Test Questions Flashcards
4. A limited company has 6,000 ordinary shareholders. In the current financial year the profits attributable to these shareholders are £1,060,000 and ordinary dividend payments are £410,000. What is the dividend cover? A. 2.46 B. 2.59 C. 2.71 D. 3.87
B. 2.59 - Learning Module 1
6. The share price of company X is 260p and the earnings per share is 18p. The share price of company Y is 182p and the earnings per share is 31p. The price earnings ratios of companies X and Y respectively, would be A. 14.44 and 5.87. B. 5.87 and 14.44. C. 6.92 and 17.03. D. 17.03 and 6.92.
A. 14.44 and 5.87 - Learning Module 1
- John owns a number of fixed interest securities and is seeking clarification on the difference between the gross and net redemption yields. The principal difference is
A. the rate of internal taxation within the investment.
B. the tax treatment of the coupon, in the investor’s hands.
C. whether they purchased on a cum or ex dividend basis.
D. whether they were purchased on a direct or indirect basis.
B. the tax treatment of the coupon, in the investor’s hands - Learning Module 1
Stacey, a first-time buyer, is about to complete on a property with a purchase price of £370,000. How much Stamp Duty Land Tax will she pay, if anything? A. Nothing. B. £3,500 C. £4,900 D. £8,500
B. £3,500 - Learning Module 1
10. Paulina purchases shares in two listed companies as per the following table Equity Purchase cost X £9,800 Y £10,600 What total Panel on Takeovers and Mergers (PTM) levy will she pay? A. £1 B. £2 C. £10 D. £20
A. £1 - Learning Module 1
- The current price of share X is 247p and the earnings per share is 57p. The current price of share Y, in the same sector, is 206p and the earnings per share is 11p. In general terms, this indicates that
A. share X is more highly favoured by investors than share Y.
B. share X will provide better value than share Y.
C. share Y has higher expectations for growth than share X.
D. share Y is significantly underpriced.
C. share Y has higher expectations for growth than share X. - Learning Module 1
- An investment manager recently completed four UK-registered share purchases on the same day
Method Purchase Price
Crest £1,500
Crest £7,500
Stock transfer form £1,500
Stock transfer form. £7,500
The total combined amount of Stamp Duty and Stamp Duty Reserve Tax payable on these transactions is A. £90 B. £95 C. £180 D. £184
B. £95 - Learning Module 1
18. If the annual rate of inflation falls from 1.8% to 0.3%, this is an example of A. deflation. B. disinflation. C. fiscal loosening. D. monetary loosening.
B. disinflation. - Learning Module 2
20. In a period when interest rates have fallen substantially, the nominal value of a conventional fixed-interest security at maturity will A. increase significantly. B. decrease significantly. C. remain constant. D. increase in line with inflation.
C. remain constant. - Learning Module 2
- A key effect of globalisation on the UK economy is
A. an influx of overseas financial institutions via the passporting rules.
B. the reduced competitiveness of labour intensive industries.
C. reduced consumer choice in technology products.
D. upward pressure on wage price inflation
B. the reduced competitiveness of labour intensive industries. - Learning Module 2
35. Portfolio X consists of blue chip shares and portfolio Y consists of unlisted shares. What type of risk is likely to be significantly higher for portfolio Y when compared to portfolio X? A. Duration risk. B. Shortfall risk. C. Inflation risk. D. Liquidity risk.
D. Liquidity risk. - Learning Module 5
- In order to reduce the interest-rate risk of a bond portfolio, a fund manager would usually
A. increase the modified duration of the portfolio.
B. reduce the modified duration of the portfolio.
C. purchase longer-dated bonds.
D. sell shorter-dated bonds.
B. reduce the modified duration of the portfolio. - Learning Module 5
37. A UK investor is looking to purchase international equities via an open-ended investment company. In respect of currency risk he should be aware that A. a fund with a covered call strategy will reduce the currency risk. B. a hedged share class will reduce the currency risk. C. purchasing share classes issued in local currencies will automatically remove the currency risk. D. purchasing a UK domiciled fund containing international equities will automatically remove the currency risk.
