IAD Questions - General 2 Flashcards
What is the annual exemption applying to Lifetime Transfers?
£3,000 per tax year
What is the small gifts exemption applying to Lifetime Transfers?
£250 per person
What is the marriage exemption applying to Lifetime Transfers?
£5,000 per parent
£2,500 per grandparent
£1,000 per any other person
What is the annual exemption for gifts to Charities, Political Parties & national benefit applying to Lifetime Transfers & on death?
Unlimited
What is the purpose of Life Assured products?
A pay-out if one or more particular individuals (life assured) dies.
What is the difference between single premium & regular premium Life Assurance products?
Single premium - policyholder pays a one-off premium
Regular premium - policyholder pays series of periodic premiums
How much can be withdrawn yearly from a Life Assurance bond without paying tax?
5%
Explain the Primary, Secondary and Tertiary sectors of the economy
Primary = Production of raw materials
Secondary = Manufacture/processing of raw materials into other goods
Tertiary = Distribution of goods & provision of services
What income tax & CGT is due for a basic rate taxpayer re a Life Assurance Bond?
0% on income & CGT
The fund issuing the bond is already subject to tax at basic rate of 20% & same with CGT.
What fees are due on purchases of shares, assuming commission, and in order?
Purchase Cost
+ Stamp Duty
+ Commission
+ PTM levy
What fees are due on sales of shares, assuming commission, and in order?
Sale price
- Commission
- PTM levy
How much is the PTM levy and when is it due on sales and purchases?
£1
On sales & purchases over £10k in value
What does R-squared measure?
The degree of correlation between a fund and a benchmark
What does a low r-squared indicate?
Little of the funds returns can be explained by changes in the benchmark - a less reliable Beta
What level of risk does a low P/E ratio indicate?
High risk
If inflation rises, what effect does it have on borrowers?
Borrowers gain at the expense of lenders. Borrowed money is worth less.
What CGT arises from holdings in an OEIC?
0
Funds grow free from CGT within an OEIC. Only when a disposal is made does this trigger a CGT liability.
What effect would a decrease in interest rates have on property?
Increases the ability to borrow so would increase the demand for property - pushing property prices up.
What IHT is due when transferring an estate to a spouse?
0% - transfers to spouses are exempt
What are the 3 most commons passive methods for tracking a benchmark?
Full replication
Stratified sampling
Optimisation
What risk does Immunisation protect against?
Interest rate risk
How will an increase in money supply affect interest rates?
Decrease interest rates
What are Smart Beta funds?
Combination of active & passive strategy
They create their own benchmark and then tracks this personalised index
What are the 3 forms of Efficient Markets Hypothesis?
Weak = Market price reflects all information implied in historic prices (“go active”)
Semi-strong = Market reflects all publicly available information
Strong = Share currently takes into account all public & private info (“go passive”)
What is the Capitalisation Rate?
Ratio used to estimate the value of income-producing properties
What is the Capitalisation Rate ratio?
Net operating income / Sales Price (value as %)
What does the Current account measure?
Flows in relation to trade in goods and services.
What does the Capital account measure?
Ie. Financial account. Measure ls inward investment, foreign investment, foreign currency borrowing.
Future Value of annuity
(Eg. £100 invested at start of years, 5 years, 6% compounded annually)
Value x [ (1+rate^periods -1) / rate ] x 1+rate
What is residency?
Where you are physically present
What is domicile?
Where is permanent home
What is Remittance Basis
For individuals that are UK resident but not UK domiciled.
They can elect for overseas income & gains to be taxed on remittance basis - annual tax charge.
Tax implications of UK resident & domiciled individuals in other countries
They must pay UK tax on earnings and investment income (and CGT) no matter where the income originated
What is a multi-factor model?
Used in the analysis of securities when constructing a portfolio
What are the 3 categories of Multi-factor models?
Macroeconomic models
Fundamental models
Statistical models
What does a high cap rate indicate about a property?
Higher risk, higher cashflows, lower the valuation
