M9A Structured Questions

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Questions and Answers
  • 1. 

    Structured products are ________ of the issuer

    • A.

      Unsecured debt securities

    • B.

      Financial derivativies

    • C.

      Fixed income instruments

    • D.

      Equity - like products

    Correct Answer
    A. Unsecured debt securities
    Explanation
    Structured products are categorized as unsecured debt securities because they do not have any collateral or asset backing. These products are issued by financial institutions or corporations and are essentially a type of bond. Unlike secured debt securities, which have specific assets pledged as collateral, unsecured debt securities rely solely on the creditworthiness of the issuer. Therefore, if the issuer defaults, the investors may not have any recourse to recover their investment.

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  • 2. 

    A structured product is a combination of

    • A.

      Bond and a financial derivative

    • B.

      Bond and an option

    • C.

      Note and option

    • D.

      All of the above

    Correct Answer
    D. All of the above
    Explanation
    A structured product is a financial instrument that combines different components, such as a bond and a financial derivative, a bond and an option, or a note and an option. These combinations allow investors to customize their investment strategy and potentially achieve specific risk and return objectives. Therefore, the correct answer is "all of the above" as all the mentioned combinations can be considered as examples of structured products.

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  • 3. 

    In order to mitigate the credit risk of the fixed income instrument used in structured products, the issuer of the structured product may choose to

    • A.

      Provid a guarantee by itself

    • B.

      Provid a guarantee by third party

    • C.

      Provide a guarantee by itself or a third party

    • D.

      Use a fixed income issuer with better credit rating than itself

    Correct Answer
    C. Provide a guarantee by itself or a third party
    Explanation
    To mitigate the credit risk of the fixed income instrument used in structured products, the issuer of the structured product may choose to provide a guarantee by itself or a third party. This means that either the issuer of the structured product will personally guarantee the creditworthiness of the instrument, or they will seek a third party to provide the guarantee. This helps to reassure investors that even if the issuer's credit rating is not strong, they have taken steps to ensure the safety of the investment.

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  • 4. 

    One of the few structured products that may have no expiry date is

    • A.

      Tracker certificate

    • B.

      Bonus certificate

    • C.

      Discount certificate

    • D.

      Airbag certificate

    Correct Answer
    A. Tracker certificate
    Explanation
    A tracker certificate is a type of structured product that is designed to track the performance of an underlying asset, such as a stock or an index. Unlike other structured products like bonus, discount, or airbag certificates, tracker certificates do not have an expiry date. This means that investors can hold onto them for as long as they want, allowing them to potentially benefit from the long-term performance of the underlying asset.

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  • 5. 

    A __________ structured product means that it is linked to a certain basket of market indices.

    • A.

      Interest rate-linked

    • B.

      Equity-linked

    • C.

      Credit-linked

    • D.

      Market-linked

    Correct Answer
    D. Market-linked
    Explanation
    A market-linked structured product refers to a financial product that is tied to the performance of a specific basket of market indices. This means that the returns or payouts of the product will be determined by the movement of these indices. It provides investors with exposure to a diversified portfolio of assets and allows them to participate in the potential gains of the market.

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  • 6. 

    A _______ product works like a term insurance plus a structured fund, where the term insurance provides insurance coverage and the other potion provides investment returns.

    • A.

      A structured note

    • B.

      A structured fund

    • C.

      A structured ILP

    • D.

      A structured deposit

    Correct Answer
    C. A structured ILP
    Explanation
    A structured ILP (Investment-Linked Policy) is a product that combines the benefits of term insurance and a structured fund. The term insurance component provides coverage for the insured individual, while the structured fund portion offers investment returns. This means that the policyholder not only receives insurance protection but also has the opportunity to grow their investment through the structured fund.

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  • 7. 

    ________ are also known as portfolio of investments with an insurance element

    • A.

      Mutual funds

    • B.

      Structured funds

    • C.

      Bond funds

    • D.

      Portfolio funds

    Correct Answer
    D. Portfolio funds
    Explanation
    Portfolio funds are a type of investment that combines various assets, such as stocks, bonds, and other securities, into a single portfolio. These funds are designed to provide investors with a diversified investment option that includes an insurance element. The insurance element typically refers to the inclusion of certain risk management strategies, such as hedging or insurance policies, within the fund. This helps to protect the investor's portfolio against potential losses and provides a level of security. Therefore, portfolio funds are also known as a portfolio of investments with an insurance element.

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  • 8. 