B. a hedged share class will reduce the currency risk. - Learning Module 5
38. Angela has £8,000 and borrows a further £2,000 to purchase some shares. The purchase price of the shares was £2.00 and she subsequently sold them for £1.80 each. Allowing for repayment of the borrowing, what percentage of her original capital would be lost? A. 10% B. 12.5% C. 17.5% D. 20%
B. 12.5% - Learning Module 5
- Jebran and Irmak are both higher-rate taxpayers, who have fully utilised their Capital Gains Tax exemption in the tax year 2021/2022, have invested in offshore funds. They have realised gains as follows
Investor Fund Gain
Jebran Reporting £10,000
Irmak Non-reporting £10,000
If no allowances are available to them, what will their respective tax liabilities be?
A. Jebran will pay £1,200 more than Irmak.
B. Jebran will pay £2,000 more than Irmak.
C. Irmak will pay £1,200 more than Jebran.
D. Irmak will pay £2,000 more than Jebran.
D. - Learning Module 6
45. Janet and Graham have made gains of £18,000 and £26,000 respectively in their unit trust holdings. Neither has made any other gains or losses in the tax year 2021/2022. If Janet is a higher-rate taxpayer and Graham is a basic-rate taxpayer, what is their combined Capital Gains Tax liability on these gains? A. £1,940 B. £2,510 C. £3,310 D. £3,880
B. £2,510 - Learning Module 6
47. Gao and Sying are both UK higher-rate taxpayers. Gao makes a fully chargeable gain of £6,000 from his onshore bond and Sying makes a fully chargeable gain of £6,000 under her offshore bond. Their respective Income Tax liabilities will result in A. Gao paying £1,200 more than Sying. B. Gao paying £2,400 more than Sying. C. Sying paying £1,200 more than Gao. D. Sying paying £2,400 more than Gao
C. Sying paying £1,200 more than Gao. - Learning Module 6
- Mei-Xing, an additional-rate taxpayer, has invested in two new issue Enterprise Investment Schemes (EISs) as per the following table
EIS Date of investment Amount invested
X August 2020 £400,000
Y August 2021 £450,000She should be aware that A. she may invest a maximum amount of up to £150,000 in the current tax year. B. EIS X will qualify for business property relief from September 2022. C. EIS Y will qualify for Income Tax relief of £202,500. D. she must hold both EISs for at least 5 years for any disposal to be exempt from Capital Gains Tax.
B. EIS X will qualify for business property relief from September 2022. - Learning Module 6
- David and Karen, both in their 50s, are higher-rate taxpayers. They wish to invest £250,000 for long term growth. What would be the main advantage of investing in an offshore investment bond?
A. Any death benefits will be free from Inheritance Tax.
B. Any withdrawals will be tax free.
C. They can control the timing of future personal taxation.
D. They will automatically pay basic-rate tax upon any surrender once they have retired.
C. They can control the timing of future personal taxation. - Learning Module 7
- An investment portfolio incorporating lifestyling would
A. exactly match the client’s attitude to risk.
B. increase its gilt exposure in the early years.
C. maintain a balanced exposure across asset classes throughout its life.
D. reduce its equity exposure in later years.
D. reduce its equity exposure in later years. - Learning Module 7
- When agreeing the benchmark for an investment portfolio with a client, it is important that the chosen benchmark is
A. always in line with the client’s long term investment objectives.
B. always positively correlated with the portfolio’s underlying assets.
C. always the lowest risk for the available choices.
D. derived from the efficient frontier curve.
A. always in line with the client’s long term investment objectives. - Learning Module 7
69. Pauline has agreed that her investment portfolio should be constructed in accordance with the MSCI PIMFA Private Investor Growth Index. Her discretionary fund manager has decided that owing to current economic conditions, he will deviate frequently in the short-term from the prescribed asset allocation model. His decision is an example of A. optimisation. B. partial replication. C. strategic asset allocation. D. tactical asset allocation.
D. tactical asset allocation. - Learning Module 8
Multiple Response
- When comparing a property authorised investment fund (PAIF) with a property investment trust
A. only under the PAIF is the price of shares directly linked to the value of the underlying investments.
B. only the PAIF is permitted to borrow money to invest.
C. only under the investment trust can the share price move independently of the value of the underlying investments.
D. under the PAIF a non-taxpayer can reclaim the tax deducted from any property income payments.
A. only under the PAIF is the price of shares directly linked to the value of the underlying investments.
C. only under the investment trust can the share price move independently of the value of the underlying investments.
D. under the PAIF a non-taxpayer can reclaim the tax deducted from any property income payments.
Learning Module 1
Multiple Response
- Elaine, an experienced investor, has diversified her portfolio into listed property company shares. She should be aware that listed property company shares
