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CISI: Securities > UoE: Chapter Quiz (Incorrect Answers) > Flashcards

UoE: Chapter Quiz (Incorrect Answers) Flashcards

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SIE Exam flashcards
1
Q

Although Structured as Companies, What Distinguishes Investment Trusts from Traditional Companies?

A

Investment trusts make their profit solely from investments.

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2
Q

In Which Market Can You Find STRIPS Created from US Treasuries and TIPS (Treasury Inflation-Protected Securities)?

A

US government bond market

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3
Q

Which Type of Bonds Typically pay Interest Gross, Making the Buyer Responsible for Paying their Own Tax?

A

Eurobonds

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4
Q

What do Regulated Collective Investment Schemes (CISs) in the UK Meet to be Marketed to Retail Investors?

A

Criteria to prevent complex or risky schemes.

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5
Q

What is the Primary use and Benefit of Secondary Markets?

A

To provide liquidity for investors

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6
Q

What is an Example of an Issuer Factor Affecting Bond Pricing?

A

Prevailing yields on benchmark bonds (spreads)

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7
Q

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?

A

Price formation process

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8
Q

What is the Process Called when the Exchange’s System Matches a Sell Order with the Best Buy Orders?

A

Execution

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9
Q

In the UK, Which Body Oversees the Secondary Market for Dealing in Gilts Once they are Issued?

A

The London Stock Exchange (LSE) and The Debt Management Office (DMO)

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10
Q

Which System is Primarily used for Issuing French Government Securities?

A

Bid-price system

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11
Q

Which Organization Conducts Auctions and Direct Sales of US Government Securities?

A

The Treasury Department

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12
Q

What is the Significance of the Nil-Paid Value in a Rights Issue?

A

It reflects the theoretical ex-rights price

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13
Q

What are Pre-Emptive Rights Designed to Protect?

A

Minority shareholders

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14
Q

What Advantage of DLT Makes it Suitable for Trade Settlement?

A

Speeding up Settlement and Reducing Costs

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15
Q

When Securities are Loaned, who Receives Dividends and Interest Payments?

A

The borrower

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16
Q

In the US, Which Subsidiary of DTCC Provides Clearing Services for US Equities Trades?

A

NSCC

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17
Q

When Does the Ex-Dividend Date Typically Occur in Relation to the Record Date?

A

One business day before

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18
Q

What Environmental Factors can Influence the Assessment of Whether the Overall Market is Overpriced or Under-Priced Based on the P/E Ratio?

A

Inflation rate

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19
Q

How Does the Amount of Profit Earned Impact a Company?

A

It determines the dividend payments.

20
Q

What Does the Quick Ratio, also Known as the Acid Test, Exclude from its Calculation?

A

Inventory

21
Q

How is Free Cash Flow Typically Calculated from the Income Statement?

A

Net income after tax + depreciation and amortization

22
Q

Which Section of the cash Flow Statement Typically Includes Interest PAID!?

A

Operating activities

23
Q

What Does “Market Timing” Involve in Active Bond Management?

A

Predicting future interest rate movements.

24
Q

According to the Spectrum of Investing, Which Approach Places the Highest Reliance on the Appointed Investment Manager’s ESG Policies?

A

Fully delegated approach

25
Q

What Does the Efficient Markets Hypothesis (EMH) Suggest about Stock Prices?

A

Stock prices always reflect all available information.

26
Q

When must companies pay dividends to preference shareholders?

A

Before paying dividends to common shareholders

27
Q

What is one key advantage of ADRs for US investors?

A

ADRs eliminate the need for currency transactions for US investors.

28
Q

How do ETFs replicate their benchmark indices?

A

Through synthetic replication using derivative contracts.

29
Q

Why might the price at which underwriters guarantee to buy shares be at a discount to the public offering price?

A

To reduce the risk for underwriters

30
Q

Who participates in stock exchange trading?

A

Both individuals and institutional investors

31
Q

What are the three major constituents of the regulatory framework surrounding primary and secondary markets in securities?

A

The law, stock exchanges, and regulatory authorities

32
Q

What document provides potential investors with information required to make an informed decision about a company and its shares?

A

Investment prospectus

33
Q

What is the primary role of the Debt Management Office (DMO) in the UK?

A

To oversee gilt issues

34
Q

What term is used to describe the regulated entities where investors’ buy and sell orders are matched via middlemen, such as brokers?

A

Stock exchanges

35
Q

Which type of venue for trading securities was introduced by MiFID II in Europe in 2018 and is used for instruments other than equities?

A

Organised trading facility (OTF)

36
Q

Which index is used heavily by institutional investors for benchmarking performance on a global scale?

A

MSCI World

37
Q

Which of the following statements about Gilt Inter-Dealer Brokers (IDBs) is true?

A

They act as agents and settle transactions as principals.

38
Q

Which entity in the EU issues EU bonds to cover its funding needs?

A

The European Commission

39
Q

What is the maximum maturity period for Japanese Government bonds (JGBs)?

A

40 years

40
Q

What is the primary goal of a “best-efforts basis” in an accelerated book build?

A

To ensure all shares are sold

41
Q

What is the primary purpose of the “pre-settlement and clearing” stage in the clearing and settlement process?

A

To eliminate credit risk

42
Q

What consensus algorithm is commonly used in blockchain DLT, as seen in Bitcoin?

A

Proof of work

43
Q

Which organization is responsible for developing high-quality, globally accepted accounting standards?

A

International Accounting Standards Board (IASB)

44
Q

Which section of the cash flow statement typically includes interest received?

A

Investing activities

45
Q

What distinguishes defined benefit (DB) pension schemes from defined contribution (DC) pension schemes?

A

DB schemes define benefits to be paid, while DC schemes depend on contributions and investment performance.

46
Q

What is the main disadvantage of passive management according to the Efficient Markets Hypothesis (EMH)?

A

Inability to match benchmark returns

47
Q

What is the difference between Debt to equity compared to Net debt to equity?

A

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

CISI: Securities (11 decks)

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