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CISI: Securities > RE: Incorrect Answers > Flashcards

RE: Incorrect Answers Flashcards

1
Q

How does an Over Allotment Option Allow Underwriter to Achieve a more Successful Listing?

A

It allows underwriters to sell shares if they rise and buy back if they fall.

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2
Q

When Issuing Bonds, Whats the Difference Between an Auction and Tender Methods?

A

An auction: Succesfu bidder pay the price they bid

Tender: Bidder pay a common price

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3
Q

Who has Responsibility for Admission of Companies on the AIM?

A

LSE

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4
Q

How Does a Book Runner Assist in the New Issue Process?

A

Findss buyers, and coordinates the level of demand across the syndicate

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5
Q

The Process that Allows a Company to Issue Several Bonds with Different Maturities Over a 2 Year Period is Known As?

A

Shelf Registration

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6
Q

How is a Municipality Able to Issue Bonds on Favourable Terms

A

The bonds are guaranteed by a third party

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7
Q

The MTS Cash Electronic Trading Platform is Used Between Which of the Following Parties to Bond Transactions?

A

Dealers Only

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8
Q

Which Organisation Enables the Price Discovery Mechanism?

A

The Trading Venue

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9
Q

Amy, has a number of shares she wishes to sell at a particular price, however, if the price falls below the one she specified she would like the order to be immediatley cancelled. What type of order should she request?

A

Fill or Kill

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10
Q

How does a Prime Broker Trade Leverage for its Hedge Fund Client?

A

By trading on a margin

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11
Q

Primary Dealers are Usually Associated with What?

A

Issues of Government Bonds

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12
Q

For Which Asset Type Would you Most Expect Dealings to Take Place on a Decentralised Dealer Market?

A

Corporate Bonds

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13
Q

What are On-the-Run Bonds?

A

The most recently issued long term bonds

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14
Q

Aside from the Government, the Four Groups of Participants that Facilitates Deals in Government Bonds are Primary Dealers, the Gov issuing Agency, Inter Dealer Broker and which Others?

A

Broker Dealers

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15
Q

By What Name is the Typical Basis in Which Dealer to Customer Transactions in Fixed Interest Securities Undertaken?

A

Request for Quote (RFQ)

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16
Q

Why has the Volume for Bonds Traded on Single Dealer Platforms Fallen?

A

Banks have become less willling to use capital in the bonds market.

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17
Q

The Key Benefit of a Shareholder Pre-Emptive Rights?

A

A company can only issue new shares to the public with their approval

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18
Q

When Might a Bond Issuer Benefit From a Rise in Interest Rates?

A

By issuing bonds prior to the rise

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19
Q

One of the Main Reasons a Company Would Decide to Use Its Own Cash to Buyback Shares From Investors Is?

A

To allow it to recognise its capital structure to include more debt.

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20
Q

What is the Minimum Number of Shares Required by a Predator to Gain Control of a Company?

A

50.1%

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21
Q

What is Nil-Paid Rights?

A

Difference Between the rights issue price and the theoretical ex rights price.

e.g. Rights price £4.00 and the Ex rights is £4.80. NPR = £0.8

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22
Q

If a Company Makes a Bonus Issue to its Shareholders, What Impact Would this have on the Share Price?

A

It would go down

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23
Q

At what Price Must a Mandatory Cash Offer be Made Under the POTAM Rules?

A

At least the highest price paid by the offerer over a 12 month period

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24
Q

Which Advantage does Synthetically Replicated ETFs Have Over Physically Replicated ETFs?

A

Lower cost and smaller tracking error.