A. offer greater diversification than direct property investment.
B. will not be eligible for a stocks and shares ISA investment.
C. will never fall in value.
D. are affected by the quality of the company management
A. offer greater diversification than direct property investment
D. are affected by the quality of the company management
Learning Module 1
Multiple Response
- Maarav has £90,000 in a building society deposit account and Pinar has £110,000 in a National Savings & Investments Direct Saver account. Both accounts offer the same rate of interest. When comparing the characteristics of the two accounts
A. Pinar’s account has a higher level of capital protection in the event of default.
B. Maarav’s account will always be subject to a penalty upon early withdrawal.
C. Maarav’s and Pinar’s accounts will both pay interest on a gross basis.
D. Pinar’s account will not have voting rights.
A. Pinar’s account has a higher level of capital protection in the event of default.
C. Maarav’s and Pinar’s accounts will both pay interest on a gross basis.
D. Pinar’s account will not have voting rights.
Learning Module 1
Multiple Response
- Sam is considering a short-term money market fund and a standard money market fund. In respect of the main differences between them, he should be aware that
A. only the short-term fund has a weighted average maturity of no more than 60 days.
B. only the standard money market fund has a weighted average life of no more than six months.
C. both funds could hold commercial bills.
D. both funds could hold certificates of deposit maturing in one month.
A. only the short-term fund has a weighted average maturity of no more than 60 days.
C. both funds could hold commercial bills.
D. both funds could hold certificates of deposit maturing in one month.
Learning Module 1
Multiple Response
- Shirley invests in a number of gilts and corporate bonds. When comparing these
A. gilts are always less volatile than corporate bonds.
B. corporate bonds are always classed as sub-investment grade.
C. investors requiring ultra-long duration would favour gilts rather than corporate bonds.
D. a requirement for a higher yield would favour corporate bonds over gilts.
B. corporate bonds are always classed as sub-investment grade.
C. investors requiring ultra-long duration would favour gilts rather than corporate bonds.
Learning Module 1
Multiple Response
- When placing money in a bank account, an investor should be aware that
A. there is no guarantee that real growth can be achieved.
B. all accounts pay interest.
C. the Financial Services Compensation Scheme applies to accounts held in the UK.
D. term deposit accounts always pay a higher rate of interest than instant access accounts.
A. there is no guarantee that real growth can be achieved.
C. the Financial Services Compensation Scheme applies to accounts held in the UK.
Learning Module 1
Multiple Response
- When considering the pricing characteristics of a conventional gilt
A. the amount paid for the stock at the redemption date is always £100.
B. a price of £104.50 is said to be below the par value.
C. a purchaser of a gilt will usually pay a higher price than the seller will receive.
D. a purchase of stock between coupon purchase dates will be transacted at the clean price.
A. the amount paid for the stock at the redemption date is always £100.
C. a purchaser of a gilt will usually pay a higher price than the seller will receive.
Learning Module 1
Multiple Response
- Priya is considering a junior ISA (JISA) for her son Shaan, aged 14. She should be aware that
A. she may transfer Shaan’s existing Child Trust Fund into a JISA.
B. she may invest in both cash and stocks and shares components of a JISA.
C. Shaan assumes responsibility for the account at age 16.
D. the JISA allowance forms part of her stocks and shares ISA allowance.
A. she may transfer Shaan’s existing Child Trust Fund into a JISA.
B. she may invest in both cash and stocks and shares components of a JISA.
C. Shaan assumes responsibility for the account at age 16.
Learning Module 6
Multiple Response
- Frank, a non-taxpayer, has an investment bond. He is considering switching his existing equity and fixed interest funds into a property fund. He should be aware that
A. the new fund is likely to have significant holdings in commercial property.
B. the value of the property fund’s assets may be established by regular professional valuation.
C. encashment of the property fund may sometimes be suspended for several months.
D. he can reclaim the tax on income and gains deducted internally with the fund.
A. the new fund is likely to have significant holdings in commercial property.
B. the value of the property fund’s assets may be established by regular professional valuation.
C. encashment of the property fund may sometimes be suspended for several months.
Learning Module 6
Multiple Response
- A retail client is considering investing in hedge funds. He should be aware that
A. higher charges are likely to apply than to traditional investment funds.
B. a wide range of investment methods may be employed.
C. liquidity risk is not an issue.
D. derivatives may be used for more than just efficient portfolio management.
A. higher charges are likely to apply than to traditional investment funds.
B. a wide range of investment methods may be employed.
D. derivatives may be used for more than just efficient portfolio management.
Learning Module 6
Multiple Response
- Sanyu, a higher-rate taxpayer, has invested in a Real Estate Investment Trust (REIT). In respect of the income payments from the REIT he should be aware that
A. he will not be subject to further taxation on any property income distribution he receives.
B. he may offset any dividend payments against his dividend allowance.
C. if held within a stocks and shares ISA, Sanyu will be able to receive the property income distribution on a gross basis.