    A structured ILP with valuation done ________ will pose a higher liquidity risk for investors

    • A.

      Daily

    • B.

      Every 2 weeks

    • C.

      Monthly

    • D.

      Quarterly

    Correct Answer
    D. Quarterly
    Explanation
    A structured ILP with valuation done quarterly will pose a higher liquidity risk for investors because it means that the valuation of the investment is only done every three months. This infrequent valuation can lead to a lack of visibility and transparency in the investment's performance, making it more difficult for investors to assess its current value and potentially limiting their ability to sell or exit the investment quickly if needed. This increases the liquidity risk as investors may have to wait longer to liquidate their investment or may face challenges in finding buyers at a fair price.

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  • 9. 

    The fund seeks daily investments results, before fees and expenses that correspond to twice the inverse of the daily performance of the market benchmark index. This best describles an

    • A.

      ILP providing regular payments

    • B.

      ILP linked to index returns

    • C.

      ILP with capital appreciation potential

    • D.

      ILP with term insurance component

    Correct Answer
    B. ILP linked to index returns
    Explanation
    The given statement indicates that the fund aims to achieve daily investment results that are twice the inverse of the daily performance of the market benchmark index. This suggests that the fund is designed to be linked to the returns of the index, meaning that its performance will move in the opposite direction of the index. Therefore, the correct answer is ILP linked to index returns.

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  • 10. 

    Which of the following is not a drawback of investing in structured ILP?

    • A.

      A structured ILP has several layers of expenses like front -end charge, bid offer spread and cost of death benefit

    • B.

      Extra layer of fees and expenses are incurred when insurer choose to invest in specially investment areas managed by external unit trusts

    • C.

      It takes time for structured ILPs investment performance to make up for expenses charged

    • D.

      Diversification of the fund minimizes the opportunity cost

    Correct Answer
    D. Diversification of the fund minimizes the opportunity cost
    Explanation
    Diversification of the fund minimizes the opportunity cost. This means that by investing in a structured ILP, the investor can spread their investments across different assets and sectors, reducing the risk of loss. This diversification helps to minimize the opportunity cost, which is the potential gain that is lost when choosing one investment option over another. By diversifying the fund, the investor can potentially earn higher returns while still minimizing risk, making it not a drawback of investing in structured ILPs.

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  • 11. 

    Which of the following statements is incorrect?

    • A.

      Returns for structured deposits are generally lower due to cost of providing return of capital

    • B.

      Design for structured funds are affected by investment restrictions

    • C.

      Investors of structured notes are secured creditors of the issuer in the event of liquidation

    • D.

      There is a wide and ready distribution network for structured ILPs

    Correct Answer
    C. Investors of structured notes are secured creditors of the issuer in the event of liquidation
    Explanation
    The statement "investors of structured notes are secured creditors of the issuer in the event of liquidation" is incorrect. In the event of liquidation, investors of structured notes are considered unsecured creditors, meaning they have a lower priority in receiving their investment back compared to secured creditors.

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  • 12. 

    Which of the following investors is not suitable to invest in structured ILPs?

    • A.

      Jane has a medium to high tolerance to loss of capital and aims for capital appreciation.

    • B.

      Tommy is interested to invest in hedge funds although he has little knowledge to invest in such niche area on his own

    • C.

      Mary does not fully understand the risk and return trade of the product

    • D.

      James buys a structured vILPv following the adfvice from his financail adviser.

    Correct Answer
    C. Mary does not fully understand the risk and return trade of the product
    Explanation
    Mary does not fully understand the risk and return trade of the product, which makes her unsuitable to invest in structured ILPs. Understanding the risk and return trade is crucial when investing in any financial product, as it helps individuals make informed decisions and manage their investments effectively. Without this understanding, Mary may not be able to evaluate the potential risks and rewards associated with structured ILPs, leading to potential financial losses.

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  • 13. 

    Which of the following is not considered a reason for investing in structured products?

    • A.

      It is used as part of the asset allocation process to reduce risk exposure of a portfolio

    • B.

      Structured products may suit investors particular investment needs.

    • C.

      Structured products are used as an alternative to a direct investment in traditional asset classes.

    • D.

      Structured products offer no access to exotic asset classes.

    Correct Answer
    D. Structured products offer no access to exotic asset classes.
    Explanation
    The given answer states that structured products offer no access to exotic asset classes. This implies that structured products do not provide investors with the opportunity to invest in unique or unconventional assets. However, the other options mentioned in the question highlight reasons for investing in structured products such as reducing risk exposure, meeting specific investment needs, and serving as an alternative to traditional asset classes.

