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1

An adviser is most likely to recommend passive rather than active funds to:

Select one:

a. increase the alpha of the portfolio.

b. reduce the beta of the portfolio.

c. increase the opportunity for the portfolio to out-perform an index.

d. limit the volatility of a portfolio.

 

 

d. limit the volatility of a portfolio.

 

chapter reference 10F6

2

Daniel's portfolio has just been rebalanced by his fund manager. This is most likely to be because:

Select one:

a. his tax status is about to change.

b. it is a new tax year.

c. his tax status has changed.

d. his risk profile has changed.

 

 

d. his risk profile has changed.

 

chapter reference 10L6A

3

A UK-authorised fund has just purchased an equity for £200,000. What stamp duty will it pay, if any?

Select one:

a. £2,000.

b. £3,000.

c. £1,000.

d. £0.

 

 

c. £1,000.

 

chapter reference 10F2

4

An investor believes that most people will invest in the same types of investments and there are opportunities by going against this trend. Which fund management style would suit her best?

Select one:

a. GAARP.

b. Contrarianism.

c. Momentum.

d. Value.

 

 

b. Contrarianism.

 

chapter reference 10E4

5

A fund manager has increased the equity content in a fund above the normal weighting for the fund to reflect his positive expectations for equities. This is an example of:

Select one:

a. strategic asset allocation.

b. tactical asset allocation.

c. contingent asset allocation.

d. diversified asset allocation.

 

 

b. tactical asset allocation.

 

 chapter reference 10C

6

Jake has made an investment into a unit trust that is not actively managed. This means that for his investment he has a:

Select one:

a. synthetic structure.

b. physical index.

c. physical structure.

d. synthetic index.

 

 

c. physical structure.

 

 chapter reference 10F6

7

When constructing a new portfolio, a manager selects the geographic area and then selects the sectors in which to invest. What method of investment management is this?

Select one:

a. Top-down.

b. Bottom-up.

c. Stochastic.

d. Optimisation.

 

 

a. Top-down.

 

chapter reference 10E1

8

What does it mean when a fund manager uses an 'overlay' strategy?

Select one:

a. A mixture of different approaches, including momentum and value investing, are combined.

b. A core share portfolio is held and derivatives are used to alter currency and market exposures.

c. A core share portfolio is held, and a 'sector rotation' approach is used to gain alpha.

d. A mixture of different approaches, including GAARP and contrarianism, are combined.

 

 

b. A core share portfolio is held and derivatives are used to alter currency and market exposures.

 

chapter reference 10E5

9

Under which approach to asset allocation are optimal portfolios created from sets of asset classes using historic data for returns and volatility?

Select one:

a. Active.

b. Theoretical.

c. Pragmatic.

d. Passive.

 

 

b. Theoretical.

 

chapter reference 10A1

10

If an investor will make a gain when encashing some shares, what action might he consider if he wishes to avoid capital gains tax?

Select one:

a. Transfer some of the shares to his spouse prior to disposal.

b. Re-invest the gains into a venture capital trust.

c. Carry forward unused annual exemptions.

d. Wait for the shares to reduce in value in order to reduce the gain.

 

 

a. Transfer some of the shares to his spouse prior to disposal.

 

chapter reference 10L6B

11

Phil's investor policy statement may need to be revised as a result of:

You must select ALL the correct options to gain the mark:

a. an increase in the base interest rate.

b. an expected long-term decline in equity returns.

c. an expected short-term weakening of sterling.

d. changes announced to income tax rates.

e. him divorcing his wife.

 

b. an expected long-term decline in equity returns.

d. changes announced to income tax rates.

e. him divorcing his wife.

chapter reference 10L3

12

Jeanette uses mathematical analysis and techniques with the aim of obtaining the maximum return consistent with a given level of volatility on her portfolio. Her approach would be categorised as being:

Select one:

a. stochastic.

b. theoretical.

c. pragmatic.

d. strategic.

 

 

b. theoretical.

 

chapter reference 10A1

13

Roberto is invested in an exchange-traded fund [ETF] that his adviser has informed him is 'synthetic'. This indicates that the ETF:

Select one:

a. can be held on a platform if required.

b. uses derivatives to match an index.

c. holds a representative sample of index stocks.

d. holds stocks to replicate an index.