D. the dividend income will be paid net of 20% withholding tax.
B. he may offset any dividend payments against his dividend allowance.
C. if held within a stocks and shares ISA, Sanyu will be able to receive the property income distribution on a gross basis.
Learning Module 6
Multiple Response
- David is considering the purchase of an Exchange Traded Note (ETN) or an index tracking open-ended investment company (OEIC) as a way of investing in the FTSE All-Share Index. In comparing them, he should be aware that
A. the funds may use different methods to generate returns from the same index.
B. ETNs usually carry counterparty risk.
C. only the OEIC can be held in a stocks and shares ISA.
D. both can be traded on a real time basis.
A. the funds may use different methods to generate returns from the same index.
B. ETNs usually carry counterparty risk.
Learning Module 6
Multiple Response
- An independent financial adviser firm offers both advisory and discretionary management services. When comparing these
A. only the advisory service requires a client’s approval before making a purchase.
B. the advisory service will always have a lower level of adviser charge.
C. the discretionary service will always include a wider range of investments.
D. both services must act in accordance with the client’s agreed investment objectives and level of risk.
A. only the advisory service requires a client’s approval before making a purchase.
D. both services must act in accordance with the client’s agreed investment objectives and level of risk.
Learning Module 9
Multiple Response
- When using alpha in order to assess and evaluate portfolio performance, a financial adviser should be aware that
A. alpha can be a measure of a fund manager’s stock picking skills.
B. alpha is the output derived from the Capital Asset Pricing Model (CAPM) equation.
C. alpha cannot be used where the investment is a fund of funds.
D. a positive alpha indicates that the portfolio is likely to have outperformed the market return.
A. alpha can be a measure of a fund manager’s stock picking skills.
D. a positive alpha indicates that the portfolio is likely to have outperformed the market return.
Learning Module 9
3. Emily, a first-time buyer, is looking to purchase a property for £523,000. She has agreed a reduced price of £476,000. How much Stamp Duty Land Tax has she therefore saved on the purchase? A. £1,150 B. £1,410 C. £2,350 D. £7,350
A. £1,150 - Learning Module 1
- A retail client has invested in two money market funds as per the following table
Fund type Amount
Short-term £10,000
Standard. £15,000
In respect of these investments she should be aware that
A. Atleast £12,500 of the standard fund must be held in assets with an average maturity of more
than twelve months.
B. A maximum of £25,000 of her capital may be held in assets with an average life of no more than
twelve months.
C. The minimum average maturity for the standard fund is 90 days.
D. Within the short-term fund, £10,000 must be held in assets with an average maturity of no more
than 60 days.
D. Within the short-term fund, £10,000 must be held in assets with an average maturity of no more
than 60 days. - Learning Module 1
7. A client is using a limited company to purchase a residential property for £2,400,000. What would be the Stamp Duty Land Tax liability on this transaction? A. £228,000 B. £285,000 C. £288,000 D. £360,000
B. £285,000 - Learning Module 1
2,400,000 - 500,000
X 0.15% dwelling
- A retail client has just purchased three investments, as shown in the following table
Amount Investment
£10,000 UK investment trust
£50,000 Commercial property fund
£4,900 UK direct equity holding
From this information, it can be deduced that
A. the purchase of the direct equity was exempt from Stamp Duty Reserve Tax.
B. the commercial property fund will have the most volatile price.
C. the net asset value of the investment trust may be more than £10,000.
D. both the equity assets will be priced on a daily basis.
C. the net asset value of the investment trust may be more than £10,000. - Learning Module 1
10. A company makes a net profit of £1,000,000. It pays £250,000 interest to bondholders and wishes to retain £400,000 as cash reserves. If it elects to pay the balance as a dividend, what would be the dividend cover? A. 1.33 B. 1.67 C. 2.14 D. 2.86
C. 2.14 - Learning Module 1
- A retail client wants to sell a conventional gilt he owns. The gilt is showing both clean and dirty prices. The client should be aware that the
