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RO2 keys > Top-up > Flashcards

Top-up Flashcards

1
Q

Investment limits for

EIS
SEED
VCT

A

EIS - 1m
SEED - £100k
VCT - £200k

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2
Q

Income tax relief and tax relief clawback length

A

EIS - 30% - 3yrs
SEED - 50% - 5yrs
VCT - 30% - 3yrs

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3
Q

Tax free dividends for

EIS
SEED
VCT

A

Yes for all but limit of £200k for SEED

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4
Q

Tax free capital gains for EIS, SEED, VCT?

A

EIS - yes after 3yrs
SEED - yes after 3yrs
VCT - yes

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5
Q

Tax relief for losses and IHT business relief for EIS, SEED, VCT

A

EIS - yes
SEED - yes
VCT - no

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6
Q

Top down portfolio construction

A
  1. Asset allocation
  2. Geographical spread
  3. Sector weighting
  4. Choose stocks and preferences
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7
Q

When should an investment be replaced?

A

Only when genuine underperformance is shown or circumstances changed making them unsuitable

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8
Q

Discretionary management service

A

Gives advisor authority to carry out trades on your behalf within your risk profile

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9
Q

Advisory management service

A

Must get clients permission for each trade

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10
Q

Capital preservation investment objective

A

Risk averse and wants an investment equal to or above inflation

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11
Q

Capital appreciation investment objective

A

Growth is the priority

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12
Q

Total return investment objective

A

Long term aspiration for growth from gains and income

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13
Q

What is stochastic model sensitive to?

A

Small changes to input data

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14
Q

Within a split capital investment trust that has zero dividend preference shares. This may contain what?

A

Negative hurdle rate

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15
Q

How do investment platforms help with tax?

A

They produce annual consolidated statements each year

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16
Q

Both strategic and tactical asset allocation are based upon what?

A

Capital preservation

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17
Q

Man advantage to a client of using a trading platform?

A

Simplified admin.

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18
Q

High risk has what relationship with volatility

A

High volatility and positive correlation

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19
Q

Correlation co-efficient being positive or negative has what effect on volatility

A

Positive - reduced volatility

Negative - increased volatility

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20
Q

Min. Guaranteed earnings in a cash ISA?

A

95% within a 5yr period

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21
Q

Money market funds and short term money market funds weighted average maturity and weighted average life

A

Money market funds weighted average maturity of 6 months and weighted average life 12 months

Short term money market funds weighted average maturity of 60 days and weighted average life of 120 days

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22
Q

Bond pricing. Payment will be quoted at the mid price but what will buyers and sellers pay/receive

A

Sellers receive less than mid price

Buyers pay more than mid price

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23
Q

A 10yr GILT could be stripped into how many payments and why?

A

21 because of 20half yearly interest payments then payment on redemption

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24
Q

FTB SDLT max. allowance

A

£425k

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25
Q

SDLT on rent

A

1% on rent excess of NPV exceeding £125k for resi.

1% on rent excess of NPV exceeding £150k for commercial upto £5m then 2% thereafter

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26
Q

Second homes or BTL purchases are subject to X% surcharge for properties purchased at or above £X

A

3% for properties purchased at £40k or more. So 3% on top of all bands including 0%

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27
Q

What is an added benefit if you have it within a commercial property?

A

A tenant

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28
Q

Monetary and fiscal policy for inflation

A

Monetary - supply of money supply and interest rates

Fiscal - taxation and gov. Spending

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29
Q

Tightening or easing monetary policy means what and what effect?

A

Tightening - increasing rates - reduced general wealth and fall in asset prices

Easing - rise in general wealth and increase in asset prices

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30
Q

Quantitative easing

A

Releasing money so buys back some GILT’s so releases money to public and encourages public spending

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31
Q

A countries current and capital account

A

Current - goods and services, interest, dividends and rent

Capital - investments and loans

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32
Q

What type of risk cannot be removed by diversification?

A

Systematic

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33
Q

Efficient frontier

A

Helps an investor find out if they’re exposing themselves to unnecessary risk

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34
Q

CAPM is based upon what theory?

A

Modern portfolio theory

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35
Q

CAPM is for what

A

Investor would want to be compensated for amount of risk taken over risk free return

36
Q

Tendencies of people based upon prospect theory

A

People hold onto losses hoping they’ll rise again

Over confidence for own skills and underestimate likelihood of bad outcomes

37
Q

Stochastic modelling for risk

A

Plots out range of possible returns using asset allocation based upon risk profile

38
Q

Positive screening
Negative screening
Neutral approach

A

Pos. - seeks out firms making an effort to be as ethical as possible but has a tolerance for unethical practices

Neg. - avoids unethical practices

Neut. - choosing socially responsible firms

39
Q

Investment objectives for a client are set out in what?

A

Investment policy statement

40
Q

Stratified sampling for index tracker funds

A

Hold sample of index funds but not full replication

41
Q

Synthetic fund for index tracker funds

A

Computerised model buying and selling stocks within the index

42
Q

What states an investment trusts restrictions?

