemed to have been taken within the investment with a potential further liability of 20 per cent for higher rate payers and 25 per cent for additional rate payers
Investment bonds are attractive to investors because withdrawals are tax free. True or false?
False
The investor may withdraw upto 5% of the value of the original investment per annum without paying tax at that time but tax liability may rise when the bond matures, on encashment of the bond or on death of the bond holder.
Noah is a higher rate taxpayer and is considering a range if investments. He wants to know which investment, out of unit trusts, investment trusts or OEICs, would be most likely to help him meet his objective of achieving capital growth. What would you advise?
A) a unit trust
B) an investment trust
C) an OEIC
D) any of the above
D)
Noah could choose any of the above, the fact he’s a higher rate tax payer has no bearing on his decision - they are all taxed the same.