A. clean price assumes that the gilt is held until redemption.
B. clean price assumes that the seller retains the accumulated interest to the date of the sale.
C. dirty price assumes that the buyer receives the accumulated interest.
D. dirty price assumes the maximum spread that can be charged by the market maker on the sale.
C. dirty price assumes that the buyer receives the accumulated interest. - Learning Module 1
- Adrian is keen to purchase shares in a company traded on AIM. He should be aware that
A. all dividends received are not subject to the dividend allowance.
B. shares traded on AIM are not eligible to be held within a stocks and shares ISA.
C. the shares will be exempt from Capital Gains Tax after five full years of holding.
D. the shares will be exempt from Inheritance Tax after two full years of holding.
D. the shares will be exempt from Inheritance Tax after two full years of holding. - Learning module 1
- The key difference between a fixed charge and a floating charge debenture is that
A. assets subject to a fixed charge may be sold without the consent of the charge holder.
B. assets subject to a floating charge can never be sold as part of the company’s normal trading.
C. the cost of a floating charge fluctuates in line with the base rate.
D. a fixed charge has a higher priority than a floating charge for payment.
D. a fixed charge has a higher priority than a floating charge for payment. -Learning Module 1
- Elizabeth is purchasing existing gilts on a direct basis and Harvey is purchasing gilts via a collective fund. In respect of the transaction charges, what will they pay?
A. Elizabeth is likely to pay a higher price than the quoted mid-market price.
B. Elizabeth will pay a dilution levy if the mid-market price is rising at the point of purchase.
C. Harvey will pay dealing commission to an inter dealer broker.
D. Harvey will pay Stamp Duty Reserve Tax on the purchase.
A. Elizabeth is likely to pay a higher price than the quoted mid-market price. - Learning Module 1
3.Fixed interest investments regarded as the least volatile are those with a:
A. long period to maturity and a high coupon
B. short period to maturity and a high coupon
C long period to maturity and a low coupon
D. short period to maturity and a low coupon
B. short period to maturity and a high coupon
- Which of the following is a result of the ageing UK population?
A. Declining proportion of wealth spent on manufactured goods
B.Lower average wealth holdings due to increased longevity
C. Demand for services diminishes as people become richer
D. Falling GDP within the banking and insurance sectors
A. Declining proportion of wealth spent on manufactured goods
- Priti is investing in a Seed Enterprise Investment Scheme. After how long of holding
the investment will she receive 100% relief from inheritance tax?
A. 1 year
B. 18 months
C. 2 years
D. 3 years
C. 2 years
- What effect did the financial crisis have on optimised portfolios created under
Modern Portfolio Theory?
A.Portfolios did not deliver the expected diversification benefit as the rules of
correlation were not maintained
B.Optimised portfolios created under Modern Portfolio Theory fared better than
those created under the Pragmatist approach
C. It established that Modern Portfolio Theory is acceptable only under ‘normal
conditions’
D. It increased the attention paid to assessing volatility in the overall level of risk
within a portfolio
A.Portfolios did not deliver the expected diversification benefit as the rules of
correlation were not maintained
Multiple Response
- Which features would you expect to find with a floating rate note? Tick all that apply.
A.Coupons are paid monthly
B.Changes in interest rates affect the market price as per other fixed interest stock
C. The price is likely to remain close to its nominal value
D. The interest rate is linked to a money market rate
C & D
Question 16
A floating rate note (FRN) is a security issued by a company that offers a variable interest
rate linked to a money market rate (e.gr LIBOR). As interest rates change, so the interest
rate on the FRN may change; hence, the price is more likely to stay close to its nominal
value. The interest rate is expressed in basis points e.g. 100 basis points (1%) above LIBOR.
Interest is usually paid half-yearly or quarterly (not monthly).
Multiple response
- Ben owns ordinary shares and preference shares in the same company. In which of the following ways do these types of share differ? Tick all that apply.
A. Status ranking in the event of liquidation
B. Yields
C. Entitlement to dividend payments
D. Frequency of dividend payments
A & B & C
Question 17
Preference share dividends are usually paid at a fixed rate and take priority over ordinary share dividends, which are dependent on the profits left after tax and after preference shareholder dividends have been paid. Preference shares generally have no voting rights like ordinary shares, but in the event of liquidation, preference shares rank above ordinary shares. Both types of shares usually pay dividends half yearly.
18. Which indices are aggregated into the FTSE-All Share Index? Tick all that apply. A. FTSE AIM index series B. FTSÈ 100 C. FTSE TMT D. FTSE 250
B & D
Question 18
The FTSE-All Share Index comprises the FTSE 100, FTSE 250 and the FTSE Small Cap.
