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Securities > Final Study Questions > Flashcards

Final Study Questions Flashcards

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SIE Exam flashcards
1
Q

Dealers on stock exchanges act as:

A
  • Investment banks
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2
Q

A company announces an increase in the dividend that it will pay out to shareholders in response to continued profit growth. Assuming all of the following securities are in issue, which of the following is most likely to benefit from this increase in income?

A

Depositary receipt holder

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3
Q

Who decides whether a company’s shares are admitted to both the official list and the LSE?

A

UKLA

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4
Q

The market is showing signs of unrest. If an investor wishes to pursue a flight to quality, which of the following bonds might they choose?

A

Recently issued 10-year US T-bond

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5
Q

What are the rules for stripping UK exchequer bonds?

A

Only designated gilts can be stripped and only by the DMO, Bank of England and GEMMs

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6
Q

Stock borrowing and lending was created to address which of the following?

A

Settlement risk

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7
Q

Eurobonds, as bearer documents, typically need to be kept safe. They would normally be

A

held in depositaries

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8
Q

Which is NOT on the income statement?

A

Investment income

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9
Q

Which of the following is true of a capital investment in a structured investment?

A

There are penalties if redeemed early

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10
Q

Which of the following is a corporate debt instrument backed by a particular company asset?

A

Fixed charge bond

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11
Q

Which of the following types of corporate debt would most likely have the lowest coupon?

A

Guaranteed bonds

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12
Q

Bill is a closed ended fund manager and Andy is an authorised open ended fund manager. Which of the following is TRUE?

A

Both funds can invest in quoted companies

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13
Q

Which of the following has the largest impact upon the price of a corporate bond?

A

The yield of the benchmark government bond

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14
Q

A risk-averse investor looking to invest in bonds would most likely choose to invest in:

A

Putable bonds

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15
Q

An investor, after receiving excellent returns on her equity investments, switches to bonds. Which of the following is the most likely reason?

A

To capitalise on the gains before a downturn

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16
Q

Which of the following is true of capital reserves and revenue reserves?

A

Capital reserves can be converted into a bonus issue of shares

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17
Q

The ratio EV/EBIT represents:

A

The cost of purchasing the company over operating revenue

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18
Q

Company X increases its holdings in company Y and yet does NOT trigger disclosure under the Takeover Code, which of the following would BEST explain this?

A

X is a major supplier of Y

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19
Q

Which of the following is a key feature of exchange-traded funds?

A

They must not be closed-ended

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20
Q

If an investor has diversified their risk exposure by asset class, they have:

A

increased the number and range of their holdings

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21
Q

increased the number and range of their holdings

A

Stock exchanges

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22
Q

What is the main purpose of a dividend paid by a UK company?

A

To distribute profits to the owners of the company

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23
Q

Money market funds aim to achieve maximum returns while minimising credit, market and liquidity risks. These funds typically invest in:

A

Government securities, short-term bonds, commercial paper, repurchase agreements or even other money market funds

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24
Q

To whom do regulatory news or information services process and disseminate information?

A

Secondary information providers

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25
Q

Which of the following would be a result of an increase in the equity risk premium on a share?

A

The price of the share falls

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26
Q

For which of the following reasons might an investment bank submit a stabilisation notice?

A

Share price has fallen below a certain level

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27
Q

A dealer acting as principal will perform which of the following?

A

Buying and selling securities with clients

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28
Q

A trade has moved to the confirmation stage with a central counterparty. Which of the following has occurred immediately prior to this?

A

The trade has been executed on an exchange

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29
Q

Why would a company choose to do a rights issue?

A

To fund a takeover

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30
Q

Which of the following could result in a ‘rebate’ in a stock lending situation?

A

Cash is used as collateral

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31
Q

Who makes the decision of whether a company meets the requirements of size, control, free float and trading history for a listing on the official market?

A

The FCA

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32
Q

Who recognises the London Stock Exchange?

