M9a-Mcq Set1 Aug2016
M9a-Mcq Set1 Aug2016
M9a-Mcq Set1 Aug2016
4) The following terminologies about Structured ILPs are correct except
a) Forward pricing is based on Bid and Offer prices as determined on the last asset
valuation date
b) Turnover ratio is typically higher for an aggressive small cap growth stock fund
c) Expense ratio does not include trading expenses , initial sales charges and
redemption fees
d) Soft Dollars include research & advisory services , economic & political analyses,
portfolio analyses and data & quotation services
(C4/S1.2)
5) The current spot price of oil futures is $112. The March oil futures price is $100. How do
you describe this?
a) 12 basis over
b) 12 basis under
c) 6 basis over
d) 6 basis under
(C3/S2)
6) Which of the following creditors will get priority when it comes to receiving payment?
a) Shareholders
b) Senior bondholder
c) Subordinated tranche holder
d) Company Executive
(C1/S4)
7) Which of the following is NOT an issuer-specific risk?
a) Operational risk
b) Interest rate
c) Litigation
d) Regulatory action
(C2/S1)
8) The issuer wants to have full flexibility in designing a structured product. Which wrapper
should be used?
a) Structured Deposits
b) Structured Notes
c) Structured Funds
d) Structured ILPs
(C1/S1.3)
9) Which of the following about swaps is FALSE?
a) It is an agreement to exchange cash flows at future dates
b) Nothing is bought or sold
c) There is a change of ownership of the financial instrument
d) It allows two companies domiciled in different countries to exchange equivalent
amount of currency
(C3/S4)
10) A structured ILP may be suitable for Mr. Khor who has a medium to long term horizon as
a) Most ILP sub-finds are diversified
b) Structured ILPs are managed by professional fund managers
c) It takes time for the ILP sub-funds investment experience to compensate for the
expenses charged
d) Theres economy of scale
(C4/S2.1, S2.2)
11) Your client is considering between structured ILP A and structured ILP B. Structured ILP A
has a fund size of 200 million and B has a fund size of 10 million. Which of the following
statement is true?
a) B has a higher liquidity risk compared to A
b) A has a higher liquidity risk compared to B
c) A & B have the same level of liquidity risk
d) Fund size does not affect the level of liquidity risk
(C4/S2.3)
12) Joy placed S$50,000 into a structured ILP with a sum assured of S$62,500. If Joy
surrenders her policy before it matures, she will be getting 100% if NAV of her units.
Which of the following risks should she be most concerned with if she is likely to
surrender the policy before its maturity?
a) Market risk
b) Counterparty risk
c) Liquidity risk
d) Opportunity cost
(C6)
13) For Forward contracts in energy market, majority of trades use book out process
whereby
a) Contracts are cleared by the buyers and sellers in a series of trades to cancel mutual
contracts by cash settlement
b) Contracts are cleared by the buyers and sellers in a series of trades to cancel mutual
contracts by physical delivery
c) Contracts are cleared by the buyers and sellers in a series of trades to offset the
previous contracts
d) Contracts are cleared by the buyers and sellers in a series of trades to exchange for
new contracts
(C3/S2.2a)
14) Which of the following swaps allows cash flows occurring on the same dates to be
netted?
a) Equity swap
b) Commodity swap
c) Interest rate swap
d) Credit default swap
(C3/S4.2)
15) Which of the following is not found in the Policy Document?
a) Fees and charges under an ILP
b) Specifications on how units are subscribed and redeemed
c) The minimum holding amount and minimum redemption amount
d) Illustration of non-guaranteed benefits under the policy
(C4/S6)
32) Which of the following cannot be used to mitigate the liquidity risk of a portfolio bond?
a) Invest in publicly traded products
b) Invest in shares with high trading volume
c) Ask for counterparty for margin
d) Invest in shares that are high in demand
(C2/S3)
33) The additional amount required to restore the account is called
a) Initial Margin
b) Margin Call
c) Variation Margin
d) Maintenance Margin
(C3/S2.6)
34) Which of the following describes a non-standardized contract?