Multiple Response
- What are the main conditions that need to be met in order for a Venture Capital Trust (CT) to be approved by HMRC? Tick all that apply.
A. Its income must be wholly or mainly derived from shares or securities.
B.At least 70%of qualifying holdings must be in ordinary, non-preference shares
C. All of the money raised must be employed within 1 year
D. No more than 10% must be invested in any single company or group
A & B
Answers a), b) and c) are all conditions that need to be met for a VCT to gain approval byHMRC. Another condition is that no more than 15% (not 10%) of the total investmentmust be invested in any single company or group.
Question 1 out of 25:
Which of these is TRUE for a company to be admitted to the Alternative Investment Market (AIM)?
a. The company must have assets of at least £1m before joining
b. At least 20% of shares to be in public hands
c. The prospectus must warn of the nature of the AIM
d. Minimum trading record of at least 1 year
c. The prospectus must warn of the nature of the AIM
Multiple Response
Question 4 out of 25:
The yield curve for gilts is currently flat… this could indicate:
a. Expectations are for relatively consistent interest rates
b. Yields on both long and short dated gilts are broadly the same
c. Exchange rates have recently turned against sterling, resulting in a devaluation of the pound
d. Equities are currently seen as a better option for income needs
a & b
Question 9 out of 25:
Ideally, how should Price / Earnings ratios be compared?
a. On a prospective basis, using similar accounting procedures
b. On a prospective basis, with varying accounting periods
c. On a historic basis, using similar accounting periods
d. On a historic basis, using similar accounting procedures
A
Question 11 out of 25:
Which of the following statements in respect of the Lifetime ISA is TRUE?
A. Withdrawals other than for house purchase can only be made after the age of 60
B. Both the personal contribution and the government bonus count toward the annual ISA allowance
C. Only a cash version is available
D.A lifetime ISA must be opened before you reach the age of 40
D.A lifetime ISA must be opened before you reach the age of 40
Question 12 out of 25:
Multiple Response Question:
In relation to Stamp Duty and Stamp Duty Reserve Tax, which of the following statements is correct?
A. Stamp Duty is rounded to the nearest £1
B. Stamp Duty Reserve Tax is charged to the nearest penny
C. AIM shares are exempt from Stamp Duty and Stamp Duty Reserve Tax
D. Stamp Duty Reserve Tax is charged on OEICs but not Investment Trusts
B. Stamp Duty Reserve Tax is charged to the nearest penny
C. AIM shares are exempt from Stamp Duty and Stamp Duty Reserve Tax
Question 14 out of 25:
Multiple Response Question:
In relation to futures, which of the following statements is true?
A. Only the buyer of the future has to deposit the initial margin with the middleman
B. The buyer of a future is said to have the ‘long position’
C. The further payments made in addition to the initial margin are known as a ‘variation margin’
D. Futures always require the physical delivery of the asset
B. The buyer of a future is said to have the ‘long position’
C. The further payments made in addition to the initial margin are known as a ‘variation margin’
Question 15 out of 25: How much can Pietr invest in SEIS in each tax year? A. £1m B. £100,000 C. £200,000 D. £300,000
D. £300,000
Question 16 out of 25:
A structured product is offering a set income level and capital protection based on FTSE 100. It also has a ‘barrier’ - what does this mean?
a. If the FTSE 100 falls to a prescribed limit, returns are reduced
b. If the FTSE 100 grows to a prescribed limit, returns are limited
c. There will be a limit on the capital protected
d. There will be a limit on the income return
a. If the FTSE 100 falls to a prescribed limit, returns are reduced
Question 17 out of 25:
Multiple Response Question:
Inflation risk is most likely to impact on which of the following investments:
a. National Savings Index Linked Certificates
b. Venture Capital Trusts
c. National Savings Ordinary Account
d. Treasury bills
c. National Savings Ordinary Account
d. Treasury bills
Multiple Response
Question 18 out of 25:
Peter and Lois, a married couple, are considering investing Lifetime ISAs, they should be aware that:
a. Either one of them may subscribe for a Lifetime ISA but they may only have one between them
b. The ISA funds, including bonus, may be withdrawn tax free at any time
c. The maximum annual bonus is £1000
d. The maximum annual contribution is £4000
c. The maximum annual bonus is £1000
d. The maximum annual contribution is £4000
Question 20 out of 25: What is the name for the measure of money supply that comprises notes and coins in circulation, instant access and time deposits of UK residents with UK banks and building societies? a. M0 b.M3 c. M4 d. M1
c. M4
Question 22 out of 25:
What is the hurdle rate in respect of an investment trust?