A

Articles of association

43
Q

Conventional and Split capital investment trust

A

Conventional - one main class of shares

Split capital - multiple classes of shares so have different priorities on wind-up

44
Q

Hurdle rate

A

Rate which must grow at to repay each class of shares at wind-up

45
Q

Rate of tax for dividends after tax exemption of £X?

A

Tax exemption of £2k

Basic rate - 8.75%
Higher rate - 33.75%
Additional rate - 39.35%

46
Q

Costs higher or lower for an investment trust compared to an OEIC or Unit trust?

A

Lower

47
Q

Non profit and with profit policy

A

Non profit - pays a fixed sum assured on death providing premiums are paid

With profit - sum assured increases each year as receives bonuses

48
Q

Traditional with profits
Low cost with profits
Low start, low cost with profits

A

Traditional - receive bonuses on top of sum assured

Low costs - has a lower investment sum assured than death benefit. Fixed death benefit with a DTA and investment sum assured rises with bonuses paid along with DTA aims to have X amount upon death when combined

Low start, low cost with profits - Low costs - same as low cost but premiums start low and increase over time

49
Q

Unit linked bonds

A

Measured by number of units held

No maturity date so has a whole of life policy

Not tradeable an must be sold back to life company

50
Q

Are unit linked bonds tradable?

A

No. Must be sold back to life company

51
Q

Other than guaranteed return bonds do bonds have a term?

A

Usually no and can be surrendered at any time

52
Q

Max. amount allowed to withdraw from a bond

A

5% of original investment, also cumulative

53
Q

High income bond

A

Based on packages of derivatives but higher risk as can return less than original investment

54
Q

Distribution bond

A

Split income received as this is paid to the investor leaving capital intact

Must have equity content of 60% and yield of atleast 110%

55
Q

Guaranteed equity and protected bonds

A

Guaranteed return on capital of 100% for equity and 90% for protected bonds

Guarantee achieved with zero coupon bond

56
Q

Segmentation

A

Each class of asset is identical in value and asset composition

57
Q

Tracking error from fund to index is caused by what?

A

Charges

58
Q

Exchange traded product

A

Aims to mirror performance of an index

59
Q

Property unit trust

Property investment trust

A

UT - cannot borrow and must match NAV

IT - can borrow and dare price is independent to NAV

60
Q

How long does a spouse or civil partner have to use allowance of deceased partner?

A

3yrs from date of death

61
Q

HTB ISA

A

25% bonus paid

£12k max. investment

Max. initial contribution of £1k

Max. monthly contribution of £200

62
Q

Put and call option

A

Put - option buyer right to sell
Call - option buyer right to buy

63
Q

Structured product

A

If investment drops then will return money. If rises will receive growth and if rise a lot then will split gains with product runners

64
Q

Zero coupon bond

A

gives a guarantee of return with no income

65
Q

Non correlation on a table

A

Closest to 0

66
Q

If inflation rises what will happen to the price of GILT’s?

A

Drop in price

67
Q

What plays a major factor in sharpe ratio and CAPM?

A

Sharpe - standard deviation

CAPM - Beta (benchmark)

68
Q

Bond taxation rules

A

5% cumulative withdrawal limit then income tax paid at 20% less than their bracket

69
Q

Unit trust, OEIC & investment trust income tax and CGT

A

Usual dividend rules, CGT and income tax after PSA

70
Q

Offshore reporting and non-reporting fund tax rules

A

Offshore reporting - usual rules apply but pay CGT not income tax

Non-reporting fund - Pay CGT but at income tax rates with no exemptions allowed

71
Q

Bond taxation calculation help

A

Can withdraw cumulative 5%
Then charged income tax but -20% and consider all costs and anything already taxed

72
Q

SDLT for non UK residents

A

2% surcharge on purchases over £40k

73
Q

Pg. 33, 90 & 53

A
74
Q

AIM benefit when holding shares

A

Exempt from IHT after 2yrs of holding

75
Q

Clean price and dirty price

A

Clean - interest not included
Dirty - interest not included for buyer

76
Q

Alpha

A

Shows fund manager ability to pick good investments

77
Q

FTSE AIM has what within it?

A

FTSE 5, 100, all-share and specialist stocks

78
Q

What is FTSE AIM?

A

Peivides primary and secondary market for smaller or newer companies

79
Q

2 Benefits to FTSE AIM

A

Less costly and less rules

80
Q

Effective annual rate when relevant to compound interest

A

Nominal rate compounded (the actual rate of interest from the beginning to now)

81
Q

Nominal returns

Real returns

A

Nominal - ignores inflation

Real - accounts for inflation

82
Q

In a deflationary environment what will happen to the value of real value of money?

A

Increase over time

83
Q

Fettered and unfettered funds

A

Fettered - funds from host provider only

unfettered - funds from other companies can be used

84
Q

Financial investments are designed to stimulate what?

A

Demand

85
Q

Non resi. property SDLT

A

extra 2% bracket between £150k - £250k

RO2 keys (13 decks)

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