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AF4036 Mock Exam Questions
AF4036 Mock Exam Questions
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AF4036 Mock Exam Questions and Practise
Flashcards
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Questions
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Answers
1
Which ONE of the following is a typical feature of a Treasury bill?
Par value less than the redeemable sum
Rate of interest of between 2% and 3% per annum
Term to maturity of between one and two years
Purchase price less than the nominal value
2
Which of the following products is NOT a type of investment?
Bonds
REITS
Unit trusts
Life insurance
3
What happens when a company makes a scrip issue?
New shares are offered to shareholders at the current market price
New shares are offered to shareholders at a premium to the market price
New shares are offered to shareholders at a discount to the market price
New shares are allotted to shareholders free of charge
4
The QAR is trading at 4.75 GBP/QAR and the LKR is trading at 50.81 QAR/ LKR. The GBP/ LKR exchange rate is:
241.35 GBP / LKR
55.56 GBP / LKR
0.093 GBP / LKR
46.06 GBP / LKR
5
If a company has announced a bonus issue on a 2:4 basis, what will existing shareholders receive?
Two shares for every four they own
One share for every four they own
One share for every two they own
Four shares for every one they own
6
A unit trust is which of the following?
An open-ended company
A closed-ended company
An open-ended trust
A closed-ended trust
7
If the net asset value of an investment trust is £1.95, and its shares are trading at £1.90, the fund is trading at:
The bid price
A premium
The offer price
A discount
8
How many business days does it take for a large foreign currency transaction to settle?
Zero, it settles instantly
Three business days
Two business days
One business day
9
A 2% 10-year bond that pays coupons twice a year is stripped. How many new instruments can be traded ?
11
10
21
20
10
As you increase the number of equities in your portfolio, the systematic risk will
Increase but at a slower rate
Decrease at a slower rate
Remain constant
Decrease sharply
11
Which ONE of the following is most likely to benefit from high levels inflation?
Borrowers
Pensioners
Exporters
Employees
12
...provides services such as underwriting and corporate reorganisation to institutional clients
Insurance Company
Building Society
Investment Bank
Retail/Commercial Bank
13
Which of the following is NOT a money market product?
Bankers Acceptance
Repurchase Agreement
Corporate Bond
Certificate for deposit
14
An increase in the US inflation rate:
Always reduces the global cost of livings
Reduces the purchasing power of the US dollar
Reduces the purchasing power of the UK pound
Reduces the price of products in the UK and US
15
The defining characteristic of eurobonds is that they:
Always deduct tax on interest payments to investors
Are issued by European governments
Denominated in a currency different from the issuing financial centre
Always provide underlying collateral to the bondholder
16
Which of the following is NOT the main factors of any investment?
Utility
Risk
Return
Time
17
What is the CAPM formula?
ke = rf + b (rm – rf)
ke = rf - b (rm – rf)
ke = rf + b ( rf – rm)
ke = rf + b (rm + rf)
18
Which financial institution type is a non-deposit taking institution?
Credit Union
Unit and Investment Trusts
Retail Bank
Building Society
19
Which of the following is NOT issued at a discount?
Commercial Paper
Zero Coupon Bond
T-Bill
Certificate of deposit
20
Which ONE of the following is a feature of Treasury bills?
They finance long-term government borrowing
They pay quarterly interest
They are priced at a discount to par value
They are issued on a monthly basis
21
Which of the following is an advantage of floating FX rates
Lack of discipline in economic management
Lower foreign exchange reserves
Uncertainty in the value of the currency
Speculation
22
What are non-investment grade bonds?
Lower than Moody's Caa or C with S&P or Fitch
Lower than Moody's Baa, or BBB with S&P or Fitch
Bonds that are securitised
Bonds suitable for trading and speculation, rather than investment
23
Which of the following is NOT a type of Market Efficiency?
Strong Form
Weak Form
Medium Form
Semi-Strong Form
24
If a relationship between 2 currency pairs is considered to be totally random, they are deemed to have a correlation of
-1
0
+1
+0.5
25
What is the name of the main London Stock Exchange (LSE) dealing system, which is used to deal in shares?
SEAQ
CREST
SETSqx
SETS
26
What is the main purpose of the financial system?
To create wealth
Allocate resources efficiently
To manage money supply
To promote financial inclusion
27
Who is the legal owner of the underlying assets in a unit trust?
The manager
The trustee
The depository
The unit holder
28
Which of the following is a disadvantage of Fixed/Pegged FX Rates?
Reduces risk in International Trade
Fixed rates should eliminate destabilising speculation
Introduces discipline in economic management
Large holdings of foreign exchange reserves required
29
When prices are falling, and the spread between the bid and offer price is widening, what kind of risk may materialise?
Credit risk
Liquidity risk
Issuer risk
Market risk
30
Which of the following is not in the Impossible trinity (trilemma)?
Tariff free trade
Free capital movement
A fixed foreign exchange rate
Independent monetary policy
31
What is a 'best-in-class' approach?
Excludes companies producing 'undesirable' products
Selects companies that are leaders in implementing ESG
Identifies long-term themes and trends that are transforming the world
Supports firms providing positive solutions to the world's challenges
32
Which of the following securities is issued at a discount and redeemed at par value?
Repurchase agreements
Commercial papers
Bonds
Certificate of deposit
33
What is the Nominal Rate of Interest Formula
i = r - Pe - l + σ
i = r + Pe + σ
i = r + l + σ
i = r + Pe + l + σ
34
If interest rates increase, in the short term what would you expect that counties currency do?
Get Weaker
Get Stronger
No reaction
No relationship
35
If you are in the UK holding pounds, which of the following is a Direct quotation to dollars?
£1 = $2
£0.75 = €1
$1 = €1.50
£0.50 = $1
36
What is the term for the process of assessing & disclosing the ESG risks and opportunities associated with an investment
Ethical Disclosure
Sustainable Reporting
Impact Investing
Ethical Investing
37
...allows individuals to invest in a diversified portfolio of assets to reduce risk
London Stock Exchange
Credit Union
Unit/Investment Trust
Brokers
38
Which of the following is NOT a main function of Central Banks?
Issue Coins and Note
Monetary policy
Fiscal policy
Banker to the Government
39
When the value of one currency rises relative to another currency, the exchange rate for the first currency has
Appreciated
Demanded
Depreciated
Revalued
40
Which of the following is NOT true regarding loadable funds theory?
assumes the market economy is stable
is a long-run theory
Concerns nominal interest rate
concerns supply from savers and demand from borrowers