a. The growth needed to cover charges
b. The growth required to ensure that the fund returns at least the minimum specified return in addition to the return of capital on all asset classes
c. The growth required to ensure that the assets of the investment trust are sufficient to repay all asset classes
d. The growth needed to cover charges
c. The growth required to ensure that the assets of the investment trust are sufficient to repay all asset classes
Question 2 out of 25: When interest rates in the UK are changed, how long on average do they take to have their maximum effect on inflation? a. 0 - 6 months b. 18 - 24 months c. 12 - 18 months d. 6 - 12 months
b. 18 - 24 months
Question 3 out of 25:
What does fiscal policy describe?
a.The short-term effect on the economy of altering levels of government spending and interest rates
b.The short-term effect on the economy of altering levels of government spending and taxation
c.The economic impact of changes in the money supply and taxation
d.The economic impact of changes in the money supply and interest rates
b.The short-term effect on the economy of altering levels of government spending and taxation
Question 4 out of 25: Which of the following are forms of fixed interest securities? a. SCARPs b. Floating Rate Notes c. Treasury Bills d. Debentures
d. Debentures
Question 6 out of 25:
Which of these is NOT one of the key uses of bonds?
a. Unpredictable short-term income
b. Speculative profits
c.Tax-free capital gains
d. Income matched against long term fixed liabilities
a. Unpredictable short-term income
Question 7 out of 25:
Which of the following is NOT a usual effect of the Bank of England easing monetary policy?
a. Longer-term interest rates should fall
b. People will be more willing to borrow
c. Asset prices, from bonds and equities to housing, should rise
d. People dependent on interest income will be better off
d. People dependent on interest income will be better off
Multiple Response Question:
Question 11 out of 25:
In relation to options, which of the following statements is true?
a. Options may be traded after issue
b. All options end in the delivery of the asset
c. Both sides pay a commission
d. A put option allows the buyer to acquire the asset at the agreed price
a. Options may be traded after issue
c. Both sides pay a commission
Question 14 out of 25: What measure is often used to compare the financial strength of with profits funds? a. Growth income ratio b. Net Earnings Ratio c. Free Asset Ratio d. Price Earnings Ratio
c. Free Asset Ratio
Question 17 out of 25:
If a share in an investment trust experiences a narrowing discount, returns will:
a. It is not possible to say
b. Look more favourable
c. Be more favourable for larger funds and less favourable for smaller funds
d. Look less favourable
b. Look more favourable
Question 19 out of 25:
Which of these is NOT a characteristic of a structured product?
a. Either a guarantee of capital or income or both
b. Fixed-term investments
c. Secondary market for private investors to trade the securities
d. Minimum or maximum returns are pre-specified
c. Secondary market for private investors to trade the securities
Question 22 out of 25: Kevin has an offshore non-qualifying investment bond. He is a higher rate taxpayer and the gain is £10,000. How much tax is due assuming the gain was made over 4 years and he spent exactly one year resident outside the UK during this period? a. £2,000 b.£3,000 c. £1,000 d. Nil
b.£3,000
Multiple Response Question:
Question 23 out of 25:
As an asset, direct investment in residential ‘buy to let’ property:
a. Generally achieves higher yields for larger properties
b. Is generally subject to higher liquidity risk than investment in exchange traded securities
c. Has generally underperformed both equities and fixed interest over the longer term
d. Is subject to higher taxation than investment in commercial property funds
b. Is generally subject to higher liquidity risk than investment in exchange traded securities
d. Is subject to higher taxation than investment in commercial property funds
Question 25 out of 25:
In the context of an investment bond, why might the product be segmented?
a. To make the charging structure simpler
b. To help with investment allocation
c. To make the product seem more complex
d. For possible tax benefits
d. For possible tax benefits
George has £100,000 in a deposit account with Barclays in Jersey and £90,000 in a deposit account with Lloyds in Manchester. What maximum amount of these deposits, if any, is protected under the Financial Services Compensation Scheme? Select one: a. £90,000. b. £190,000. c. £170,000. d. £85,000.
d. £85,000.
Guaranteed Growth Bonds from National Savings and Investments [NS&I]:
Select one:
a. are offered for a maximum period of three years.
b. have a taxable interest which cannot be offset against the investor’s personal savings allowance.
c. are available to anyone over the age of 18.
d. have an interest rate which is fixed, and is dependent upon the term selected.
d. have an interest rate which is fixed, and is dependent upon the term selected.
