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CISI: Securities > RE: Incorrect Answers > Flashcards

RE: Incorrect Answers Flashcards

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1
Q

How does an Over Allotment Option Allow Underwriter to Achieve a more Successful Listing?

A

It allows underwriters to sell shares if they rise and buy back if they fall.

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2
Q

When Issuing Bonds, Whats the Difference Between an Auction and Tender Methods?

A

An auction: Succesfu bidder pay the price they bid

Tender: Bidder pay a common price

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3
Q

Who has Responsibility for Admission of Companies on the AIM?

A

LSE

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4
Q

How Does a Book Runner Assist in the New Issue Process?

A

Findss buyers, and coordinates the level of demand across the syndicate

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5
Q

The Process that Allows a Company to Issue Several Bonds with Different Maturities Over a 2 Year Period is Known As?

A

Shelf Registration

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6
Q

How is a Municipality Able to Issue Bonds on Favourable Terms

A

The bonds are guaranteed by a third party

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7
Q

The MTS Cash Electronic Trading Platform is Used Between Which of the Following Parties to Bond Transactions?

A

Dealers Only

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8
Q

Which Organisation Enables the Price Discovery Mechanism?

A

The Trading Venue

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9
Q

Amy, has a number of shares she wishes to sell at a particular price, however, if the price falls below the one she specified she would like the order to be immediatley cancelled. What type of order should she request?

A

Fill or Kill

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10
Q

How does a Prime Broker Trade Leverage for its Hedge Fund Client?

A

By trading on a margin

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11
Q

Primary Dealers are Usually Associated with What?

A

Issues of Government Bonds

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12
Q

For Which Asset Type Would you Most Expect Dealings to Take Place on a Decentralised Dealer Market?

A

Corporate Bonds

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13
Q

What are On-the-Run Bonds?

A

The most recently issued long term bonds

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14
Q

Aside from the Government, the Four Groups of Participants that Facilitates Deals in Government Bonds are Primary Dealers, the Gov issuing Agency, Inter Dealer Broker and which Others?

A

Broker Dealers

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15
Q

By What Name is the Typical Basis in Which Dealer to Customer Transactions in Fixed Interest Securities Undertaken?

A

Request for Quote (RFQ)

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16
Q

Why has the Volume for Bonds Traded on Single Dealer Platforms Fallen?

A

Banks have become less willling to use capital in the bonds market.

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17
Q

The Key Benefit of a Shareholder Pre-Emptive Rights?

A

A company can only issue new shares to the public with their approval

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18
Q

When Might a Bond Issuer Benefit From a Rise in Interest Rates?

A

By issuing bonds prior to the rise

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19
Q

One of the Main Reasons a Company Would Decide to Use Its Own Cash to Buyback Shares From Investors Is?

A

To allow it to recognise its capital structure to include more debt.

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20
Q

What is the Minimum Number of Shares Required by a Predator to Gain Control of a Company?

A

50.1%

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21
Q

What is Nil-Paid Rights?

A

Difference Between the rights issue price and the theoretical ex rights price.

e.g. Rights price £4.00 and the Ex rights is £4.80. NPR = £0.8

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22
Q

If a Company Makes a Bonus Issue to its Shareholders, What Impact Would this have on the Share Price?

A

It would go down

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23
Q

At what Price Must a Mandatory Cash Offer be Made Under the POTAM Rules?

A

At least the highest price paid by the offerer over a 12 month period

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24
Q

Which Advantage does Synthetically Replicated ETFs Have Over Physically Replicated ETFs?

A

Lower cost and smaller tracking error.

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25
Q

What is the Name Given to the DMOs Facility Which Enables the GEMMs to Enter Into Reverse Repos with it?

A

Standing Repo

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26
Q

Exchange Traded Funds are Sold in Large Blocks, Each of Which MIght Contain 10s of Thousands of ETF Shares. By Which Name are the Blocks Known?

A

Creation Units

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27
Q

What Does Modified Duration of a Bond Measure?

A

Its price volatility to changes in interest rates.