 

 

b. uses derivatives to match an index.

chapter reference 10F6

14

Onshore investment bonds are likely to be relatively more attractive to:

Select one:

a. higher-rate taxpayers where the underlying investments generate capital growth rather than income.

b. basic-rate taxpayers where the underlying investments generate income rather than capital growth.

c. higher-rate taxpayers where the underlying investments generate income rather than capital growth.

d. basic-rate taxpayers where the underlying investments generate capital growth rather than income.

 

c. higher-rate taxpayers where the underlying investments generate income rather than capital growth.

 

chapter reference 10G4

15

Hamish has just been quoted the ongoing charges figure [OCF] of a fund he is interested in. He should be aware that it:

Select one:

a. does not take into account dealing costs.

b. is expressed as a percentage of the initial charge.

c. takes initial charges and exit costs into account.

d. includes a performance fee.

 

a. does not take into account dealing costs.

 

chapter reference 10F2

16

A fund manager buys a number of shares on the New York Stock Exchange and at the same time sells short a Dow Jones Index Future. What portfolio construction technique is being used?

Select one:

a. Hedging.

b. Over-the-counter trading.

c. Arbitraging.

d. Contrarianism.

 

a. Hedging.

 

chapter reference 10E5

17

Ken's adviser has recommended he invests in a product which limits the capital risk of equity investment, in return for a lock-in period of five years. The product is most likely to be a[n]:

Select one:

a. hedge fund.

b. exchange-traded fund.

c. distribution bond.

d. structured product.

 

d. structured product.

 

chapter reference 10E6

18

Elaine's approach to fund management is based on her investing in sectors that she expects to perform well at particular points of the economic cycle. This management style can be categorised as:

Select one:

a. momentum investing.

b. seeking value.

c. contrarianism.

d. seeking Growth At A Reasonable Price.

 

 

a. momentum investing.

 

 chapter reference 10E4

19

Modern portfolio theory:

Select one:

a. compares expected returns with expected volatility.

b. is based on forward-based judgements.

c. will always take into account the behaviour of investors.

d. is solely based on the expected returns of each asset class.

 

a. compares expected returns with expected volatility.

 

chapter reference 10A1

20

The annual management charge:

Select one:

a. is reflected in the initial charge.

b. takes dealing costs into account but not exit fees.

c. is included in the ongoing charges figure.

d. is always higher than the ongoing charges figure.

 

 

c. is included in the ongoing charges figure.

 

chapter reference 10F2

21

How are stocks selected when using the bottom-up method of investment management?

Select one:

a. Purely on their individual merits.

b. To replicate the chosen index.

c. Solely on the basis of the value they offer.

d. To achieve diversification by both geography and sector.

 

a. Purely on their individual merits.

 

chapter reference 10E2

22

A structured product offers a return of 110% of the FTSE 100 index over a period of four years with full return of capital, unless the index falls by 50% or more. What type of protection is this known as?

Select one:

a. Firm.

b. Soft.

c. Positive.

d. Hard.

 

 

b. Soft.

 

chapter reference 10E6

23

Elliot's approach to fund management is based on him finding companies with what he believes are long-term sustainable advantages over their competitors. This management style can be categorised as:

Select one:

a. practicing contrarianism.

b. seeking value.

c. finding Growth At A Reasonable Price.

d. following the momentum.

 

c. finding Growth At A Reasonable Price.

 

 chapter reference 10E4

24

What factor is an adviser LEAST likely to take into account when generating a suitable asset allocation for a client, assuming he is not using a formal risk profile?

Select one:

a. Timeframe.

b. Annualised target return.

c. Tax status of client.

d. Maximum permitted loss.

 

 

c. Tax status of client.

 

 chapter reference 10D

25

In the absence of any investment powers in a trust deed, how can the trustees of a trust set up in England and Wales invest money within the trust?

You must select ALL the correct options to gain the mark:

a. They must ensure that the fund is suitable.

b. They must adhere to the terms of the Trustee Investment Act 1961.

c. They must have at least 50% of the fund in fixed income.

d. They must ensure that the fund is diversified.

e. They can invest as if the funds were their own.

