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CISI: Securities > Fitch > Flashcards

Fitch Flashcards

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SIE Exam flashcards
1
Q

A global custodian finds itself in financial difficulty. What should it do to protect its clients assets?

A

Continue as before, segregating its clients assets in internal accounts

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2
Q

In which market can companies use an offer for subscription as a method to float their share to raise capital?

A

Primary

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3
Q

A large organisation is using publicly available third party research rather than internal research. Why might this been seen in unfavourable context?

A

A greater chance of bias

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4
Q

Regulators suggest that portfolio managers use diversification to reduce what type of risk?

A

Unsystematic or Specific

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5
Q

What is work in progress on the balance sheet?

A

Current asset

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6
Q

Why can the UK Government debt be considered risk free?

A

They can simply raise taxes to repay its debt

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7
Q

ADR Dividends are paid to the holder in what currency?

A

US dollars

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8
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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9
Q

What is a high water mark?

A

A high-water mark is the highest level in value an investment account or fund has reached

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10
Q

A UK Gov bond sale takes place 2 days before the “coupon paid date”, the trade is AKA?

A

Ex-coupon

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11
Q

Where a company wants to improve the liquidity of its shares but not reduce the nominal value of the shares, it is most likley to perfom a?

A

Scrip Issue

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12
Q

What should a lender do when its stock has been lent, but wishes to vote at an AGM?

A

The lender should recall their stock in good time

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13
Q

The Ratio EV/EBIT represents?

A

The purchasing cost of the company over operating revenue

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14
Q

An investor buys a 4% 4year bond for 109 per 100nv. If held, what will the redemption value be?

A

100

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15
Q

Is a broad range of advice used within the origination team in the quotation of the company?

A

Yes

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16
Q

What is a requirement for a firms entry into the junior market of the exchange?

A

All shares are freely transferable

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17
Q

An investor has placed their money into an infrequent actively managed account, what is likely?

A

In the long run the investor could see enhanced returns on the benchmark

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18
Q

Financial Ratio analysis can be used to assess many aspects of a company, which would be used to identify high future growth prospects?

A

High P/E: low div yield

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19
Q

What is not a consideration in order priority for a trade on an order driven system?

A

Volume

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20
Q

What is a cash management bill?

A

Short-term financial instrument issued by the United States Treasury to address temporary cash shortfalls.

21
Q

What is the best advantage of issuing warrants?

A

To delay the payment of dividends until some time in the future

22
Q

What should be noted about payables and receivables when calculating profit of CF?

A

If they are the same they cancel eachother out.

23
Q

What is the Repo rate?

A

The implied interest paid for borrowing money

24
Q

What activity does a sponsor not undertake?

A

Facilitating the marketing of the share to interested parties

25
Q

Who typically offers crossing networks or matching engines for execution of securities trading?

A

Investment firms

26
Q

What is the formula for swallowing the tail?

A

No. of rights x subscription price / TERP

(Then subtract this from the number of rights to give you the amount of shares paid)

27
Q

What do Brokers use to trade bonds with investors?

A

BondVision

28
Q

What best defines the conversion ratio on a convertible bond?

A

The nominal value of the bond divided by the conversion price of the shares

29
Q

What best describes the feature of a puttable bond?

A

The holder of a puttable bond has the right but not the obligation, to demand early repayment of the principal, usually exercisable on specified dates, which is good for the holder when interest rates are rising

30
Q

What best describes the feature of a callable bond?

A

The** issuer** of a callable bond has the right but not the obligation, to redeem the bond early, usually exercisable on specified dates, which is good for the issuer when interest rates are falling

31
Q

Is a debenture shown as a liability on the balance sheet?

A

Yes

32
Q

What can only be capitalised when purchasing an asset on the balance sheet?

A

The acquisition cost, as other would be under revenue expenditure.

33
Q

Two Eurozone Gov bonds are sold in europe with identical terms of coupon rate, maturity and redemption, and all other standard terms. However, both still sell into the market with different yields. Why?

A

Different credit ratings.

34
Q

What is the benefit of shelf registration in the US bond market?

A

To issue smaller batches of bonds with varying coupons and maturity

35
Q

What is a feature of a covered bond?

A

It is retained on the issuer balance sheet, if they default it is used as collaterla to cover any payment shortfalls.

36
Q

What happens to bond and equity prices when interest rates rise?

A

Bonds go down, and equities go down due to increased ost of borrowing etc.

37
Q

Debt with high interest cover will subsequently affect?

A

Market Prices

38
Q

A company charges £7500 as a depreciation charge on an asset using the SLD. What would this cause?

A

The book value of the asset will fall £7500 each year, this will decrease the profit figure but is not negative cash flow.

39
Q

In an order driven market, what is the order of priority for “on the book”?

A

Price followed by time

40
Q

Where a cum-dividend equity trade fails to settle on a contractual settlement, what will happen?

A

The broker of the buyer will have to make a claim to the broker of the seller.

41
Q

At what percentage of ownership would an investor be forced to make a mandatory bid?

A

30%

42
Q

What best indicates the returns on money market instruments?

A

Low risk, variable returns.

43
Q

Where do US T Bills Settle?

A

Fixed income clearing corporation

44
Q

What is the benefit to an investor for buying convertible bonds?

A

The oppurtunity to gain interest on the bond while profiting from any gain in the share price.

45
Q

What is a potential explination for a depreciation in the GBP/USD?

A

Imports in the UK becoming more expensive that exports

46
Q

How many holdings appear on an omnibus nominee account?

A

Only one holding appears on the company register.

47
Q

Why might an investor be more interested in using net debt to equity ratio instead of using debt to equity?

A

To see if the company holds substantial cash and short term investments.

48
Q

A broker holds shares of a client in a pooled nominee account?

A

The client is entitled to receive benefits of ownership, but is not on the register so cannot vote at AGMs or porticipate in rights issues.

49
Q

How many strips could be created from a 5 year UK government bond?

A

11

5 x 2 payments per year + 1 final maturity value

CISI: Securities (11 decks)

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