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  • 14. 

    The defination of structured note Is

    • A.

      An intermediate term debt security whose interest payments are determined by a formula tied to a movement of a stock, commodity or currency.

    • B.

      A structured product that is linked to certain market indices

    • C.

      An investment instrument that combines the characteristic of a zero-coupon bond with a return component

    • D.

      Structured as a security with an embedded credit default swap

    Correct Answer
    A. An intermediate term debt security whose interest payments are determined by a formula tied to a movement of a stock, commodity or currency.
    Explanation
    The correct answer is "an intermediate term debt security whose interest payments are determined by a formula tied to a movement of a stock, commodity or currency." This answer accurately describes the definition of a structured note, which is a type of debt security. The interest payments on a structured note are not fixed but instead depend on the performance of an underlying asset, such as a stock, commodity, or currency. This formula-based structure allows investors to potentially benefit from the movements of these assets.

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  • 15. 

    Structured products are dependent on their underlying assets, which are subjected to ________ risks.

    • A.

      Counterparty risk

    • B.

      Liquidity risk

    • C.

      Market risk

    • D.

      All of the above

    Correct Answer
    D. All of the above
    Explanation
    Structured products are financial instruments that are created by combining multiple financial assets, such as stocks, bonds, and derivatives. These products derive their value from the performance of these underlying assets. Therefore, they are exposed to various risks associated with these assets. Counterparty risk refers to the risk of the other party involved in the transaction defaulting. Liquidity risk refers to the risk of not being able to buy or sell the structured product quickly at a fair price. Market risk refers to the risk of the value of the underlying assets changing due to market conditions. Hence, all of these risks are applicable to structured products.

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  • 16. 

    Why should a person choose to invest in structured products?

    • A.

      Structured products can be issued quickly that enable investor to swiftly respond to market trends

    • B.

      Structured products can be used as part of the asset allocation process to reduce price volatitly of a portfolio

    • C.

      Structured products are extremely versatile instruments to deliver specific risk/return profile to suit the investors needs

    • D.

      Structured products can replicate the performance of market that is closed to foreign investors

    Correct Answer
    B. Structured products can be used as part of the asset allocation process to reduce price volatitly of a portfolio
    Explanation
    Structured products can be used as part of the asset allocation process to reduce price volatility of a portfolio. This means that by including structured products in their investment strategy, investors can potentially minimize the impact of market fluctuations on their overall portfolio value. This can be particularly beneficial for individuals who are looking for more stability and lower risk in their investments. Additionally, structured products offer a range of options and flexibility to cater to the specific risk and return preferences of investors, making them a versatile investment instrument.

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  • 17. 

    Insurers who market structured products are subject to the following regulatory framework except the

    • A.

      Futures act

    • B.

      Insurance act

    • C.

      Financial advisory act

    • D.

      CIS code

    Correct Answer
    B. Insurance act
    Explanation
    Insurers who market structured products are subject to various regulatory frameworks to ensure compliance and protect consumers. The futures act, financial advisory act, and CIS code are all relevant regulations that insurers must adhere to. However, the insurance act does not directly apply to structured products. This act primarily governs the general insurance industry, including policies related to property, health, and motor insurance. Therefore, insurers marketing structured products are not subject to the insurance act.

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  • 18. 

    Below are the deails of a new structured investment linked life insurance policy being introduced: 1) insurer and guarantor = Company XYZ 2) Credit rating = C 3) Currency Used = SGD 4) Tenure = 2 years 4) Maturity = 100 % of initial amount of single premiun 5) Payout = 7 % of initial amount of single premiun per annum. What risk does an investor face when investing in this ILP?

    • A.

      Currency risk

    • B.

      Credit risk

    • C.

      Liquidity risk

    • D.

      Market risk

    Correct Answer
    D. Market risk
    Explanation
    An investor faces market risk when investing in this ILP. Market risk refers to the potential for the value of investments to fluctuate due to factors such as economic conditions, market volatility, and changes in interest rates. In this case, the investor's payout is linked to the performance of the market, as it is based on a percentage of the initial amount of the single premium. Therefore, if the market performs poorly, the investor may receive a lower payout or even experience a loss.

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  • 19. 

    Structured products are for investors who:

    • A.

      Have knowledge of investment

    • B.

      Want a customized product to suit their specific risk return profile

    • C.