 

a. They must ensure that the fund is suitable.

d. They must ensure that the fund is diversified.

e. They can invest as if the funds were their own.

chapter reference 10L2A

26

Which fund type is likely to be the LEAST volatile?

Select one:

a. Open-ended, highly leveraged.

b. Closed-ended, unleveraged.

c. Closed-ended, highly leveraged.

d. Open-ended, unleveraged.

 

 

d. Open-ended, unleveraged.

 

chapter reference 10F5

27

Juliet is unhappy with her portfolio's performance following a review with her adviser, Tom. In such circumstances, Tom is most likely to:

You must select ALL the correct options to gain the mark:

a. suggest a change of adviser.

b. withdraw all of her investment and invest it elsewhere.

c. reduce the fees levied.

d. confirm Juliet’s risk profile.

e. re-establish Juliet's original objectives.

 

 

d. confirm Juliet’s risk profile.

e. re-establish Juliet's original objectives.

chapter reference 10L

28

Raheed is an investment manager and he is recommending to a client that they re-balance their portfolio. This is justifiable where:

You must select ALL the correct options to gain the mark:

a. there has been a change to the prevailing rate of income tax.

b. the client wishes to make a small reduction in the levels of income taken from the portfolio.

c. there has been a change to market conditions.

d. the switch in holdings is made with a view to generating additional fees.

e. there has been a change in the real returns on assets held within the portfolio.

 

c. there has been a change to market conditions.

e. there has been a change in the real returns on assets held within the portfolio.

chapter reference 10L6

29

Sanjay is a portfolio manager. He has strong convictions about investing in shares in renewable energy firms as he expects them to provide long-term sustainable growth over other shares. What is this investment style known as?

Select one:

a. Top-down.

b. Value.

c. Momentum.

d. Growth At A Reasonable Price.

 

 

d. Growth At A Reasonable Price.

 chapter reference 10E4

30

Yvonne is 42 and a higher-rate taxpayer. She wishes to invest £10,000 over the long-term with the aim of capital growth and her main objective is income tax efficiency. Yvonne is most likely to invest in a[n]:

Select one:

a. venture capital trust.

b. personal pension.

c. ISA.

d. offshore bond.

 

 

b. personal pension.

 

chapter reference 10G4

31

A structured product offers a return of 115% of the FTSE 100 Index over a period of five years, or full return of capital if the index is lower at redemption. What type of protection is this known as?

Select one:

a. Firm.

b. Hard.

c. Soft.

d. Positive.

 

 

b. Hard.

 

chapter reference 10E6

32

An adviser invests a client's funds in accordance with an asset allocation model which specifies a range for equities of 65% to 75%. Eight months later, based on the adviser's assessment of the outlook, he increases the portfolio equity content from 70% to 75%. This would be best described as a[n]:

Select one:

a. tactical move.

b. optimisation move.

c. balance move.

d. strategic move.

 

 

a. tactical move.

chapter reference 10C

33

Frank constructs his portfolios following a 'top-down' method. It is likely that after selecting the asset class within each of the world’s major investment regions, his next action would be:

Select one:

a. choosing sector weightings.

b. selecting the management style.

c. selecting the stock.

d. choosing a benchmark.

 

 

a. choosing sector weightings.

 

 chapter reference 10E1

34

Jocelyn is using the contrarianism approach to fund management. She is most likely to be managing a[n]:

Select one:

a. hedge fund.

b. OEIC.

c. investment trust.

d. bond fund.

 

 

a. hedge fund.

 

chapter reference 10E4

35

Andy, a financial adviser, is considering switching a client's investments. This could be justified when:

You must select ALL the correct options to gain the mark:

a. the client issues instructions to effect a switch.

b. there has been a clear change in the client's objectives.

c. Andy's employer only charges transactional fees.

d. market conditions adversely affect the original investment.

 

a. the client issues instructions to effect a switch.

b. there has been a clear change in the client's objectives.

d. market conditions adversely affect the original investment.

chapter reference 10L6A

36

Two assets are plotted vertically on the efficient frontier for investments graph. They are said to be:

Select one:

a. achieving the same returns for differing levels of risk.

b. achieving different returns for the same level of risk.

c. both low risk.

d. efficient investments.