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28
Q

A Specialist Fund has Been Structured as a imited Partnership Arrangement. This is Typically an Indication That?……

A

The firm invests in private equity.

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29
Q

What is the Standard Settlement Period of US and UK Government Bonds?

Not your usual suspect……

A

T+1

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30
Q

A Company Issues Class A and Class B Ordinary Shares. What will the Difference Between These Will Most Likely Relate to?

A

Right to vote on key decisions.

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31
Q

How Does a Covered Warrant Differ From a Warrant?

A

Covered warrants are issued by a firm other than the company which issues the underlying shares.

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32
Q

What is the Main Risk With Structured Products that is Especially Difficult to Hedge?

A

Credit Risk

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33
Q

What is the Shape of the Yield Curve When Investors Prefer More Liquidity?

A

Normal

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34
Q

Why Would a UK Organisation Consider Issuing a EuroBond in Germany?

A

It wishes to raise finance outside its own country, there may be a higher demand for GBP debt.

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35
Q

An Investor has Been Advised They Must wait 3 Months Before They Can Sell Units Back in an Open-Ended Fund Holding. What Key Factor is Likely to Have Triggered this Delay?

Which type of fund would they have invested in?

A

They invested in a property fund.

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36
Q

Are Investment Trusts Allowed To Borrow Money?

A

Yes

37
Q

Why Would the Yield Curve Become Inverted?

A

There is an expectation for a significant reduction in interest rates.

38
Q

When Could Negative Bond Yields Occur?

A

Could occur where monetrary policy has been eased to lower inflation.

39
Q

For a CIS to Become Regulated, What Must Occur?

A

The local finance regulator must recognise the CIS from insde the country or recognise it from outside the country.

40
Q

The Process of CLS is Designed to Address Problems Associated with Which type of Transaction?

Asset Class

A

FX trading

41
Q

What is an Example of a Primary Information Provider?

A

LSE Regulatory News Service

42
Q

Which Risk can be Diversified Away?

A

Unsystematic risk

43
Q

Why is the a Risk Premium When Investing in Equities?

A

To compensate investors for assuming greater risk, compares to other investements such as bonds of cash.

44
Q

How Long Before is a Special Ex Trade Possible Before the ex-date?

Where do the dividends go to?.

A

10 business days before the ex dividend date with the seller entitled to the dividend.

45
Q

What is a Cross Rate?

A

A cross rate is between 2 currencies that does not include the US dollar

46
Q

If Interest Rates were to Rise in the UK, What would one expect to be the effect on the price and yield of gilts?

A

Price would fall and yield would rise

47
Q

Which Measure is Used as a Targer for the UK Monetary Policy Committee in Realtion to Inflation?

Obvious

A

Consumer Price Index

48
Q

What Fund Manager Typically Has “Skin in the Game” ?

Holds a stake in their own fund

A

Hedge funds

49
Q

What is the Formula for the Converison Premium?

A

Bond Price / (Shares x Price)

An answer of 1.157 for example would be a premium of 15.7%

The -1 X 100 to get the answer.

50
Q

What is the Maturity of US Treasury Issued Long Bonds?

A

30 years

51
Q

What is a Rule for Credit Ratings?

A

The more letter the better the bonds.

52
Q

What are the German Government Bonds in Order of Maturity (1 earliest)

A

Bund
Bobl
Schatz

53
Q

What Ratio Effectively Provides a Yield for the Whole Company Being Analysed?

A

ROCE

Return on Capital Employed

54
Q

What is the Quick Ratio Calculation?

A

Current Assets - Inventory / Liabilities

55
Q

What Holds Ownership via a Nominee Name with a Unique Identifier for Each Individual Client?

A

Designated Nominee

56
Q

How Often is the Coupon on a German Bond Paid?

A

Annually

57
Q

What Trading Venues Do Dark Pools Operate On?

A

Multi Lateral Trading Facility

58
Q

What Factor do Order Does not Specify a Price?

A

Market Order

59
Q

In a New Listing What is the Term for a Firm that Book Builds?

