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Securities > Mock 4 > Flashcards

Mock 4 Flashcards

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SIE Exam flashcards
1
Q

Insolvency legislation defines a strict order of repayment of company debts in liquidation. In the order of repayment who/what is paid after subordinated loan stock?

A

Preference shareholders

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2
Q

What services will a prime broker offer to cover a short position in a long/short equity hedge fund strategy?

A

Securities lending and borrowing

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3
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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4
Q

In the offering of a bond issue, which of the following would not be a responsibility of the listing agent?

A

servicing

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5
Q

Which of the following best differentiates MTN medium term notes from other bond issue?

A

Issuers use shelf registration

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6
Q

Which of the following would don’t be an intangible non-current asset?

A

trade creditors

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7
Q

where do corporate bonds mostly trade?

A

OTC

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8
Q

Why might a hedge fund use a prime broker?

A

A more tailored and bespoke range of services is offered to them

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9
Q

an investor is looking to buy shares on a ‘special cum-div’ basis. What is the latest day on which they can do this?

A

The day before the payment date

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10
Q

When stock is lent thorough a stock borrowing and lending intermediary which is not true of the lender?

A

have the ability to sell the shares before settlement

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11
Q

Which of the following nominee accounts would best facilitate proxy voting at a company’s annual general meeting?

A

designated

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12
Q

Considering the price/earnings ratio and the dividend yield respectively, what would an investor NORMALLY expect if a company continuously shows rapidly increasing profits?

A

High / low

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13
Q

Who sets the rules for members of an exchange governing their trading practices?

A

The exchange

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14
Q

Which of the below techniques is a method used for passive investment?

A

Optimisation

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15
Q

In relation to an IPO, which of the below will be involved in completing the due diligence in the production of the company’s prospectus?

A

Legal advisor and reporting accountants

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16
Q

A private company has produced projections for the coming year and their findings show that growth would only be possible by taking total control of a small public company. After considering a number of possible solutions which of the following would NOT be considered an appropriate financing method?

A

A follow-on offer

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17
Q

If an investor placed an order in a competitive gilt auction, which of the following best describes the price the investor will pay?

A

the investor will pay the price they bid if they are successful

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18
Q

which of the following is a capital expenditure?

A

equipment for a new office

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19
Q

what is a reverse repo?

A

A transaction where one party purchases stock from the other, agreeing at the same time to resell the equivalent securities at an agreed price and on an agreed date in the future

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20
Q

In respect of a prospectus who is responsible for co-ordinating the due diligence process?

A

listing agent

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21
Q

The best way to minimise a portfolio’s risk is to invest in equities with:-

A

negative correlation

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22
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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23
Q

If a predator pays more for a target than its net asset value, due to loyal customer base and innovation in the market, how will this be justified in financial statements?

A

Goodwill

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24
Q

XYZ is a company established in the UK as a public limited company. Which of the below must ALWAYS be true:

A

It will be restricted in relation to how much share capital it can issue

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25
Q

A company is looking to raise additional capital. For which of the following reasons might the company choose to do so through a rights issue?

A

Fair treatment for existing shareholders

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26
Q

Dividend yield is defined as?

A

Dividend / market price as a percentage

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27
Q

Which one of the following would offer the greatest yield?

A

Mezzanine debt

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28
Q

On some occassions, companies may provide additional disclosures on financial statements. Which of the below would not be included on these disclosures?

A

Disclosure of the company’s management policies

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29
Q

In a free float calculation, which of the following will not be considered?

A

Insider holdings

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30
Q

Which of the following would most likely be considered when assessing the credit rating of a bond?

A

The issuer’s current credit rating

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31
Q

Which one of the following is most likely to have a narrow spread between its bid and offer price, an annual management fee of 0.5% or less and investor would incur a stockbrokers commission when buying and selling?

A

ETF

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32
Q

Which of the following is a secondary information provider?

A

Thomson Financial

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33
Q

Stabilisation is used for which of the following purposes?

A

To reduce short-term volatility in a share price close to inception that is unrelated to the issuers fundamentals

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34
Q

What trades on a ‘request for quote’ system?

A

High yielding bonds

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35
Q

Which of these would normally be used to establish the owner of a UK share?

A

Company register

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36
Q

Where a bond is trading below par, which of the following statements is TRUE with regard to redemption value and yields?

A

There would be capital gain: the flat yield will be less than the gross redemption yield

37
Q

The behaviour rules for broker/dealer firms trading on an exchange would be overseen by:

A

The exchange

38
Q

How would an investor determine the issuance price in an offer for subscription?

A

By the prospectus

39
Q

What is the profitability ratio?

A

Profit before interest and tax / Capital employed

40
Q

What is the minimum number of market makers for any share trading on an exchange’s order driven system?

A

0

41
Q

The regulators suggest that portfolio managers use diversification to reduce which type of risk?

A

Specific

42
Q

A company carries out a 5 for 1 bonus issue when its share price is 860. After the issue has been completed, which of these statements is most likely to be true?

A

The shares will be more marketable

43
Q

When issuing equity a company will appoint a sponsor, who will provide all of the following services EXCEPT:

A

Facilitating the marketing of the share to interested parties

44
Q

For which of the following forms of corporate debt can a company enter into an agreement with a broker to issue these instruments on an ongoing basis as and when the company chooses to?