A

The Financial Conduct Authority

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33
Q

In a stock borrowing and lending agreement, the borrower will provide collateral to the lender. Where the fee has been has been quoted as a rebate this would mean, it is where:

A

cash has been placed as collateral and the lender will earn all of the interest that accrues on the cash collateral and an agreed rate will rebated to the borrower

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34
Q

Short selling market developed to:

A

Cover settlement failure

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35
Q

An investor receives a provision allotment letter from a company performing an offer for sale. What does this confirm about the investor?

A

She is an existing shareholder

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36
Q

Company A and Company B have announced a merger. Company A’s shares would be:

A

Exchanged for new shares

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37
Q

Where a bond is repaid in a single lump sum at the maturity date, this is an example of:

A

Bullet bond

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38
Q

Which of the following is the prime role of the primary markets?

A

To enable surplus funds to be matched against investment opportunities

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39
Q

The UK Debt Management Office announces the results of an auction, upon which of the following will it have an immediate impact?

A

Interest rates

40
Q

In relation to equity issued by companies, which of the following is best defined as ‘registered title’?

A

The name of the legal owner of the share

41
Q

Capital employed can be defined as:

A

Total equity plus non-current liabilities

42
Q

Which of the following is a characteristic of coupons on convertible bonds?

A

They have a lower coupon compared with coupon on an otherwise identical bond

43
Q

UK T-Bills and stripped gilts ALWAYS have:

A

Zero coupon

44
Q

High frequency trading (HFT) creates which of the following risks?

A

Systemic

45
Q

Investor uses an index weighted by dividend yields, an example of:

A

Smart beta

46
Q

Which of the following is true of companies that use GAAP?

A

Standardises how particular transactions are shown

47
Q

An institutional investor is looking to invest in a ‘carry trade’. Which of the following describes such a trade?

A

They would need to borrow funds in a currency where there is a relatively low borrowing rate, and will invest those funds, after converting to another currency where there is a higher rate of interest available for short-term deposits

48
Q

A convertible bond that gives the holder the right to convert into 100 shares has a conversion price of £1.00. If the current share price is £3.00 and this market price falls, we would expect which of the following?

A

The market price of the bond to fall

49
Q

Eurozone investor buys a US T-bond denominated in Euros. For which reason will they need to sacrifice the risk free return commonly associated with government debt?

A

Euros can only be printed in the Eurozone

50
Q

The diluted EPS figure is:

A

A theoretical calculation based on assumptions about future events, which may or may not actually take place, and its importance to the reader of the accounts and any potential investor

51
Q

On receipt of rights to buy new shares, which of the following can a shareholder NOT do?

A

Sell the rights to the issuer

52
Q

Dirty Price

A

Clean price + accrued interest = Dirty Price

53
Q

Which of the following is false in relation to cryptocurrency?

A

It is heavily regulated

54
Q

Which two do companies need/have to follow according to listing obligations when an issuer is planning on having its securities listed?

A

Reporting and good corporate governance

55
Q

An investment bank has successfully completed a book-build for a company wishing to issue shares. What does this suggest?

A

They have allocated available shares to willing buyers

56
Q

Which of the following describes how corporate bonds being traded, along with their prices, can be discovered?

A

Dealers give prices within separate pools of liquidity

57
Q

The providers of which of the following services would be considered a participant in the wholesale market?

A

Derivatives trading

58
Q

Where there is a sub-custody agreement, which of the following describes the correct set of relationships?

A

The client is the client of the global custodian, whereas the local custodian is the agent of the global custodian

59
Q

A bank is assisting a client to issue securities in emerging and frontier markets. Which considerations should specifically be stated in relation to the client?

A

There is likely to be less liquidity in the primary markets

60
Q

A 30 year old person who is in good health would have predominately which of the following investments within their personal pension?

A

Medium risk equities

61
Q

Who is the legal owner of the shares that underlie an ADR?

A

The depositary bank

62
Q

How frequently does a STANDARD listed UK company need to produce accounts?

A

Every 6 months

63
Q

The analysis of risk and return is best done in which of the following way?