Gautum has invested in Treasury bills. Which of these characteristics of his investment is INCORRECT?
Select one:
a. He could have obtained them at a routine weekly auction.
b. He must have purchased a minimum of £500,000 nominal of bills.
c. The interest he will receive is linked to RPI three months prior to issue.
d. Their prevailing rate of return is often used as the benchmark ‘risk-free rate of return’.
c. The interest he will receive is linked to RPI three months prior to issue.
A company's credit rating has been marked down unexpectedly. The yield from bonds previously issued by them will: Select one: a. rise. b. fall heavily. c. fall gradually. d. be unaffected.
a. rise.
Mary is about to become an ordinary shareholder in her employer’s company which, as a part-owner of the company, will give her certain rights, APART from the right to:
Select one:
a. a fixed rate of dividend half yearly.
b. one vote for each share in the company she owns.
c. share the company’s residual value on liquidation, after all debts and rights of shareholders with a prior claim.
d. vote at general meetings of the company and to elect the directors.
a. a fixed rate of dividend half yearly.
Caleb is considering an investment into a listed private equity investment company. Which of these statements is INCORRECT?
Select one:
a. They are closed-ended but not eligible for inclusion in an ISA.
b. They are closed-ended and traded on the London Stock Exchange.
c. They can invest directly in unlisted companies and in funds that invest in unlisted companies.
d. They are a form of investment trust that is eligible for inclusion in an ISA.
a. They are closed-ended but not eligible for inclusion in an ISA.
If Derek is investing in a tracker fund which is not weighted according to market capitalisation, he is tracking the: Select one: a. FTSE 100. b. FTSE AIM 100. c. Nikkei 225. d. Dax 30.
c. Nikkei 225.
Edith has just purchased her first buy-to-let property. She is unsure as to the nature of the shorthold lease she should let the property under. You inform her that:
Select one:
a. there is no minimum period, but she should aim for as long a rental agreement as possible to enhance the property value.
b. the minimum period is six months, but she should aim for as long a rental agreement as possible to enhance the property value.
c. there is no minimum period but she should avoid long rental agreements so as not to depress the property value.
d. the minimum period is six months but she should avoid long rental agreements so as not to depress the property value.
c. there is no minimum period but she should avoid long rental agreements so as not to depress the property value.
How much stamp duty land tax will be payable on the purchase of a residential property for £300,000, if the purchaser is NOT a first-time buyer?
Select one:
a. £5,500.
b. £5,000.
c. £15,000.
d. £10,000.
b. £5,000.
Joyce has let one of the rooms in her house to Terry. Terry has sub-let the room to a friend, Colin. What is the maximum amount of tax-exempt income they can receive?
Select one:
a. £3,750 for Joyce and £3,750 for Terry.
b. £4,250 for Joyce and £0 for Terry.
c. £2,125 for Joyce and £2,125 for Terry.
d. £7,500 for Joyce and £0 for Terry.
a. £3,750 for Joyce and £3,750 for Terry.
Juan is considering investing in Spanish fine wine as a long-term investment. What would be a valid reason for avoiding this choice of investment?
Select one:
a. He does not have enough room in his own cellar to store it.
b. He wishes to use some of the investment for personal use.
c. He requires a regular income from his investments.
d. Spanish wine has been a historic poor performer.
c. He requires a regular income from his investments.
In the immediate aftermath of the 2011 tsunami in Japan, the yen surged almost 5% against the US dollar. What action was then taken in the currency markets and by whom?
Select one:
a. The Bank of Japan acted alone and sold yen to deflate the economy.
b. The Bank of Japan and other central banks bought yen to avoid further deflationary pressures.
c. The Bank of Japan and other central banks sold yen to avoid further deflationary pressures.
d. The Bank of Japan acted alone by increasing interest rates.
c. The Bank of Japan and other central banks sold yen to avoid further deflationary pressures.
A Japanese company is looking to establish a new factory in the UK. Assessing this decision in isolation, what would be the likely change in the exchange rate between UK Sterling and Japanese Yen?
Select one:
a. Sterling would appreciate and Yen would weaken.
b. Sterling would weaken and Yen would appreciate.
c. Both Sterling and Yen would appreciate at the same rate.
d. Both Sterling and Yen would weaken at the same rate.
a. Sterling would appreciate and Yen would weaken.
