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Securities > Asset Classes - Other Asset Classes > Flashcards

Asset Classes - Other Asset Classes Flashcards

1
Q

Which of the following is the best description of a reverse repo transaction?

A

The purchase and resale of an asset at a pre-agreed price

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2
Q

Which of the following is correct in relation to the transferability of American depositary receipts (ADRs)?

A

They are freely-transferable if in a ‘good marking name’

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3
Q

Real estate investment trusts (REITs) must distribute what percentage of their profits as dividends?

A

90%

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4
Q

An Instutional investor is least likely to invest in which of the following types of property?

A

Residential

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5
Q

Dividends paid to holders of an ADR will be in which of the following currencies?

A

Dollars

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6
Q

On the creation of an ADR, in whose name is the document registered?

A

The depository’s

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7
Q

An investor purchases a call covered warrant. What type of investment have they bought?

A

Option to buy existing shares issued by a third party

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8
Q

Which of the following is not a characteristic of property?

A

Homogenous

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9
Q

An example of zero-coupon debt that is issued at a discount to its nominal value is which one of the following?

A

Commercial paper

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10
Q

A cross rate is defined as:

A

A non-US dollar foreign exchange rate between two countries

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11
Q

Which of the following best describes a gilt repo?

A

Gilts sold and then repurchased at a pre-agreed price

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12
Q

Which of the following is NOT a form of UK government debt finance over a long period of time?

A

Treasury bill

A T-bill is about short-term finance.

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13
Q

Which of the following is FALSE in respect of UK government treasury bills?

A

They are a form of long-term borrowing

The UK Debt Management Office issues T-bills via a weekly COMPETITIVE tender. As bills do NOT pay a coupon, they are always issued and traded at a discount to par, hence the term ‘discounted instruments’. T-bills are usually issued with a three or six month-life. However, the most common is the three-month bill.

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14
Q

Which of the following is NOT true of equity warrants?

A

They may pay a fixed or variable income

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15
Q

Warrants pay neither interest nor dividends.

A

On exercise the company issues new shares at the ‘strike price’.

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16
Q

Of the following organisations, which sets-out the processes involved in trading eurobonds?

A

International Capital Markets Association

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17
Q

Which of the following is true of the property market?

A

Property is generally indivisible

Availability of land can be restricted by legislation

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18
Q

The currencies of the United Arab Emirates and Saudi Arabia are pegged to the US Dollar. What are these examples of?

A

A fixed exchange rate

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19
Q

When a warrant is exercised, who are the shares delivered by?

A

The company

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20
Q

Which of the following is true of the dividends paid on the underlying shares of an ADR?

A

They are paid by the company to the depository bank

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21
Q

Which of the following are true of eurobonds?

A

Interest is usually paid before the deduction of withholding tax
They are usually in bearer form

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22
Q

ll of the following are true regarding UK T-bills except:

A

They carry a fixed coupon

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23
Q

For how long can ADRs be traded in pre-release form?

A

Three months

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24
Q

In relation to warrants, which of the following is FALSE?

A

They must be exercised on expiry

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25
Q

If a UK based REIT pays at least 90% of the rental income to shareholders, then the REIT will not need to pay:

A

Corporation tax

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26
Q

Which of the following is FALSE of repos?

A

They allow bonds to be borrowed in return for a fee

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27
Q

Which ONE of the following statements regarding forward foreign exchange transactions is FALSE?

A

Non-deliverable forwards are settled at the forward rate

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28
Q

A eurobond has been immobilised. What does this imply?

A

As a bearer bond, eurobonds are often held with depositories, such as Euroclear and Clearstream. This is for added security.

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29
Q

ADR dividends are paid in what currency to the underlying investors?

A

US dollars

30
Q

Which of the following is true of the currency markets?

A

London is the largest centre for trading

31
Q

When is settlement for eurobond transactions?

A

Two business days

32
Q

Which of the following is not true of warrants?

A

They are call options purchased by the issuing company

33
Q

minimum denomination for UK Treasury bills?

A

£25,000

34
Q

Which of the following is the best description of commercial paper?

A

A short-term, zero-coupon, corporate-issued security

35
Q

What is the major disadvantage of property over equity?