A

Backward-looking analysis of historic returns and forward-looking forecasts

64
Q

A company wants to do a placing but has already issued shares in a country that insists on pre-emption rights. Which of the following must they do?

A

Put it to shareholders

65
Q

If someone uses MTS Cash, what does that tell us about their method of trading?

A

Dealer to dealer

66
Q

Which of the following is true of a full-service broker and a discount broker?

A

The full-service broker will have a higher minimum charge than the discount broker

67
Q

Why is it important that ‘request for quote’ systems run alongside the dealer-to-customer market?

A

To achieve better prices

68
Q

You expect interest rate cuts that have not been anticipated by the market as a whole. You sell short term bonds and buy long term bonds. Which of the following strategies are you following?

A

Policy switching

69
Q

Which of the following would show depreciation in the GBP/USD currency rates?

A

Imports to the UK becoming more expensive than exports

70
Q

A company has performed well during the course of the year. In which way is it MOST likely to reward its shareholders?

A

Declare a high final dividend

71
Q

Which of the following is considered the main risk of investing in emerging/frontier markets as opposed to emerged markets?

A

Less sophistication

72
Q

Minority holdings are shown in:

A

net assets and net income in the consolidated statement of financial position and the group income statement

73
Q

What should investors be aware of when investing in structured deposits as opposed to structured investments?

A

That they could benefit from services such as the UK’s compensation scheme

74
Q

Generally Accepted Accounting Practices (GAAP) are which of the following?

A

Provide a basis for good practice

75
Q

Which of the following would NOT be found under non-current assets in the statement of financial position?

A

Stock

76
Q

Which of the following could be described as a main benefit of a central counterparty?

A

Reduction of systemic risk

77
Q

Which of the following best indicates the returns on money market instruments?

A

Low risk, variable returns

78
Q

A company obtains a quotation on an exchange without adjusting their capital structure. How did they achieve this?

A

An introduction

79
Q

Why would an investment trust not be allowed to be an exchange-traded fund?

A

An investment trust is closed-ended

80
Q

A high frequency trader successfully completes the purchase of a large holding of shares. Which of the following are they likely to do next?

A

Sell the shares as quickly as possible

81
Q

An investor bought a convertible preference share. She suddenly starts receiving a variable dividend on the share. Why might this be?

A

She has utilised the inherent option of the preference share

82
Q

Why would a company perform a stock split, rather than a capitalisation issue?

A

To ensure there is no change in the share capital line

83
Q

A company charges £7,500 as a depreciation charge on an asset using the straight-line method. Which of the following is true?

A

The book value of the asset will fall £7,500 each year

84
Q

A company, quoted on the London Stock Exchange’s Alternative Investment Market (AIM) one month ago, ceases to have a corporate broker on the 1st July. Which of the following statements is TRUE?

A

If by the 31st July the broker has not been replaced the company will be removed from the exchange

85
Q

Where can authorised participants buy exchange traded funds (ETFs) directly from a fund manager?

A

In the primary market

86
Q

Which of the following best reflects the role of the origination team in the quotation of a company?

A

A broad range of advice

87
Q

Which one of the following is not an advantage of using as Distributed Ledger?

A

It can increase the use of a centralised register

88
Q

How would a trader normally gain dark liquidity?

A

Multilateral trading facilities

89
Q

An introduction is used by a company to:

A

gain extra liquidity

90
Q

Why do shareholders get to vote on dividends at AGM?

A

To ratify the directors’ decision on the level of dividend

91
Q

The role of a gilt inter-dealer broker is to:

A

ensure market makers remain anonymous

92
Q

If shares are held in a corporate nominee account, which of the following is true of the name on the register?

A

It is a single nominee name

93
Q

Which of the following is key advantage for a portfolio manager to hedge with futures?

A

It leads to lower portfolio disruption

94
Q

When would you see goodwill on a company statement of financial position?

A

Where a subsidiary is bought for more than net asset value

95
Q

Which of the following would best describe the purpose of index linked gilts?

A

To provide an inflation protected product

Securities (19 decks)

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