A

MTN

45
Q

Secondary information providers take information from primary information providers and then disseminate this information mostly to:

A

Brokers and research analysts

46
Q

As a bond approaches maturity its price will:

A

Get closer to par

47
Q

In a stock borrowing and lending situation which of the following statements are FALSE?

A

The lender of the stock can still sell the stock

48
Q

What is the main reason for investing in equity?

A

The opportunity for increases in capital

49
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

50
Q

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

A

To achieve better prices

51
Q

Revenue expenditure will have an initial impact on the:

A

income statement

52
Q

What is the role of the regulator with regards to the trading of Official List securities?

A

To suspend trading or listing

53
Q

A company has annouced they are going to pay a dividend. Some of the company’s shares are being borrowed from a pension fund in a stock lending agreement. Which of the following BEST describes the payment of the dividend?

A

The borrower will receive all dividend payments from the company, but in most cases the dividends will also be passed to the pension fund as a manufactured dividend

54
Q

A company when bringing securities to the primary market are not required to fulfil publishing requirements in which of the following situation?

A

Selective marketing

55
Q

Under which of the following would companies that trade on the junior market be required to provide half yearly reports?

A

The exchange

56
Q

What are the responsibilities of a market maker outside of the exchange’s open hours?

A

A market maker has no responsibilities during this time

57
Q

Euroclear UK and Ireland run a settlement system for UK securities called CREST. Other than arranging payment and delivery of securities, what extra service does CREST arrange?

A

Collects payment for SDRT and transfers them directly to HMRC

58
Q

In an initial share offering, if the underwriter’s contract contains a ‘greenshoe’ option this means that:

A

The underwriter can offer an additional 15% of the shares if it chooses

59
Q

By hedging a position, which one of the following is the most likely outcome?

A

You will limit or reduce the potential upside

60
Q

How does the Government encourage pension planning in relation to pension payments?

A

Relatively favourable tax treatment

61
Q

What is the significance of return on capital employed?

A

It measures the profits of the company before interest and tax relative to the assets employed

62
Q

What is the pricing mechanism for Exchange traded Funds?

A

Value can be monitored continuously

63
Q

Which of the following bonds pay an annual coupon?

A

OATS

64
Q

When referring to index-linked gilts, which of the following is true?

A

The redemption value and the coupon are linked to retail prices

65
Q

Which of the following is the best description of a manufactured dividend?

A

Payments passed back to the lenders of shares to compensate them for any missed dividends issued by the company

66
Q

Which of the following would be considered ‘revenue expenditure’?

A

Payments to a firm providing security services

67
Q

Which one of the following is considered a passive strategy?

A

Duration based immunisation

68
Q

The types of order accepted on order driven systems are:

A

orders that will either execute or cancel immediately, or will go to the buyers and sellers queue

69
Q

Which of the following would be considered a benefit of an investment trust over an authorised unit trust?

A

The fund manager can have a longer time horizon in terms of investment

70
Q

During share buybacks, which of the below represents a guaranteed purchase of a certain number of shares?

A

Bought deal

71
Q

Which of the below would be classified as revenue expenditure?

A

Purchase that immediately impacts the income statement

72
Q

An investor buys a gilt for settlement on 2nd January which has 90 days interest accrued. Upon which date will the investor receive the next coupon payment?

A

1st April

73
Q

With regard to companies listed on a junior market e.g. the LSE’s Alternative Investment Market , which of the following must stay with the company for the duration of the listing?

A

Broker and advisor

74
Q

A fall in prices on the stock market would most likely be caused by a:

A

0.5% rise in the Bank of England base rate.

75
Q

The interaction between the cash price of bonds and the futures prices is a dynamic two-way process. This is an example of:

A

arbitrage trading

76
Q

Advice on takeovers and corporate finance is usually given by:

A

An investment bank

77
Q

What is the maximum time that an equity can be bought, where an arrangement is agreed that the seller does receive the dividend?

A

10 days

78
Q

Performance fees based on high water marks are most likely to be associated with

A

Hedge Fund

79
Q

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

A

Equity

80
Q

Which one of the following is most likely to invest in money market instruments?

A

Banks

81
Q

According to IFRS, what is NOT depreciated?

A

Freehold land

82
Q

Which of the following is an example of capital expenditure?

A

Purchase of non-current assets

83
Q

Which of the below is NOT a non current asset?

A

Inventory

84
Q

A market analyst produces a report on market depth and liquidity. What would be the sources of this report?

A

Exchanges and trade reports

85
Q

A company is considering a follow-on offer. Which of the following would most likely dissuade the company?

A

The prospect of a bear market

86
Q

When wouldn’t you get the limit price on your order?

A

In the opening auction

87
Q

How are Sterling Treasury Bills issued?

A

By tender

88
Q

Which one of the following is ALWAYS true about participating preference shares?

A

They can participate in further profits of the company

89
Q

A company wishes to raise new capital to fund long term expansion. It does not expect to make profit in the early years of this expansion so does not want to be tied down to funding obligations.
Which of the following would be the best to issue?

A

Ordinary shares

Securities (19 decks)

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