 

 

b. achieving different returns for the same level of risk.

chapter reference 10B

37

The effectiveness of modern portfolio theory has been severely criticised in recent years. What is considered to be its main weakness?

Select one:

a. It is over complicated and difficult to explain to investors.

b. It cannot cope consistently with derivatives in a portfolio.

c. Its probabilistic techniques are less effective in times of economic crises.

d. The regulator has expressed concern over its reliability.

 

 

c. Its probabilistic techniques are less effective in times of economic crises.

chapter reference 10A4

38

Susie has just had a meeting with her investment adviser. He has recommended a partial encashment and reinvestment of her holdings, which could be suitable advice for her if:

You must select ALL the correct options to gain the mark:

a. there has been a clear change in her objectives.

b. the action is not likely to result in any charges for Susie.

c. her portfolio needs rebalancing to reflect her attitude to risk.

d. the switch will not result in any potential tax liability.

e. there has been consistent underperformance of an investment over a medium to long-term.

 

a. there has been a clear change in her objectives.

c. her portfolio needs rebalancing to reflect her attitude to risk.

e. there has been consistent underperformance of an investment over a medium to long-term.

chapter reference 10L6

39

Usain has a portfolio which includes exchange-traded funds [ETFs]. What would be the primary reason for using this type of passive investment?

Select one:

a. To minimise the possibility of returns diverging from the chosen index.

b. To outperform active fund managers.

c. To minimise costs.

d. To remove volatility from his portfolio.

 

 

a. To minimise the possibility of returns diverging from the chosen index.

chapter reference 10F6

40

Grant has recently received a summary portfolio valuation. What information is this likely to include?

You must select ALL the correct options to gain the mark:

a. A price history.

b. A general summary of investment markets.

c. Expected dividends.

d. A valuation and income summary.

e. Purchases and sales.

 

 

d. A valuation and income summary.

e. Purchases and sales.

chapter reference 10L5

41

If an investment portfolio has a strong positive cash flow, what does this mean for the fund manager?

You must select ALL the correct options to gain the mark:

a. They can accept short-term capital losses.

b. They can accept short-term uncertainty.

c. They can take a long-term view of certain types of investment.

d. They can accept long-term uncertainty.

e. They can guarantee to outperform the benchmark.

 

a. They can accept short-term capital losses.

b. They can accept short-term uncertainty.

c. They can take a long-term view of certain types of investment.

chapter reference 10L2C

42

Sasha, an investor in a discretionary portfolio, is about to receive her first summary portfolio valuation from her investment manager. Sasha should understand that:

You must select ALL the correct options to gain the mark:

a. the costs and charges impacting her investment will be broken down into separate components.

b. it would include the addition of cash or stock.

c. she has received this because she made the investments about a year ago.

d. she can expect to receive another summary portfolio valuation in three months' time.

e. the value of her portfolio must have fallen by 10% or more since the last summary portfolio valuation.

 

a. the costs and charges impacting her investment will be broken down into separate components.

b. it would include the addition of cash or stock.

d. she can expect to receive another summary portfolio valuation in three months' time.

chapter reference 10L5

43

Sam, an existing client, has 60-70% of his assets invested in equities long term. If his fund manager decides to change this for the next 12 months to 80% in equities, this is an example of:

Select one:

a. tactical asset allocation.

b. strategic modelling.

c. strategic asset allocation.

d. stochastic allocation.

 

 

a. tactical asset allocation.

chapter reference 10C

44

Sandra has agreed a benchmark portfolio with her adviser. The benchmark states that Sandra will hold 60% of her fund in equities but that this can vary between 55% - 65% as the portfolio manager sees fit. This is an example of:

Select one:

a. the top-down approach.

b. strategic asset allocation.

c. stochastic modelling.

d. tactical asset allocation.

d. tactical asset allocation.

 

chapter reference 10C

45

If an investor wants to encash and re-invest an existing equity ISA investment, which factors should her adviser take into account before doing so?