A

Liquidity risk

36
Q

All of the following are true with respect to term repos except:

A

They are always for an overnight period

37
Q

Which of the following is NOT true of ADRs (American depositary receipts)?

A

Commonly trade for less than $10

38
Q

repo rate

A

It is the difference between the amount of cash paid over at the start of the agreement and the amount paid over at the end expressed as a percentage

39
Q

In foreign exchange markets, which of the following has a standard settlement of two business days?

A

Spot

40
Q

The major source of income for a REIT is?

A

Rental income

41
Q

Interest is usually paid on Eurobonds:

A

Annually

42
Q

What is the minimum denomination of a UK government T-bill?

A

£25,000

43
Q

ICMA regulates which of the following?

A

Eurobonds

44
Q

warrants

A

On exercise the investor will receive shares which are then part of ordinary share capital.

45
Q

Which of the following is the main benefit to an investor of holding cash in an instant access deposit account?

A

Capital is protected up to a certain amount

46
Q

Which of the following is false of the currency markets?

A

All transactions are guaranteed by the International Currency Clearing House

47
Q

Which of the following is true of call options but not true of warrants?

A

On exercise they do not dilute the shareholding

48
Q

Which of the following are characteristics of the property market

A

Decentralised market

Management costs are an important consideration

49
Q

equity warrants

A

The holder exercises the warrant, not the issuing company.

50
Q

Eurobonds

A

Eurobonds are issued by corporates, governments and international institutions. They can be traded in many countries - not only London, Luxembourg and Brussels.

51
Q

Who typically issues covered warrants?

A

Investment banks

52
Q

A tri-party repo will involve the party that needs cash, the lender who receives collateral and a:

A

Custodian bank

53
Q

Which of the following currencies is used to calculate cross rates for transactions from one unusual currency to another?

A

US dollars

54
Q

What is the correct form for collateral if ADRs are to be traded in pre-release format?

A

Cash

55
Q

Commercial paper is which of the following?

A

Unsecured, short-term debt repaid at par

56
Q

description of a reverse repo transaction

A

The purchase and then sale of a bond

57
Q

Consider the three following property transactions:
Andy purchases a buy-to-let residential property, then leases it out.
Martin leases a residential property.
Sarah leases a commercial property.
Which of the following is true?

A

Sarah will typically have a longer lease than Martin

58
Q

A warrant of a listed public company gives the holder:

A

The right to buy shares at a pre-determined price during a pre-determined time

59
Q

What is the delivery time for a spot FX transaction after the trade date?

A

Two business days

60
Q

Which of the following statements is TRUE of supply and demand in the property market?

A

Supply is relatively inelastic

61
Q

The foreign exchange market is where:

A

Spot and forward contracts are traded

62
Q

Which of the following is NOT an advantage of investing in REITs over physical property?

A

Control of investment

REITs are managed by external managers and hence, investors (unit-holders) have very little control

63
Q

Which of the following is true of eurobonds?

A

Interest paid gross

64
Q

Which of the following is TRUE of warrants?

A

If exercised, new shares will be created

65
Q

Which one of the following statements about property as an investment is false?

A

The different types of property available make diversification easy Although there are different types of property available (residential / commercial) the fact that property can only be bought in discrete and sizeable units acts as a barrier to diversification.

66
Q

An investor buys commercial paper direct from an issuing company. Which of the following could be a motivation?

A

To reduce the impact of costs through elimination of broker’s charges

67
Q

Corporate commercial paper (CP) may be described as:

A

An unsecured discount instrument

68
Q

T-bills, issued by the UK Debt Management Office, have all of the following characteristics except:

A

They pay a fixed gross coupon. T-bills do not pay a coupon, instead they are issued at a discount and redeemed at face value - the difference between them being the interest received.

69
Q

Which of the following statements is true of American depositary receipts?

A

They are freely-transferable if in the name of a good nominee, such as the Depository Trust Corporation

70
Q

A Japanese exporter is concerned over volatility in USD/JPY and wants to hedge receivables due from sales made in the US. A large US dollar receipt is due to come in around six months’ time and the amount is known now.
What would you advise the exporter to do to hedge out this risk?

A

Sell USD/Buy JPY six-month forward

Securities (19 decks)

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