a) Forward contract traded over the counter
b) Commodity future contracts
c) Financial future contracts
d) All of the above
(C3/S2)
35) The strike price of a put option is $10. The market price is $15. The intrinsic value of the
put option is
a) In-the-money
b) At-the-money
c) Out-of-the-money
d) Under-the-money
(C3/S3)
36) Which of the following best describes the price where the units of a portfolio bond are
subscribed to?
a) Forward pricing
b) Offer price
c) Bid price
d) Historic Pricing
(C4/S1.2)
37) Calvin invested in a USD structured product issued by Bank A with a credit rating of AA.
The fund size is US$8 million. Calvin is concerned about getting his money when he
needs it. Which of the following risk is his top concern?
a) Foreign exchange risk
b) Interest rate risk
c) Liquidity risk
d) Credit risk
(C4/S2.3)
38) The coefficient of correlation of 2 securities that are not correlated is
a) +0.5
b) 0
c) -0.5
d) 1
(C2/S6.2)
39) Which of the statements least describes an issuer-specific risk?
a) Internal operation of Company A
b) Regulatory impact on the industry which Company B is in
c) Downgrade in credit rating of Company C
d) Exchange rate of the securities in which Company D is traded in
(C2/S1)
40) Which is true about a Structured ILPs death benefit?
a) Death benefit is the same amount as the single premium invested
b) Death benefit is more than the single premium invested
c) Death benefit is lower than the single premium invested
d) Death benefit is capped at 110% of the single premium invested
(C4/S1.1)
41) What information is found in the Statement to Policy Owners?
a) Net cash surrender value at the end of the previous statement period
b) Number and value of units held at the end of the previous statement period
c) Projection on policy values under reasonable investment expectation
d) Current death benefit at the start of current statement period
(C4/S6.3)
47) When one is bullish about the market, he can leverage by using
a) Long stock
b) Short stock
c) Long call
d) Short call
(C3/S3.4)
48) Rachel has a strong feeling that a particular stock is about to move lower yet she is
fearful of selling the stock short because of unlimited losses. Which strategy can she
use?
a) Covered calls
b) Long puts
c) Protective puts
d) Naked calls
(CS/S3.4, S3.5)
49) Investors of structured products may face counterparty risks which means that
a) The issuers credit rating may be downgraded
b) The issuer may face difficulty in meeting its cash flow obligations
c) Interest rate fluctuations may affect the quality of the structured products
d) The counterparty may fail to meet its contractual obligations to the issuers
(C2/S2)
50) Which of the following option strategies would be most appropriate if an investor
wishes to use leverage and is bullish on a certain stock?
a) Long a call
b) Sell a naked put
c) Write a covered call
d) Buy a protective put
(C3/S3.4)
Answers:
1 C 26 C
2 D 27 A
3 C 28 B
4 A 29 B
5 A 30 B
6 B 31 A
7 B 32 C
8 B 33 C
9 C 34 A
10 C 35 C
11 A 36 B
12 A 37 C
13 A 38 B
14 C 39 D
15 D 40 B
16 B 41 B
17 B 42 C
18 D 43 B
19 D 44 A
20 C 45 D
21 B 46 B
22 A 47 C
23 B 48 B
24 D 49 D
25 D 50 A
Workings:
Question 3:
(250/250) * 0.05 * 50,000 * 5 = $12,500
$12,500 + $50,000 = $62,500
Answer is C
Question 18:
Convert to Aud : 100,000 / 1.4 = 71,428.57
Appreciated 10% = 1.1 * 71,428.57 = 78,571.43
Convert to Sgd : 78,571.43 * 1.2 = 94,285.71
Loss in % = (100,000 94,285.71) / 100,000 = 0.057
Multiply by 100 to get % & round off = 6%
Answer is D loss of 6%
Question 24
1.5% * 150,000 * 5 = 11,250
1% * 150,000 = 1,500
Add principal = 150,000
Total = 162,750
Answer is D