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Securities > mock 1 > Flashcards

mock 1 Flashcards

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SIE Exam flashcards
1
Q

Where the lender of stock wishes to cast their vote on a special resolution, which of the following statements is TRUE?

A

The lender should recall the stock in good time

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2
Q

A corporate bond is often quoted against a benchmark bond. Which one of these most likely a benchmark bond?

A

A government bond in the same currency with a similar maturity

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3
Q

A credit rating is normally applied to a company’s:

A

Debt

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4
Q

Regulators suggests that portfolio managers use diversification to reduce which type of risk?

A

Specific

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5
Q

What is the function of a trustee in a debenture issue?

A

To ensure the issuer complies with the terms of the issuance

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6
Q

Which of the following would be a consequence of an increase in the equity risk premium?

A

A fall in the price of equity

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7
Q

Which of the following would explain why a company would buy shares in another company to forge a strategic link?

A

Protect supplies

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8
Q

A Global custodian finds itself in financial difficulty. What should it do to protect its client’s assets?

A

Continue as before segregating its clients’ assets in internal accounts

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9
Q

What is the best definition of gearing?

A

A measure of the proportion of debt to equity that a company raises

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10
Q

An investor is entitled to a rights offer. They ask their broker to prepare a split allocation letter. This suggest that they intend to:

A

Sell some of the rights in order to be able to fund the purchase of the remaining shares at nil cost

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11
Q

In normal market conditions which of the following statements about interest rates and inflation is most likely?

A

Inflation would be expected to be lower than interest rates

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12
Q

When can an investor sell an OEIC?

A

Any period specified by the OEIC prospectus

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13
Q

An investor has a portfolio of UK bond holdings. What would be the main reason for adding overseas bonds?

A

Diversification

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14
Q

Investing in a REIT will remove which risk normally associated with direct property investments?

A

Liquidity risk

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15
Q

Which of the following would not be found on the statement of financial position under intangible non-current assets?

A

Work in progress

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16
Q

Why would an underwriting firm performing an offer for sale decide to use a fixed price rather than a tender?

A

To ensure that the issue is fully subscribed

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17
Q

Which of the following would account for UK government debt being considered risk free?

A

The UK itself controls the printing of money

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18
Q

A company wishes to raise capital cheaply. From the company’s point of view, which of the following would be seen as the BEST advantage of issuing warrants?

A

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

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19
Q

Which of the following would be MOST associated with rollover risk?

A

Commercial paper

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20
Q

When trading in the UK government bond market and cash bargains which of the following statements is TRUE?

A

The cash settlement will take place following the acquisition of the bargain and by the end of the next business day

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21
Q

Which of the following reserves can a company use to pay a dividend to shareholders?

A

Profit and loss reserve

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22
Q

All of the following have been deducted prior to calculating earnings per share, except:

A

Equity dividends

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23
Q

When a trade settles DvP where does the seller get their confidence in the settlement of the trade from?

A

That both sides of the trade are settling concurrently

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24
Q

The price of a company’s bond increases. This is most likely to have happened because of:

A

An upgrade in its credit rating by a ratings agency

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25
Q

ADR dividends are paid to the holder in:

A

US dollars

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26
Q

In which of the following funds would you expect to see commercial paper?

A

Money market fund

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27
Q

A company’s free float increases from 1.44 to 1.8. Which of the following is most likely?

A

The correct answer is: D - A greater number of shares are now available for the investing public

The free-float of a public company is an estimate of the proportion of shares that are not held by large owners and that are not stock with sales restrictions (restricted stock that cannot be sold until it becomes unrestricted stock).

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28
Q

Which is the best description of the Enterprise Value to EBITDA ratio?

A

The cost to buy a company against an adjusted operating profit

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29
Q

When a company announces its intention to pay a specified dividend on a specified future date this is called the dividend declared date. What is the minimum number of business days between the declaration and the proposed record date?

A

6

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30
Q

Who is primarily responsible for organising a roadshow for potential investors in a new issue?

A

The underwriting firm appointed by the issuer

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31
Q

If interest rates rise, which ONE of the following is TRUE of the Treasury 6.75% 2028 stock? Its price and yield will:

A

Fall and rise

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32
Q

Why would an investor want to deal special-ex?