You must select ALL the correct options to gain the mark:

a. The ability to offset any gains against any losses from previous tax years.

b. The costs of doing so.

c. The client's need for income or growth on the new investment.

d. A potential capital gains tax liability.

e. The client's attitude to risk.

b. The costs of doing so.

c. The client's need for income or growth on the new investment.

e. The client's attitude to risk.

chapter reference 10L6

46

Correlation, standard deviation and the efficient frontier for investments are all associated with the:

Select one:

a. arbitrage pricing theory.

b. capital asset pricing model.

c. efficient market hypothesis.

d. modern portfolio theory.

d. modern portfolio theory.

 

chapter reference 10A1

47

A fund's ongoing charges figure would include the:

Select one:

a. commission on trades.

b. exit costs.

c. initial charges.

d. annual management charge.

d. annual management charge.

 

 

chapter reference 10F2

48

What method of investment management is most likely to be used when managing index-tracking funds?

Select one:

a. Value.

b. Momentum.

c. Growth at a reasonable price.

d. Top-down.

d. Top-down.

 

 chapter reference 10E1

49

Hilary, a portfolio manager, regards herself as a 'value' investor. The investment most likely to interest her would be a stock:

Select one:

a. whose price may appear at a high level, but Hilary thinks has premium quality long-term characteristics.

b. that is 'out of fashion' in the market but which Hilary thinks is worth more than the price placed on it by the market.

c. that is expected to perform well in the environment created at that point of the economic cycle.

d. that the market as a whole doesn't like, and Hilary thinks high returns can be achieved by going against the trend.

b. that is 'out of fashion' in the market but which Hilary thinks is worth more than the price placed on it by the market.

 

 

chapter reference 10E4

50

The extent to which an asset contributes to the overall risk-return characteristics of a portfolio is determined by its:

Select one:

a. correlation with other assets in the portfolio.

b. quartile performance over the last five years.

c. Sharpe ratio.

d. standard deviation.

a. correlation with other assets in the portfolio.

 

 

chapter reference 10B1

51

Frank favours a purely pragmatic approach to asset allocation. What is a key risk of this?

Select one:

a. It takes no account of the correlation between different asset classes.

b. It takes no account of volatility.

c. It relies purely on historical past performance.

d. The risk of bias either for or against asset classes.

d. The risk of bias either for or against asset classes.

 

chapter reference 10A4

52

Lana, a portfolio manager, regards herself as a 'momentum' investor. The stock that would interest her most would be a stock that:

Select one:

a. has a high price earnings ratio having been subject to an attractive takeover bid.

b. is 'out of fashion' in the market but Lana thinks it is worth more than the price placed on it by the market.

c. is expected to perform well in the environment created at that point of the economic cycle.

d. the market as a whole doesn't like, and Lana thinks high returns can be achieved by going against the trend.

c. is expected to perform well in the environment created at that point of the economic cycle.

 

 

 chapter reference 10E4

53

An active fund manager's performance is best viewed:

Select one:

a. over a variety of periods.

b. over the past 12 months.

c. over the past 3 years.

d. over the same number of years as the expected investment period.

a. over a variety of periods.

 

 

chapter reference 10F4

54

Kim, an adviser, has established that Caleb, a client, has a balanced attitude to risk. The assets that Kim would typically advise Caleb to hold in his portfolio would include:

You must select ALL the correct options to gain the mark:

a. open ended investment companies.

b. larger overseas listed companies.

c. investment trusts.

d. unlisted securities.

e. fixed-interest securities.

f. smaller overseas companies.

a. open ended investment companies.

b. larger overseas listed companies.

e. fixed-interest securities.

f. smaller overseas companies.

chapter reference 10L1

55

Ray is an investment fund manager who follows the 'pragmatist' approach. This means that he:

Select one:

a. uses forward-looking judgments of likely returns and volatility to determine portfolio weightings.

b. uses mathematical analysis and techniques with the aim of obtaining the desired risk-return trade-off.

c. invests for the long-term and will only adjust asset allocations in extreme conditions.

d. relies on deep and vigorous analysis to identify businesses whose value is greater than the price placed on them by the market.

a. uses forward-looking judgments of likely returns and volatility to determine portfolio weightings.

