Winter 2021 Exam Flashcards
Which of the following is false for a basic-rate taxpayer with a portfolio of equity and fixed-interest unit trusts and open-ended investment companies (OEICs)?
a. Any losses from the portfolio are allowable for capital gains tax (CGT) calculations.
b. All share buyback proceeds are subject to 10% tax credit.
c. All dividends received are subject to 10% tax credit.
d. The taxation of share buybacks on the OEICs held will be treated the
same way as the unit trusts.
b. All share buyback proceeds are subject to 10% tax credit.
c. All dividends received are subject to 10% tax credit.
When analysing the suitability of bonds for a portfolio, an investor might become more interested in a bond’s yield to call if:
Interest rates are expected to fall.
A basic-rate taxpayer has a portfolio of several equity and fixed-interest unit trusts and OEICs. The taxation of dividends is:
Positive and equal for both OEICs and unit trusts.
If two variables are strongly linked together yet there is a low correlation coefficient, the most likely reason is:
The relationship is non-linear.
A Treasury bond due in one year has a yield of 2.2%; a Treasury bond due in five years has a yield of 2.8%.
- A bond issued by Severn Tidal Company due in five years has a yield of 4.5%.
- A bond issued by Severn Wind Company due in one year has a yield of 4.1%.
The default risk premiums on the bonds issued by Severn Tidal and Severn Wind are respectively closest to:
a. 1.7% and 1.9%.
b. 1.7% and 1.3%.
c. 1.3% and 2.3%.
d. 1.9% and 2.3%.
a. 1.7% and 1.9%.
The Panel on Takeovers and Mergers (PTM) levy is a flat rate charge of: (3)
- £1.00 collected on all UK share trades
- on the LSE and other London exchanges
- over £10,000.
An individual investing in a UK company will pay stamp duty reserve tax (SDRT) on all of the following types of investment except:
a. Share options.
b. Convertible loan stock.
c. Uncertificated shares.
d. An American depositary receipt (ADR) of a UK company.
An American depositary receipt (ADR) of a UK company.
Which of the following is not true of a bond’s yield to maturity?
a. Yield to maturity is the average return if the bond is held to maturity.
b. Yield to maturity depends on the bond’s duration.
c. Yield to maturity depends on the bond’s coupon rate.
d. Yield to maturity depends on the bond’s maturity and par value.
Yield to maturity depends on the bond’s duration.
The bid ask spread is least likely to be affected by:
a. Liquidity.
b. Market uncertainty.
c. The size of dealer positions.
d. Information availability.
c. The size of dealer positions.
The Fama-French model for estimating stock returns is least likely to suggest:
a. The return premium to small company shares is due to market inefficiency.
b. The capital asset pricing model (CAPM) omits other rewarded risks.
c. Value stocks are riskier than growth stocks.
d. Growth stocks are not likely to stay growth stocks forever
a. The return premium to small company shares is due to market inefficiency
In a double profit taxation system such as the UK, which of the following is correct?
a. The whole of a company’s net income is taxed and an investor is liable for any tax on dividends.
b. A company’s net income after dividend distribution is taxed and an investor is liable for any tax on dividends.
c. A company’s net income after dividend distribution and debt servicing is taxed and an investor is liable for any tax on dividends.
d. A company’s net income before dividend distribution and before debt servicing is taxed and an investor is not liable for any tax on dividends
a. The whole of a company’s net income is taxed and an investor is liable for any tax on dividends.
The Task Force on Climate-Related Financial Disclosures (TCFD) recommends organisational reporting is structured around all of the following core areas except:
a. Operations.
b. Governance.
c. Strategy.
d. Risk management.
a. Operations
An EU green bond is any type of listed or unlisted bond or capital market debt instrument issued by a European or international issuer, that meets all of the following requirements except:
a. Green bond framework.
b. Proceeds to green projects.
c. Taxonomy alignment to the Intergovernmental Panel on Climate Change
d. External verification.
c. Taxonomy alignment to the Intergovernmental Panel on Climate Change
A real estate investment trust (REIT) has a property rental profit of £10,000,000. To gain full tax benefits, what is the minimum that must be distributed to shareholders as dividends?
c. £9,000,000.
A key motivation for investment in commodities is likely to be their:
Positive correlation with expected and unexpected inflation