A

For tax planning purposes

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33
Q

Participants in a dark pool are MOST LIKELY to have chosen this type of execution venue because of:

A

Ability to execute trades at efficient prices

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34
Q

Modified duration shows the expected change in a bond’s price, given a specified change in interest rates. Which of the following is most likely?

A

The higher the modified duration, the more the price of that instrument will move

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35
Q

What is the purpose of an ICEBERG order?

A

To reduce market impact

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36
Q

Bloomberg and Thomson Reuters are which type of information provider?

A

Secondary Information Provider

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37
Q

Which of the following could make up part of a company’s free float?

A

Shares held by an institutional investor holding 4% of the company’s shares

38
Q

Eurobond

A

The coupon on a Eurobond is paid Gross

39
Q

What is the aim of portfolio diversification?

A

To optimise the risk-reward trade-off

40
Q

Which of the following is a capital expenditure?

A

Equipment for a new office

41
Q

Which ONE of the following is a criteria for entry on to a junior market of the exchange?

A

All shares freely-transferable

42
Q

Which of the following would be shown as a liability on the statement of financial position (balance sheet)?

A

Debentures

43
Q

An investor is investigating French and US government bonds, which of the following statements is correct with regards to standard settlement procedures?

A

French bonds settle within Euroclear, whilst US bonds settle within the DTCC with a shorter settlement time than the French bonds

44
Q

An investor approaches you looking for an investment that can provide capital growth over a long period and the possibility of some income. They are also happy to take on a high-level of risk. What would you recommend?

A

Equity in a newly-formed company which is traded on a junior market of an exchange

45
Q

A Depositary Receipt may be pre-released however the issuer must deliver the underlying shares for deposit within:

A

Three months

46
Q

A bond rated AA moves to A-, what will be the effect on price and yield?

A

Fall, rise

47
Q

What is a key benefit of using an Inter-Dealer Broker (IDB)?

A

What is a key benefit of using an Inter-Dealer Broker (IDB)?

48
Q

Which of the following is the best definition of the gross redemption yield (GRY)?

A

The annualised total return for a bond held to maturity

49
Q

An investor bought shares ‘cum’ but there was a delay in settlement until after the record date. Upon the dividend payment date, which of the following describes the appropriate process?

A

Buying investor’s firm will need to arrange for the dividend claim to be made

50
Q

A company could issue bonds in order to satisfy the needs of investors that wish to invest in it, with the coupon rate and maturity set according to market demand. This is an example of which of the following?

A

Medium-term notes

51
Q

Where a company wants to improve the liquidity of its shares but not reduce the nominal value of the shares it is most likely to perform which of the following?

A

Have a scrip issue

52
Q

Modern electronic trading environments lend themselves to algorithmic trading, a negative aspect of high frequency trading is the possibility of a ‘flash crash’ which can be summarised as which of the following?

A

Where there has been a rapid decline in the value of the market for it then to recover relatively quickly

53
Q

Revenue expenditure will have an initial impact on the:

A

income

54
Q

If the yield curve is considered normal which of the following is TRUE?

A

Long dated yields move inversely to long dated prices

55
Q

Financial ratio analysis can be used to assess many aspects of a company. Which of the following would be used to identify potentially high future growth prospects?

A

High P/E ratio : low dividend yield

56
Q

Why would a lead manager be LEAST likely to go through a syndication process and, instead, take responsibility for the entire process themselves?

A

It is a placing

57
Q

Which of the following would be considered the difference between commercial paper in the UK and commercial paper in the US?

A

UK commercial paper has a maturity up to 1 year, whereas US commercial paper has a maturity up to 270 days

58
Q

Which of the following best differentiates medium term notes (MTNs) from other bond issues?

A

Issuers use shelf registration

59
Q

A life insurance company that wishes to gain long term capital growth would invest in which asset class?

A

A life insurance company that wishes to gain long term capital growth would invest in which asset class?

60
Q

Which of the following is a major benefit of a quote-driven market?

A

Increased liquidity

61
Q

An investor has placed their money into an infrequent actively managed account. Which of the following is most likely?