A

Lead Manager

60
Q

Who is Responsible for the Issue of UK T Bills to Investors?

A

The Bank of England

61
Q

Who Would Usually Lead and Manage the Sale of Shares in an IPO?

A

Investment Bank

62
Q

Which Factor Determines Whether a Bond can be Traded Electronically?

A

Its Liquidity

63
Q

A privately owned manufacturing company is looking to raise capital through listing on the LSE. It appoints a number of advisers to form an origination team for the pending flotation. Who is MOST likley to assess the best method of bringing the company to the market?

A

The Sponsor (lead investment bank)

64
Q

The Use of a Designation on an Account is Primarily Used……?

A

As a refernece to identify the account

65
Q

In which type of issue in the Eurobond market is the lead manager MOST likely to place the entire deal themselves without forming a syndicate?

A

A bought deal.

66
Q

What is a corporate governance expectation for an issuer that is planning to list securities?

A

The role of the Chairman and the CEO should be split

67
Q

A large US Oil Company is being floated on both New York and London Stock Exchanges. Beta LTD is a london based investment bank responsible for the UK listing. Betas role within the syndicate would mosy likley be described as?

A

Co-lead manager

68
Q

What type of electronic platform is commonly used to facilitate dealer-to-customer trading of bonds?

A

TradeWeb

69
Q

Where are trade involves shares that are “dematerialised”, this means that…..

A

The transaction will be settled electronically

70
Q

What type of cash flow is the “free cash flow to shareholders” known as?

A

Equity

71
Q

Life Insurnace companies gernerally invest for their long term obligations in which asset class?

A

Equities

72
Q

A significant benefit of using a central counterparty system is that it……..?

Reduces what risk?

A

Reduces systemic risk

73
Q

What is a key difference when comparing a companies profit against cash?

A

Recognition of revenues at point of sale

74
Q

Factors of a Japanese Bond?

A

T+1 pays coupons semi annually and has a maturity of up to 40 years.

75
Q

If the “Dow Divisor” used to Calculate the Dow Jones Industrial Average Index is 0.2, this means that a $1 price change of a component stock wil, in itself, trigger an index movement of…….

A

5 points (0.2/1)

76
Q

What is the Equation for foward spot rates?

A

= Spot Rate x [(1+base %) / (1+counter%)]

77
Q

The seller of a security is at the confirmation stage of the clearing and settlement process.

This indicates that……..

A

They have agreed the basis in which the trade will proceed

78
Q

In order to Amortise an asset over its useful life, a company must……

A

Reflect an ongoing reduction in the companies financial statements.

79
Q

Stockbrokers can receive remuneration by charging……

A

fees and commissions only

80
Q

What key risks are evident when an investor purchases overseas sovereign bonds?

A

Country risk and exchnage rate risk?

81
Q

What is a key benefit of purchasing shares in an investement trust compared to a comparable unit trust?

A

Clarity of a single price to buy and sell

82
Q

When considering the operation and characteristics of private equity funds, a fund manager should be aware that…..

A

Returns are usually correlated with the economic cycle.

83
Q

Which passive bond strategy involves constructing a bond portfolio whose coupon and redemption payment cash flows are synchronised to match those of the liabilities to be met?

A

Cash matching

84
Q

A company sells its shares to an investement banks, which subsequently sells those shares to investors at a premium to the price they paid, this is known as a……..

A

An offer for sale.

85
Q

When an issuer of new bonds is deciding which investment bank it wants to assist in the issue, the decision is normally finalised after which stage of the process?

A

Pitching

86
Q

What is usually considered disadvantage of holding shares through a pooled nominee?

A

Loss of shareholder perks

87
Q

On a statement of financial position under which heading would you expect to find pre payments?

A

Current assets

88
Q

In order to calculate the depreciation of an asset, a company must identify both its…….

A

Useful business lifespan and non-recoverable cost

89
Q

As an alternative to using the cash flow statement to calculate free cash flow, what is often used instead?

Obvious joey….

A

Income statement

CISI: Securities (11 decks)

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