Topic 8 Flashcards
Collective Investments
Investment risk can most typically be spread by using which of the following?
a. Clustering.
b. Consolidation.
c. Diversification.
d. Gearing.
c. Diversification.
Which of the following is true in relation to the manager of an investment trust?
They:
a. can borrow to potentially improve capital and income growth.
b. can cancel shares if the trust value falls sharply.
c. can issue more shares or repurchase shares according to demand.
d. cannot benefit from the effects of gearing.
a. can borrow to potentially improve capital and income growth.
Three of the following types of charges may be applied to an investment held with an open-ended investment company.
Which is the exception?
a. A dilution levy.
b. Annual management charge.
c. Initial or buying charge.
d. Policy fee.
d. Policy fee.
Mohammed has an onshore investment bond issued by a life office which is also invested in the life office’s managed fund.
At what rate is the underlying fund deemed to be taxed?
a. 18%.
b. 20%.
c. 32.5%.
d. 40%.
b. 20%.
Under the terms of a split-capital investment trust, what type of share receives the whole of the income generated by the portfolio, if any?
a. Both income and capital shares.
b. Capital shares.
c. Income shares.
d. Neither.
c. Income shares.
An investment trust is best described as:
a. a public limited company that invests in the stocks and shares of other companies.
b. a trust that invests solely in commercial property.
c. a trust holding assets for beneficiaries.
d. an open-ended investment company that invests in shares of other companies.
a. a public limited company that invests in the stocks and shares of other companies.
Under a unit trust, what does the cancellation price represent?
The:
a. maximum offer price at which a full encashment of units may be made.
b. minimum bid price that investors will receive when they cash in their units.
c. price applicable to investors who cancel their investment during the cooling-off period.
d. price at which the manager will buy back units if underlying assets do not have to be traded.
b. minimum bid price that investors will receive when they cash in their units.
Distributions received by a taxpayer from a fixed-income unit trust is assessable to which type of tax, if any?
a. Capital gains tax.
b. Withholding tax.
c. Income tax.
d. None.
c. Income tax.
Income from a unit trust will be classed as dividend income and the fund classed as an equity fund providing:
a. less than 60% of the underlying funds are held in cash or fixed-interest securities.
b. less than 70% of the underlying funds are held in cash or fixed-interest securities.
c. more than 50% of the underlying funds are held in cash or fixed-interest securities.
d. more than 60% of the underlying funds are held in cash or fixed-interest securities.
a. less than 60% of the underlying funds are held in cash or fixed-interest securities.
Jason wishes to cash in his unit trust holding. Which unit price will he receive in normal market conditions?
a) Creation price.
b) Offer price.
c) Bid price.
d) Cancellation price.
c) Bid price.
In relation to investment trusts, which of the following is true?
a) The trust can borrow for investment purposes.
b) Shares trading at a premium can be bought at below their net asset value.
c) The net asset value is the price shares are trading at.
d) The trust deed outlines the trust’s investment objectives.
a) The trust can borrow for investment purposes.
The aim of investment diversification is to:
a) reduce investment risk.
b) increase investment performance.
c) increase income from investments.
d) reduce investment administration and documentation.
a) reduce investment risk.
Which of the following is false in relation to qualifying life assurance policies?
a) Premiums must be payable at least annually.
b) They must have a minimum term of 10 years.
c) Premiums cannot vary beyond specified limits.
d) The death benefit must be at least 101% of the bid value of the policy.
d) The death benefit must be at least 101% of the bid value of the policy.
Which function is responsible for overseeing the operation of an open-ended investment company and safeguarding investor interests?
a) The trustee.
b) The depositary.
c) The manager.
d) The authorised corporate director.
b) The depositary.
What percentage of a unit trust’s fund must be in cash or fixed-interest investments for distributions to be treated as interest payments?
a) At least 50%.
b) Up to 60%.
c) More than 60%.
d) At least 75%.
c) More than 60%.
