Test Questions

Question 1

Delta

Answer 1

Sensitivity of the change in the option price with respect to the underlying asset price

Question 2

What is pure expectations theory

Answer 2

The shape of the yield curve can be explained in terms of expected future interest rates

Question 3

Monetarist school of thought

Answer 3

Supply and demand are in equilibrium

Question 4

Which of the following are true in relation to an investment trusts capital structure?

Answer 4

The investment trust can raise more capital through a rights issue

The investment trust may have a split capital structure

Can raise money through borrowing

Question 5

Simple aggregate unweighted share price

Answer 5

Dow Jones industrial average

Question 6

Which of the following exchanges would an investor wishing to trade non-ferrous metals derivatives most likely use

Answer 6

London metal exchange (LME)

Question 7

How long to transactions on the FOREX take?

Answer 7

T+2

Question 8

Available for sale bonds

Answer 8

Available for sale bonds have transaction costs added to purchase price to arrive at initial carrying value

Question 9

What determines the height of the short-run Phillips curve?

Answer 9

Long-term money growth rate

Question 10

What best describes the strategy of a market neutral hedge fund

Answer 10

It aims to have returns that have a low correlation with returns on traditional assets

Question 11

Which best describes how derivatives are treated in financial accounts

Answer 11

They are captured on the balance sheet when a contractual arrangement is entered

Question 12

Which of the following best describes an index-linked gilt?

Answer 12

A gilt whose coupons and principle are linked to the RPI

Question 13

If one country currency appreciated relative to another the most likely explanation is

Answer 13

The real GDP is higher than the other countries

Question 14

Which ratio would be least distorted by accounting practices

Answer 14

Price/cash flow ratio

Question 15

A change in methods of depreciation which leads to a higher depreciation charge will

Answer 15

Reduce profits

Question 16

Stamp duty reserve tax is charged at

Answer 16

0.5% on the purchase of all eligible securities

Question 17

Wan analyst identifies a potential liability which is NOT predictable enough to have a specific provision in the accounts

Answer 17

Contingent liability

Question 18

The default category under IAS 39 for financial liabilities which do not meet the definition of financial liabilities at fair value through profit and loss is

Answer 18

Measured at amortized cost

Question 19

Highest non-investment grade for Moodys

Answer 19

Ba1

Question 20

What is least accurate in regards to ADRs

Answer 20

They eliminate currency risk for US investors

Question 21

MES is best described as

Answer 21

Lowest level of output where long run costs is at a minimum

Question 22

International accounting standards requires that goodwill in a business combination

Answer 22

Is recorded in the balance sheet at cost less accumulated impairment charges

Question 23

Consumption function

Answer 23

At zero income the level of consumption is know as autonomous consumption

Question 24

Overall economic activity can be measure by

Answer 24

The value of consumer purchases

The value of output by firms

The value of expenditure by firms on inputs

Question 25

The frequency of data in a histogram is represented by the

Answer 25

Area of the bars

Question 26

A measure of the decline in the value of an investment from its historical peak value is best describes as

Answer 26

Drawdown

Question 27

Facts about ETFs

Answer 27

ETFs are traded on the London Stock exchange

ETFs must be UCITS compliant to obtain FCA recognition

ETFs are passively managed

Question 28

When price volatility increases over time, which of the following is most likely to occur

Answer 28

Correlations between securities increases