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Question # 4

A defined benefit pension scheme gives an employee the advantage of:

A.

Not having to make any contributions

B.

Being index-linked to inflation

C.

Knowing what income will be received in retirement

D.

Consistently better investment performance

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Question # 5

Which of the following is used to establish an investor's total return from a bond?

A.

Running yield

B.

Annual coupon

C.

Price-to-book ratio

D.

Yield to maturity

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Question # 6

How would an active fund manager seek to avoid underperforming their peer group when deciding on asset allocation?

A.

Through the use of asset allocation by consensus

B.

By assessing the prospects for each main asset class

C.

By hedging currency and market risk

D.

Through the use of quantitative models

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Question # 7

Which of the following will be a major constraint on a client’s ability to invest and protect against all of the risks that might arise?

A.

Age

B.

Affordability

C.

Risk aversion

D.

Tax implications

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Question # 8

Which of the following elements would be included in a recommendation report to a client?

A.

Previous arrangements

B.

Restrictions

C.

Cost of living

D.

Rate of inflation

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Question # 9

Which one of the following is true of fundamental analysis? It seeks to establish:

A.

Long-term price trends of a security

B.

Long-term volume trends of a security

C.

The momentum of share prices

D.

The intrinsic value of a security

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Question # 10

Why might an expansionary fiscal policy lead to future inflationary pressures?

A.

It causes higher interest rates

B.

Workers demanding higher wages

C.

Due to a significant fall in private sector investment

D.

Due to the effect of time lag

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Question # 11

Which type of corporate action can only occur if a resolution is passed to forgo pre-emption rights?

A.

Placing

B.

Share buyback

C.

Stock split

D.

Warrant exercise

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Question # 12

An investor would regard a company’s interest cover ratio as significant as it provides:

A.

An indication of the extent to which the company can service its debts

B.

An indication of what interest rate the company is paying

C.

A breakdown of how much debt a company has in relation to equity

D.

A summary of how much liquid cash an organisation has for funding dividend payments

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Question # 13

An economy with two consecutive quarters of negative growth is considered to be in what phase of an economic cycle?

A.

Recession

B.

Slump

C.

Depression

D.

Inflationary

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Question # 14

Why is the process of prioritising the protection needs of your client important?

A.

To establish the net worth of your client

B.

It provides an opportunity to establish a benchmark

C.

To protect your firm from risk

D.

It allows you and the client to agree on an affordable plan

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Question # 15

Why might a portfolio manager use an equity fund rather than direct equity investment within a portfolio?

A.

To avoid paying capital gains tax

B.

To gain exposure to a specialist sector

C.

In order to reduce ongoing charges

D.

To benefit from changes in volatility

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Question # 16

An investor with $900,000 of investable assets would normally be categorised as:

A.

Mass affluent

B.

High-net-worth

C.

Very-high-net-worth

D.

Ultra-high-net-worth

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Question # 17

Historically, rapid technological change and globalisation have:

A.

Decreased urbanisation

B.

Decreased equity issuance

C.

Increased inflationary pressure

D.

Increased bond issuance

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Question # 18

What is the most likely effect on the demand curve of an increase in consumer preference for a good?

A.

A downward movement

B.

An upward movement

C.

A rightward shift

D.

A leftward shift

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Question # 19

How do imports and exports affect the Gross Domestic Product (GDP) calculation?

A.

Imports and exports are ignored as they only affect Gross National Product (GNP)

B.

Exports are added and imports are ignored

C.

Imports are subtracted and exports are added

D.

Imports are added and exports are subtracted

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Question # 20

How do passive fund managers use swaps to replicate an index?

A.

They swap the return on the index in exchange for a fixed fee

B.

The loss on an index is swapped for the profit on a different index

C.

Having created an index fund, the managers use swaps to cover the tracking error

D.

They swap a pre-defined return in exchange for the return on the index

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Question # 21

The ongoing charges figure for a mutual fund should be included in its:

A.

Key features document

B.

Key investor information document

C.

Prospectus

D.

Terms of business

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Question # 22

Under an accumulation and maintenance trust, when does the trustees' discretion over payments normally cease (if at all)?

A.

On the death of the settlor

B.

On the death of the life tenant

C.

At the end of a prescribed period

D.

It continues indefinitely

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Question # 23

When creating a portfolio for a risk-averse client, why would you select stocks with a beta of less than one?

A.

So that the portfolio is easier to understand

B.

So that the portfolio moves in line with the market

C.

In order to produce a low-volatility portfolio

D.

To produce a high-volatility portfolio

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Question # 24

How does standard deviation provide investors with a measure of historical volatility?

A.

By the analysis of historical share price movements

B.

Through the measurement of the highs and lows of each asset

C.

By measuring the degree of fluctuation around the mean

D.

Through the measurement of share price movements compared to the benchmark

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Question # 25

Back-end loading is often associated with:

A.

Bonds

B.

Collective investments

C.

Equities

D.

Real estate

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Question # 26

Which index could be used to measure inflation from the perspective of the seller?

A.

Retail price index

B.

Producer price index

C.

Consumer price index

D.

Inflation price index

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Question # 27

In relation to the financial services industry, which one of the following statements regarding the European Union is true?

A.

It operates as a single regulator

B.

It aims to bring about a single market

C.

It has the power of veto over national regulators

D.

It delegates systemic risk control to the European Central Bank

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Question # 28

Equities have a higher risk/reward profile when compared to many other asset classes. Their use within a portfolio stems from:

A.

The potential to counter inflationary effects

B.

Their lower cost compared to other assets

C.

The ability to align liabilities with profits from equities

D.

Their low volatility when compared to bonds

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Question # 29

In economics, costs are defined as:

A.

Opportunity

B.

Financial

C.

Normal profit

D.

Minimum efficient scale (MES)

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Question # 30

The UCITS regulations have been integral to introducing a common format for:

A.

Company accounts

B.

Corporate actions

C.

Key investor information documents

D.

Trade settlement

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