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25
What is the Name Given to the DMOs Facility Which Enables the GEMMs to Enter Into Reverse Repos with it?
Standing Repo
26
Exchange Traded Funds are Sold in Large Blocks, Each of Which MIght Contain 10s of Thousands of ETF Shares. By Which Name are the Blocks Known?
Creation Units
27
What Does Modified Duration of a Bond Measure?
Its price volatility to changes in interest rates.
28
A Specialist Fund has Been Structured as a imited Partnership Arrangement. This is Typically an Indication That?......
The firm invests in private equity.
29
What is the Standard Settlement Period of US and UK Government Bonds? ## Footnote Not your usual suspect......
T+1
30
A Company Issues Class A and Class B Ordinary Shares. What will the Difference Between These Will Most Likely Relate to?
Right to vote on key decisions.
31
How Does a Covered Warrant Differ From a Warrant?
Covered warrants are issued by a firm other than the company which issues the underlying shares.
32
What is the Main Risk With Structured Products that is Especially Difficult to Hedge?
Credit Risk
33
What is the Shape of the Yield Curve When Investors Prefer More Liquidity?
Normal
34
Why Would a UK Organisation Consider Issuing a EuroBond in Germany?
It wishes to raise finance outside its own country, there may be a higher demand for GBP debt.
35
An Investor has Been Advised They Must wait 3 Months Before They Can Sell Units Back in an Open-Ended Fund Holding. What Key Factor is Likely to Have Triggered this Delay? ## Footnote Which type of fund would they have invested in?
They invested in a property fund.
36
Are Investment Trusts Allowed To Borrow Money?
Yes
37
Why Would the Yield Curve Become Inverted?
There is an expectation for a significant reduction in interest rates.
38
When Could Negative Bond Yields Occur?
Could occur where monetrary policy has been eased to lower inflation.
39
For a CIS to Become Regulated, What Must Occur?
The local finance regulator must recognise the CIS from insde the country or recognise it from outside the country.
40
The Process of CLS is Designed to Address Problems Associated with Which type of Transaction? ## Footnote Asset Class
FX trading
41
What is an Example of a Primary Information Provider?
LSE Regulatory News Service
42
Which Risk can be Diversified Away?
Unsystematic risk
43
Why is the a Risk Premium When Investing in Equities?
To compensate investors for assuming greater risk, compares to other investements such as bonds of cash.
44
How Long Before is a Special Ex Trade Possible Before the ex-date? ## Footnote Where do the dividends go to?.
10 business days before the ex dividend date with the seller entitled to the dividend.
45
What is a Cross Rate?
A cross rate is between 2 currencies that does not include the US dollar
46
If Interest Rates were to Rise in the UK, What would one expect to be the effect on the price and yield of gilts?
Price would fall and yield would rise
47
Which Measure is Used as a Targer for the UK Monetary Policy Committee in Realtion to Inflation? ## Footnote Obvious
Consumer Price Index
48
What Fund Manager Typically Has "Skin in the Game" ? ## Footnote Holds a stake in their own fund
Hedge funds
49
What is the Formula for the Converison Premium?
Bond Price / (Shares x Price) | An answer of 1.157 for example would be a premium of 15.7% ## Footnote The -1 X 100 to get the answer.
50
What is the Maturity of US Treasury Issued Long Bonds?
30 years
51
What is a Rule for Credit Ratings?
The more letter the better the bonds.
52
What are the German Government Bonds in Order of Maturity (1 earliest)
Bund Bobl Schatz
53
What Ratio Effectively Provides a Yield for the Whole Company Being Analysed?
ROCE ## Footnote Return on Capital Employed
54
What is the Quick Ratio Calculation?
Current Assets - Inventory / Liabilities
55
What Holds Ownership via a Nominee Name with a Unique Identifier for Each Individual Client?
Designated Nominee
56
How Often is the Coupon on a German Bond Paid?
Annually
57
What Trading Venues Do Dark Pools Operate On?
Multi Lateral Trading Facility
58
What Factor do Order Does not Specify a Price?
Market Order
59
In a New Listing What is the Term for a Firm that Book Builds?
Lead Manager
60
Who is Responsible for the Issue of UK T Bills to Investors?
The Bank of England
61
Who Would Usually Lead and Manage the Sale of Shares in an IPO?
Investment Bank
62
Which Factor Determines Whether a Bond can be Traded Electronically?
Its Liquidity
63
A privately owned manufacturing company is looking to raise capital through listing on the LSE. It appoints a number of advisers to form an origination team for the pending flotation. Who is MOST likley to assess the best method of bringing the company to the market?
The Sponsor (lead investment bank)
64
The Use of a Designation on an Account is Primarily Used......?
As a refernece to identify the account
65
In which type of issue in the Eurobond market is the lead manager MOST likely to place the entire deal themselves without forming a syndicate?
A bought deal.
66
What is a corporate governance expectation for an issuer that is planning to list securities?
The role of the Chairman and the CEO should be split
67
A large US Oil Company is being floated on both New York and London Stock Exchanges. Beta LTD is a london based investment bank responsible for the UK listing. Betas role within the syndicate would mosy likley be described as?
Co-lead manager
68
What type of electronic platform is commonly used to facilitate dealer-to-customer trading of bonds?
TradeWeb
69
Where are trade involves shares that are "dematerialised", this means that.....
The transaction will be settled electronically
70
What type of cash flow is the "free cash flow to shareholders" known as?
Equity
71
Life Insurnace companies gernerally invest for their long term obligations in which asset class?
Equities
72
A significant benefit of using a central counterparty system is that it........? ## Footnote Reduces what risk?
Reduces systemic risk
73
What is a key difference when comparing a companies profit against cash?
Recognition of revenues at point of sale
74
Factors of a Japanese Bond?
T+1 pays coupons semi annually and has a maturity of up to 40 years.
75
If the "Dow Divisor" used to Calculate the Dow Jones Industrial Average Index is 0.2, this means that a $1 price change of a component stock wil, in itself, trigger an index movement of.......
5 points (0.2/1)
76
What is the Equation for foward spot rates?
= Spot Rate x [(1+base %) / (1+counter%)]
77
The seller of a security is at the confirmation stage of the clearing and settlement process. This indicates that........
They have agreed the basis in which the trade will proceed
78
In order to Amortise an asset over its useful life, a company must......
Reflect an ongoing reduction in the companies financial statements.
79
Stockbrokers can receive remuneration by charging......
fees and commissions only
80
What key risks are evident when an investor purchases overseas sovereign bonds?
Country risk and exchnage rate risk?
81
What is a key benefit of purchasing shares in an investement trust compared to a comparable unit trust?
Clarity of a single price to buy and sell
82
When considering the operation and characteristics of private equity funds, a fund manager should be aware that.....
Returns are usually correlated with the economic cycle.
83
Which passive bond strategy involves constructing a bond portfolio whose coupon and redemption payment cash flows are synchronised to match those of the liabilities to be met?
Cash matching
84
A company sells its shares to an investement banks, which subsequently sells those shares to investors at a premium to the price they paid, this is known as a........
An offer for sale.
85
When an issuer of new bonds is deciding which investment bank it wants to assist in the issue, the decision is normally finalised after which stage of the process?
Pitching
86
What is usually considered disadvantage of holding shares through a pooled nominee?
Loss of shareholder perks
87
On a statement of financial position under which heading would you expect to find pre payments?
Current assets
88
In order to calculate the depreciation of an asset, a company must identify both its.......
Useful business lifespan and non-recoverable cost
89
As an alternative to using the cash flow statement to calculate free cash flow, what is often used instead? ## Footnote Obvious joey....
Income statement

CISI: Securities (11 decks)

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