CACS Exam Questions: Quiz!

The responsibility of the trustee is to ensure that the fund manager manages the fund in accordance with the investment objective and restrictions stated in the trust deed. This means that the trustee is responsible for overseeing the actions of the fund manager and ensuring that they are aligned with the goals and limitations set out in the trust deed. The trustee acts as a fiduciary, safeguarding the interests of the unit holders and ensuring that the fund is managed in their best interests. This involves monitoring the fund's performance, reviewing investment decisions, and ensuring compliance with legal and regulatory requirements.

Henry bought 10,000 shares at $0.50 per share, which cost him a total of $5,000. He sold all his shares at $0.63 each, earning a total of $6,300. His return can be calculated by finding the percentage increase in his investment. The difference between the selling price and the buying price is $0.63 - $0.50 = $0.13 per share. The total difference is $0.13 * 10,000 = $1,300. His return is then calculated as ($1,300 / $5,000) * 100 = 26%. Therefore, his return is 26%.

By highlighting the potential of using financing for incremental funding, the Covered Persons can show the HNW individual how they can make a healthy spread over borrowing costs. This means that even after factoring in the borrowing costs, the client can still expect a positive return on investment. This explanation suggests that the Covered Persons are emphasizing the benefits of using financing to invest in products that have an optimistic outlook for returns.

A major step in asset allocation is assessing the investor's risk tolerance. This is important because it helps determine the appropriate mix of assets that align with the investor's comfort level for risk. By understanding the investor's risk tolerance, financial advisors can recommend a diversified portfolio that balances risk and return based on the individual's preferences and goals. This step is crucial in designing an investment strategy that suits the investor's needs and helps them achieve their financial objectives.

The main objective of REIT (Real Estate Investment Trust) investment is to enable investors to achieve returns from recurring rental income. REITs are investment vehicles that own, operate, or finance income-generating real estate properties. By investing in REITs, investors can earn regular income through rental payments from tenants. This recurring rental income is a key source of returns for REIT investors, along with the potential for capital appreciation of the underlying properties. REITs provide a way for investors to access the real estate market and benefit from the steady cash flow generated by rental properties.

Network topology refers to the arrangement of nodes and connections in a network. Common topologies include star, bus, ring, mesh, and tree, each with its own characteristics and applications. Spiral is not a recognized network topology.

The expense ratio refers to the total operating expenses charged to a fund, expressed as a percentage of the fund's average assets for the year. This means that it measures the proportion of a fund's assets that are used to cover operating expenses. A higher expense ratio indicates higher costs for investors, as a larger portion of their investment is being used to cover expenses rather than generating returns.

The standard deviation is a figure that measures the absolute volatility of the fund. This means that it provides a measure of how much the returns of the portfolio fluctuate around its average return. A higher standard deviation indicates a higher level of volatility and risk, while a lower standard deviation indicates a lower level of volatility and risk. Therefore, a standard deviation of 18% suggests that the client's portfolio has a moderate level of volatility.

As bonds approach maturity, the call premium, which is the amount paid to call or redeem the bond before its maturity date, tends to decrease. This is because as the bond gets closer to its maturity date, the issuer is less likely to call or redeem the bond early. Therefore, the premium paid for the option to call the bond decreases as the likelihood of the call decreases.

S&P Index futures are more likely to be cash-settled at maturity because they are based on the performance of a stock market index rather than a physical commodity like oil, gas, gold, or corn. Cash settlement means that the contract is settled in cash rather than through the physical delivery of the underlying asset. Since stock market indices do not have a physical form, it is more practical to settle S&P Index futures contracts in cash.

The correct answer is "Buyer, buy." In a call option, the buyer has the right, but not the obligation, to buy the underlying securities at the strike price. The buyer pays a premium for this right, and if the market price of the underlying securities is higher than the strike price, the buyer can exercise the option and buy the securities at a lower price, thus making a profit.

The forward points can be calculated by subtracting the spot rate from the forward rate. In this case, the spot rate is 1.0970/80 and the forward rate is 1.1150/70. By subtracting the spot rate from the forward rate, we get 0.0180/0.0190. Therefore, the forward points are 180/190.

The current yield is calculated by dividing the annual interest payment by the current market price of the bond. In this case, the annual interest payment is 5% of the par value, which is $1,000, so it is $50. The current market price of the bond is $950. Dividing $50 by $950 and multiplying by 100 gives a current yield of 5.26%.

