UoE: Chapter Quiz (Incorrect Answers) Flashcards
Although Structured as Companies, What Distinguishes Investment Trusts from Traditional Companies?
Investment trusts make their profit solely from investments.
In Which Market Can You Find STRIPS Created from US Treasuries and TIPS (Treasury Inflation-Protected Securities)?
US government bond market
Which Type of Bonds Typically pay Interest Gross, Making the Buyer Responsible for Paying their Own Tax?
Eurobonds
What do Regulated Collective Investment Schemes (CISs) in the UK Meet to be Marketed to Retail Investors?
Criteria to prevent complex or risky schemes.
What is the Primary use and Benefit of Secondary Markets?
To provide liquidity for investors
What is an Example of an Issuer Factor Affecting Bond Pricing?
Prevailing yields on benchmark bonds (spreads)
What Term Describes the Process by Which One Investor’s Wish to Buy is Matched with Another Investor’s Wish to Sell on Stock Exchanges?
Price formation process
What is the Process Called when the Exchange’s System Matches a Sell Order with the Best Buy Orders?
Execution
In the UK, Which Body Oversees the Secondary Market for Dealing in Gilts Once they are Issued?
The London Stock Exchange (LSE) and The Debt Management Office (DMO)
Which System is Primarily used for Issuing French Government Securities?
Bid-price system
Which Organization Conducts Auctions and Direct Sales of US Government Securities?
The Treasury Department
What is the Significance of the Nil-Paid Value in a Rights Issue?
It reflects the theoretical ex-rights price
What are Pre-Emptive Rights Designed to Protect?
Minority shareholders
What Advantage of DLT Makes it Suitable for Trade Settlement?
Speeding up Settlement and Reducing Costs
When Securities are Loaned, who Receives Dividends and Interest Payments?
The borrower
In the US, Which Subsidiary of DTCC Provides Clearing Services for US Equities Trades?
NSCC
When Does the Ex-Dividend Date Typically Occur in Relation to the Record Date?
One business day before
What Environmental Factors can Influence the Assessment of Whether the Overall Market is Overpriced or Under-Priced Based on the P/E Ratio?
Inflation rate
How Does the Amount of Profit Earned Impact a Company?
It determines the dividend payments.
What Does the Quick Ratio, also Known as the Acid Test, Exclude from its Calculation?
Inventory
How is Free Cash Flow Typically Calculated from the Income Statement?
Net income after tax + depreciation and amortization
Which Section of the cash Flow Statement Typically Includes Interest PAID!?
Operating activities
What Does “Market Timing” Involve in Active Bond Management?
Predicting future interest rate movements.
According to the Spectrum of Investing, Which Approach Places the Highest Reliance on the Appointed Investment Manager’s ESG Policies?
Fully delegated approach
What Does the Efficient Markets Hypothesis (EMH) Suggest about Stock Prices?
Stock prices always reflect all available information.
When must companies pay dividends to preference shareholders?
Before paying dividends to common shareholders
What is one key advantage of ADRs for US investors?
ADRs eliminate the need for currency transactions for US investors.
How do ETFs replicate their benchmark indices?
Through synthetic replication using derivative contracts.
Why might the price at which underwriters guarantee to buy shares be at a discount to the public offering price?
To reduce the risk for underwriters
Who participates in stock exchange trading?
Both individuals and institutional investors
What are the three major constituents of the regulatory framework surrounding primary and secondary markets in securities?
The law, stock exchanges, and regulatory authorities
What document provides potential investors with information required to make an informed decision about a company and its shares?
Investment prospectus
What is the primary role of the Debt Management Office (DMO) in the UK?
To oversee gilt issues
What term is used to describe the regulated entities where investors’ buy and sell orders are matched via middlemen, such as brokers?
Stock exchanges
Which type of venue for trading securities was introduced by MiFID II in Europe in 2018 and is used for instruments other than equities?
Organised trading facility (OTF)
Which index is used heavily by institutional investors for benchmarking performance on a global scale?
MSCI World
Which of the following statements about Gilt Inter-Dealer Brokers (IDBs) is true?
They act as agents and settle transactions as principals.
Which entity in the EU issues EU bonds to cover its funding needs?
The European Commission
What is the maximum maturity period for Japanese Government bonds (JGBs)?
40 years
What is the primary goal of a “best-efforts basis” in an accelerated book build?
To ensure all shares are sold
What is the primary purpose of the “pre-settlement and clearing” stage in the clearing and settlement process?
To eliminate credit risk
What consensus algorithm is commonly used in blockchain DLT, as seen in Bitcoin?
Proof of work
Which organization is responsible for developing high-quality, globally accepted accounting standards?
International Accounting Standards Board (IASB)
Which section of the cash flow statement typically includes interest received?
Investing activities
What distinguishes defined benefit (DB) pension schemes from defined contribution (DC) pension schemes?
DB schemes define benefits to be paid, while DC schemes depend on contributions and investment performance.
What is the main disadvantage of passive management according to the Efficient Markets Hypothesis (EMH)?
Inability to match benchmark returns
What is the difference between Debt to equity compared to Net debt to equity?
Debt to equity is all non-current liabilities / total equity (share capital + reserves)
Where as Net DE is Debt (less the cash and current assets) / Equity