A

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

62
Q

In terms of the degree of risk, where does mezzanine debt rank in the order of payment should a company be in liquidation?

A

Between subordinated debt and preference shareholders

63
Q

Which of the following cash flows would not be listed under operating cash flows in a company’s cash flow statement?

A

Profits realised on disposal of an asset

64
Q

The equity risk premium is:

A

The total return on a stock over a period minus the risk free rate

65
Q

Repo

A

A repo is a sale and repurchase agreement normally involving instruments such as Gilts. The asset is sold and then repurchased at a later date. It is a type of secured borrowing that generates a repo rate. The difference between the sale and repurchase price represents the interest paid on the loan of cash.
Tripartite repos use a custodian to facilitate the transfer of cash and collateral.
Repos can be for any period of time, not just overnight. However overnight repos are the most common.

66
Q

hich one of these items is NOT a non-current asset?

A

Deferred Tax

67
Q

Which one of the following is not a part of the origination team?

A

Market maker

68
Q

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

A

Greater chance of bias

69
Q

When a market maker uses a stock borrowing and lending intermediary to cover a short position by borrowing stock from a fund manager, which of the following best describes the relationship between the SBLI and their counterparties?

A

Agent with the market maker and agent with the fund manager

70
Q

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

A

To provide an inflation protected product

71
Q

An authorised unit trust is essentially a unit trust that is allowed to be marketed to the investing public, and must be constituted by a trust deed made between:

A

The fund manager and the trustee

72
Q

Which of the following is not a consideration in order priority for execution on an exchange order driven system?

A

Volume

73
Q

All of the following are true regarding UK government bond issues except:

A

A primary dealer (GEMM) does not have to participate in the auction process

74
Q

A base line for spread measurement, which is based on the rate at which funds for particular currencies are offered between a range of banks, would be called:

A

LIBOR

75
Q

[1078497] Which of the following is considered as a sell side to sell side electronic trading platform for bonds?

A

MTS Cash

76
Q

Which of the following is the lowest form of debt?

A

PIK

77
Q

An investment bank when engaging in a foreign exchange transaction with another investment bank in a different time zone could be exposed to risk. This risk could mitigated by the use of which of the following mechanisms?

A

Continuous linked settlement

78
Q

When would a company consider issuing a follow-on offer?

A

When markets are rising

79
Q

The Insolvency Act 1986 and the Enterprise Act 2002 define a strict order of repayment of company debts in liquidation. In the order of repayment, who/what is paid before subordinated loan stock?

A

Unsecured loans

80
Q

Which of the below is likely to invest more in money market instruments?

A

Which of the below is likely to invest more in money market instruments?

81
Q

A UK government bond sale takes place 2 days before the ‘coupon paid date’. The trade is known as:

A
  • Ex-coupon
82
Q

A prime broker provides a number of services for institutional investors, what would be the purpose of stock lending and borrowing?

A

Liquidity

83
Q

If the price of the investment falls in a year only to rise again in the next, the fund manager will not become eligible to receive an additional fee, until the previous maximum fund price is surpassed. This would be the best description of which of the following?

A

High water mark

84
Q

A medium-term note programme benefits from which of the following?

A

Settlement would take place the day after the bargain

85
Q

Which one of the following is an electronic platform to facilitate dealer-to-customer trading in bonds?

A

TradeWeb

86
Q

Which of the following is not associated with order-driven trading systems?

A

Firm quotes during the MQP

87
Q

Which of the following ratios would allow an investor to determine the income returned from equity over the current share price?

A

Dividend yield

88
Q

Which of the following would determine the credit rating of a company by a credit rating agency?

A

To assess whether the issuer’s cash flow will comfortably service and repay its obligations

89
Q

With respect to government bonds from the US & France, which one of the following is true?

A

French government bonds have a greater settlement period

90
Q

Hedging with the use of derivatives is a strategy that helps investors with:

A

Protecting against losses

91
Q

In which of the following types of issue might a company retain a greenshoe option?

A

A secondary offer

92
Q

Which one of the following would not increase the issued share capital?

A

A call on partly paid shares

Securities (19 decks)

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