To establish the size of the lending facility for an existing client, it is crucial to consider the amount and quality of the collateral the client is willing to place. Collateral serves as security for the loan and can help mitigate the lender's risk. By assessing the value and quality of the collateral, the lender can determine the maximum amount they are willing to lend. This information is essential in establishing the appropriate size of the lending facility for the client.

A range accrual note is suitable for a conservative investor who does not want to risk his principal investment because it offers a fixed interest rate within a specified range. This means that as long as the underlying asset stays within the predetermined range, the investor will receive the fixed interest rate. This provides a level of stability and protection for the principal investment, making it a suitable choice for conservative investors.

The required rate of return for a stock can be calculated using the Capital Asset Pricing Model (CAPM), which takes into account the risk-free rate, the stock's beta, and the expected market return. In this case, the risk-free rate is 3 percent and the expected market return is 8 percent. The beta for Stock A is given as 1.20. Using the CAPM formula, the required rate of return for Stock A can be calculated as follows: Required rate of return = Risk-free rate + (Beta * (Expected market return - Risk-free rate)) = 3% + (1.20 * (8% - 3%)) = 3% + (1.20 * 5%) = 3% + 6% = 9%. Therefore, the correct answer is 9.00%.

An increase in exports relative to imports is most likely to cause a nation's currency to appreciate on the foreign exchange market. When a country's exports exceed its imports, there is a higher demand for the nation's currency as foreign buyers need to exchange their currency for the country's currency to purchase its goods and services. This increased demand for the currency drives up its value, leading to an appreciation in the currency's exchange rate.

The percentage allocation to the 5 years US treasury on day 1 can be calculated by subtracting the cushioning value from 100% and then subtracting the crush size of the commodity fund. In this case, the calculation would be: 100% - 15% - 33.3% = 51.7%. However, since the options provided are in multiples of 25%, the closest option is 55%.

Oil futures can be a risky investment as they involve speculating on the future price of oil. If an investor does not want to top up any cash during the investment phase, it means they do not want to add more money to their investment if the value decreases. Oil futures can be highly volatile, and if the price of oil falls significantly, the investor may be required to add more cash to cover potential losses. Therefore, oil futures would likely be unsuitable for an investor who does not want to top up any cash during the investment phase.

If the reinvestment rate is the same as the bond's yield to maturity, it means that any interest or coupon payments received from the bond can be reinvested at the same rate as the yield to maturity. This ensures that the investor can earn the same return as the bond's yield to maturity. If the reinvestment rate is lower than the yield to maturity, the investor may not be able to earn the same return. Therefore, if the reinvestment rate is the same as the bond's yield to maturity, an investment in a coupon bond will provide the investor with a return equal to the bond's yield to maturity at the time of purchase.

The client can invest in a combination of ETFs listed on SGX that mimic foreign broad market indices and stocks listed on SGX with significant foreign exposure. This allows the client to diversify his portfolio internationally while still remaining in SGD as his investment currency of denomination. The ETFs provide exposure to foreign markets, while the stocks listed on SGX with foreign exposure allow the client to invest in companies that have operations or significant exposure to foreign markets. By combining these two investment options, the client can achieve a balanced and diversified international portfolio.

The correct answer is that the beta of an individual security is affected by a number of factors such as economic growth rate and change in inflation rate. This is because beta measures the sensitivity of a security's returns to the overall market returns. Therefore, any factors that affect the overall market, such as economic growth and inflation, will also impact the beta of an individual security.

In a "Worst-of" Equity Linked Note (ELN), the return is based on the performance of the worst-performing underlying asset. In this case, Company C's shares closed at 10% below its strike price, making it the worst-performing asset.

Since the ELN is cash-settled and not converted, the investor will receive the $1,000,000 cash at maturity. However, the investor initially invested $850,000 at a discounted price of 85, meaning they effectively paid $850,000 * 0.85 = $722,500 for the note.

Therefore, the investor's profit/loss is calculated as:

$1,000,000 (cash received) - $722,500 (initial investment) = $277,500

Since the question asks for the profit/loss in thousands, the answer is -$100,000.

The tracking error of a portfolio measures the percentage of return that is not attributable to movements in the benchmark index. This means that it quantifies the deviation between the portfolio's return and the benchmark return. A higher tracking error indicates a larger divergence from the benchmark, while a lower tracking error suggests a closer alignment with the benchmark.