 

chapter reference 10A2

56

A fund manager investing the assets of a trust could be bound by the:

You must select ALL the correct options to gain the mark:

a. Variations of Trust Act 1958.

b. Trust Companies Act 2005.

c. Trustee Act 2000.

d. wishes of the beneficiaries.

e. trust deed.

c. Trustee Act 2000.

e. trust deed.

chapter reference 10L2A

57

Harry has purchased a structured product that gives 'hard protection'. The most likely return Harry will receive from the product is the:

Select one:

a. ongoing income guaranteed, increasing by a real rate of return above inflation as measured by CPI.

b. initial capital guaranteed and the possibility of an additional return linked to the FTSE 100.

c. initial capital guaranteed and the possibility of an additional return linked to inflation rates.

d. ongoing income guaranteed and a capped maximum reduction in the initial capital.

b. initial capital guaranteed and the possibility of an additional return linked to the FTSE 100.

 

chapter reference 10E6

58

During her review, Jennifer's adviser recommends that she switch some of her investments to rebalance her portfolio. This means that:

You must select ALL the correct options to gain the mark:

a. the portfolio is likely to become more tax efficient.

b. Jennifer's risk profile must have become more adventurous.

c. Jennifer's best performing asset could be sold.

d. the switches may give rise to a capital gains tax liability.

e. the adviser must report the advice to their compliance officer.

c. Jennifer's best performing asset could be sold.

d. the switches may give rise to a capital gains tax liability.

chapter reference 10L6B

59

Jordan's portfolio is invested in managed unit trusts. He has a high tolerance to risk and is discussing with his adviser the merits of switching into exchange-traded funds. He should be aware:

You must select ALL the correct options to gain the mark:

a. this might be an example of his adviser 'churning' investments.

b. that his new portfolio might not reflect his attitude to risk.

c. this could be justified where there has been persistent underperformance.

d. that switching is not permitted within the first five years of purchase.

e. there shouldn't be any potential tax issues with this.

a. this might be an example of his adviser 'churning' investments.

b. that his new portfolio might not reflect his attitude to risk.

c. this could be justified where there has been persistent underperformance.

chapter reference 10L6

60

Yosuf has received a total dividend payment of £1,000 from his direct equity holding, his only investment. Zena has received a dividend of £1,000 from her ISA. Assuming they are both higher-rate taxpayers and neither has used their dividend allowance, what is the difference in the amount of tax they will pay on the dividends?

Select one:

a. Zena will pay 7.5% more tax than Yosuf.

b. Yosuf will pay 22.5% more tax than Zena.

c. Yosuf will pay 32.5% more tax than Zena.

d. There is no difference.

 

 

d. There is no difference.

 chapter reference 10G2

61

What would an investment policy statement typically contain?

You must select ALL the correct options to gain the mark:

a. Fund manager's credentials.

b. Overall investment objective.

c. Risk classification.

d. Terms of business.

e. Legal constraints.

b. Overall investment objective.

c. Risk classification.

e. Legal constraints.

chapter reference 10L1

62

Nigel's adviser is using stochastic portfolio modelling. This means that he will:

Select one:

a. use optimisation programmes to determine the most effective passive investment approach.

b. use a number of factors to generate a probabilistic assessment of returns and volatility.

c. adopt an asset allocation model that gives him a range for the percentage of capital in each asset class.

d. set Nigel's asset allocation for the long-term and only adjust it in extreme circumstances.

b. use a number of factors to generate a probabilistic assessment of returns and volatility.

chapter reference 10B3

63

Gillian has recently received a contract note from her investment adviser. This document will usually give her the:

You must select ALL the correct options to gain the mark:

a. full name of share or stock.

b. expected dividend.

c. settlement date.

d. amount of VAT paid.

e. number of shares bought/sold.

a. full name of share or stock.

c. settlement date.

e. number of shares bought/sold.

chapter reference 10L5

64

The theory which indicates the optimal portfolio for an investor based on their level of risk is the:

Select one:

a. modern portfolio theory.

b. Growth at a reasonable price style.

c. stochastic portfolio model.

d. Fama and French model.

a. modern portfolio theory.

 

chapter reference 10A1

65

As a defensive strategy, the main focus of asset allocation is the:

Select one:

a. concentration of capital and building of wealth.

b. preservation of capital and reduction of risk.

c. preservation of capital and building of wealth.

d. concentration of capital and reduction of risk.

b. preservation of capital and reduction of risk.

