Chapter 2 Flashcards
Andi is considering renting out a room in her house. She anticipates rental income of £150 per week and expects to incur £300 a year in allowable expenses. She should be aware that:
Answer
a.
the total amount of tax-exempt rent would be greater if she rented out two rooms instead.
b.
there would be no tax to pay under the rent-a-room scheme.
Incorrect, chapter reference 2B6
c.
charges for any related goods and services provided are not tax-exempt.
d.
there would be a taxable amount of rent under the rent-a-room scheme.
D
What factors are taken into account when calculating the net present value of rent payable under a lease for stamp duty land tax purposes?
Select one or more:
a.
Term of lease.
Correct, chapter reference 2B3B
b.
Inflation.
Correct, chapter reference 2B3B
c.
Property value.
Incorrect, chapter reference 2B3B
d.
Annual rent.
Correct, chapter reference 2B3B
e.
Interest rates.
A,B,D
How much more stamp duty land tax will be paid in England by Dionne, who is buying a second holiday home for £475,000, than by Trevor, who is buying his first property for the same price?
Question 5Answer
a.
£28,000.
b.
£15,500.
Incorrect, chapter reference 2B3A
c.
£23,000.
d.
£8,750.
C
Charlie is purchasing £15,000 worth of shares electronically. The potential costs involved with his purchase will include:
Select one or more:
a.
UK Listing Authority levy.
b.
commission, which is always paid as a percentage of the purchase price.
c.
Panel on Takeovers and Mergers levy.
Correct, chapter reference 2A2A
d.
stamp duty.
Incorrect, chapter reference 2A2A
e.
stamp duty reserve tax.
Correct, chapter reference 2A2A
C,D
The share price of GreatInvest plc, which is an established business, has dramatically risen. Which two factors are most likely to have caused this?
Select one or more:
a.
A relatively upbeat assessment of future trading conditions.
b.
A change in the company’s management.
c.
A relatively upbeat assessment of future inflation rates.
d.
An incremental increase in the dividends paid by GreatInvest plc.
Incorrect, chapter reference 2A1
e.
Reported takeover activity.
Correct, chapter reference 2A1
B,E
Edith has just purchased her first buy-to-let property. She is unsure as to the nature of the shorthold lease she should let the property under. You inform her that:
Question 14Answer
a.
the minimum period is six months but she should avoid long rental agreements so as not to depress the property value.
Incorrect, chapter reference 2B1C
b.
there is no minimum period but she should avoid long rental agreements so as not to depress the property value.
c.
there is no minimum period, but she should aim for as long a rental agreement as possible to enhance the property value.
d.
the minimum period is six months, but she should aim for as long a rental agreement as possible to enhance the property value.
B
Alfred and Peter are having an argument about a company that is the 260th largest on the London Stock Exchange by market capitalisation. Alfred says it is in the FTSE 250 but Peter says it is not. They ask Frank to adjudicate who says the company is in the FTSE 350. Who is correct?
Question 15Answer
a.
Alfred and Frank.
b.
Alfred only.
c.
Frank only.
d.
Peter and Frank.
Incorrect, chapter reference 2A6B
A
Julie has received a dividend recently from her preference shares. It is likely that:
Select one or more:
a.
any future dividends will be guaranteed.
Incorrect, chapter reference 2A3A
b.
the yield will usually be higher than from a corporate bond from the same company.
Correct, chapter reference 2A3A
c.
future dividends will increase in value.
d.
she will not have voting rights in the company.
B,D
Max owns a number of cumulative preference shares. In terms of dividend payments and rights:
Question 23Answer
a.
he will never have voting rights.
b.
he will receive a fixed and guaranteed dividend.
Incorrect, chapter reference 2A3A
c.
he may receive a fixed dividend and may also have voting rights.
d.
his payment of dividends will rank behind ordinary share holders.
C
Joyce has let one of the rooms in her house to Terry. Terry has sub-let the room to a friend, Colin. What is the maximum amount of tax-exempt income they can receive?
Answer
a.
£2,125 for Joyce and £2,125 for Terry.
Incorrect, chapter reference 2B6
b.
£4,250 for Joyce and £0 for Terry.
c.
£7,500 for Joyce and £0 for Terry.
d.
£3,750 for Joyce and £3,750 for Terry.
D
Moosa is considering an investment into soft commodities. He should understand that:
Question 27Answer
a.
the price volatility of this asset class should be less than with his diversified equity portfolio.
Incorrect, chapter reference 2C2
b.
this asset class will be closely correlated to his diversified equity portfolio.
c.
there is a higher probability of a sudden and unfavourable price change in commodity prices than there is of a sudden collapse in share prices.
d.
he should not be exposed to supply and demand risk since stocks usually replenish annually.
C