 

chapter reference 10A

66

Fiona, a portfolio manager, regards herself as a GAARP investor. The investment most likely to interest her would be a stock:

Select one:

a. whose price may appear at a high level, but Fiona thinks has premium quality long-term characteristics.

b. that the market as a whole doesn't like, and Fiona thinks high returns can be achieved by going against the trend.

c. that is 'out of fashion' in the market but that Fiona thinks is worth more than the price placed on it by the market.

d. that is expected to perform well in the environment created at that point of the economic cycle.

a. whose price may appear at a high level, but Fiona thinks has premium quality long-term characteristics.

 

chapter reference 10E4

67

Howard, who has a high attitude to risk, is considering his adviser's recommendation to adopt a core-satellite approach to managing his portfolio. His advisor has explained that this approach will hold the core investments in:

Select one:

a. passive funds.

b. property funds.

c. commodity funds.

d. specialist funds.

a. passive funds.

 

chapter reference 10C1

68

Defined benefits pension schemes need to remain viable during long periods of inflation. What investments are scheme managers likely to include within the fund to try to ensure this is the case?

You must select ALL the correct options to gain the mark:

a. Index-linked bonds.

b. Equities.

c. Property.

d. Inflation swaps.

e. Commercial bills.

f. Debentures.

a. Index-linked bonds.

b. Equities.

c. Property.

d. Inflation swaps.

chapter reference 10L2B

69

A higher-rate taxpayer is considering investing in either an onshore or an offshore bond. When would an onshore bond be more suitable?

Select one:

a. If the investor wishes to take a regular income.

b. If the investor has an unused capital gains tax exemption.

c. If the investor is likely to be a non-taxpayer when the bond is encashed.

d. If the investor is likely to be a taxpayer when the bond is encashed.

d. If the investor is likely to be a taxpayer when the bond is encashed.

chapter reference 10G4

70

Brenda has decided to have her portfolio managed on an active basis. This is because she:

Select one:

a. believes that active management will outperform the benchmark index.

b. is funding her investments with regular premiums.

c. wishes to take an income from her portfolio.

d. has a moderate to low attitude to risk.

a. believes that active management will outperform the benchmark index.

 

chapter reference 10C1

71

Switching a client's investments may give rise to a realised capital gain. What options should be considered to reduce or eliminate any capital gains tax [CGT] in this instance?

You must select ALL the correct options to gain the mark:

a. Offset gain[s] against losses made in previous years.

b. Transfer the investments to the client's spouse before selling.

c. Consider use of the client's annual CGT exempt amount.

d. Transfer the investments into a trust before selling.

e. Switch via an offshore account.

a. Offset gain[s] against losses made in previous years.

b. Transfer the investments to the client's spouse before selling.

c. Consider use of the client's annual CGT exempt amount.

chapter reference 10L6B

72

If George's investment uses derivatives in order to match the FTSE 350 index, he has a[n]:

Select one:

a. passive physical fund.

b. passive synthetic fund.

c. active physical fund.

d. active synthetic fund.

b. passive synthetic fund.

 

chapter reference 10F6

73

Liam invested in a maximum investment plan exactly eight years ago. He can access the funds tax-free after what further minimum period of time?

Select one:

a. 2 years, 7 months.

b. 2 years.

c. 6 months.

d. He can have immediate access.

 

d. He can have immediate access.

 

chapter reference 10G4

74

Portfolios that diverge significantly from index benchmarks will typically display:

Select one:

a. lower short-term volatility.

b. superior long-term performance.

c. inferior long-term performance.

d. greater short-term volatility.

 

 

d. greater short-term volatility.

 

chapter reference 10E1

75

Vladimir is invested in a structured product which offers him 'soft protection'. He should be aware that:

Select one:

a. they are readily accessible for a small charge.

b. his capital is at risk if a stated threshold is breached.

c. counterparty risk does not apply to these products.

d. these types of product are very low risk.

b. his capital is at risk if a stated threshold is breached.

 

chapter reference 10E6

76

Penny invested in a maximum investment plan exactly six years ago. She can access the funds tax-free after what further minimum period of time?

Select one:

a. 2 years.

b. 4 years.

c. 18 months.

d. Immediately.

c. 18 months.

 

chapter reference 10G4