      Want a share of the issuers profit

    • D.

      Have a demand for high market volatitily

    Correct Answer
    B. Want a customized product to suit their specific risk return profile
    Explanation
    Structured products are designed to meet the specific risk-return preferences of investors. These products are customized to align with the individual investor's desired level of risk and potential return. By offering tailored solutions, structured products allow investors to have more control over their investment strategy and to align it with their specific financial goals. This customization feature makes structured products attractive to investors who want a product that suits their specific risk-return profile.

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  • 20. 

    How often does the MAS 307 require the structured investment- linked policy sub-funds to be valued?

    • A.

      Daily

    • B.

      Weekly

    • C.

      Monthly

    • D.

      Yearly

    Correct Answer
    C. Monthly
    Explanation
    The MAS 307 requires the structured investment-linked policy sub-funds to be valued on a monthly basis. This means that the valuation of these sub-funds is conducted once every month.

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  • 21. 

    Which of the statements about structured deposits is/are true?

    • A.

      They are issued by banks

    • B.

      They are a form of wrapper

    • C.

      They offer loer returns than most other structured products

    • D.

      All of the above

    Correct Answer
    D. All of the above
    Explanation
    Structured deposits are financial products issued by banks. They can be considered a form of wrapper, as they package together different underlying assets such as bonds, equities, or derivatives. In terms of returns, structured deposits typically offer lower returns compared to other structured products, as they focus on providing capital protection and stability. Therefore, all of the statements mentioned in the question are true.

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  • 22. 

    In order to inform the client of the inherent risk and key features of the structured investments linked life policy sub funds, the adviser should provide;

    • A.

      Product summary sheet

    • B.

      Benefit illustration

    • C.

      Product highlight sheet

    • D.

      Fund report

    Correct Answer
    C. Product highlight sheet
    Explanation
    The product highlight sheet would be the most suitable option to inform the client about the inherent risk and key features of the structured investments linked life policy sub funds. This sheet provides a concise summary of the product, highlighting its key features, benefits, and risks. It is designed to provide the client with a quick overview of the product, allowing them to make an informed decision. The other options, such as the product summary sheet, benefit illustration, and fund report, may provide additional information but may not be as focused on highlighting the key features and risks of the product.

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  • 23. 

    Complete the sentence. Structured deposits :

    • A.

      Are capable of generating high returns

    • B.

      Are a form of investment products

    • C.

      Are covered by deposit insurance scheme

    • D.

      Generally have their capital guaranteed by an insurance company.

    Correct Answer
    B. Are a form of investment products
    Explanation
    Structured deposits are a form of investment products. This means that they are financial instruments that individuals can invest in to potentially earn returns. Unlike traditional deposits, structured deposits often have more complex features and may offer higher potential returns, but they also come with higher risks. Therefore, individuals need to carefully consider their investment goals and risk tolerance before investing in structured deposits.

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  • 24. 

    Compared to an ILP, a structured ILP

    • A.

      Has a more complex structure

    • B.

      Has a higher insurance element

    • C.

      Is not as heavily regulated

    • D.

      Is less risky

    Correct Answer
    A. Has a more complex structure
    Explanation
    A structured ILP has a more complex structure compared to a regular ILP. This means that it may have additional features or components that make it more intricate and sophisticated. It does not necessarily mean that it has a higher insurance element, is less regulated, or is less risky. The complexity of its structure is the main distinguishing factor between the two.

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  • 25. 

    The advantages of investing in a structured ILP may include the following, EXCEPT

    • A.

      Portfolio diversification

    • B.

      Access to bulky investments

    • C.

      Economies of scale

    • D.

      Low fees and charges

    Correct Answer
    D. Low fees and charges
    Explanation
    Investing in a structured ILP offers several advantages, such as portfolio diversification, access to bulky investments, and economies of scale. However, the exception is low fees and charges. This means that the structured ILP may have higher fees and charges compared to other investment options.

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  • 26. 

    Mary has invested in a structured ILP that invests in a structured fund where 95% of the assets are invested in 4 properties worth $10 million. She should be MOST concerned with _________ if she wants to be able to withdraw cash at any time,

    • A.

      Market risk

    • B.

      Counter party risk

    • C.

      Interest rate risk

    • D.

      Liquidity risk

    Correct Answer
    D. Liquidity risk
    Explanation
    Mary should be most concerned with liquidity risk if she wants to be able to withdraw cash at any time. Liquidity risk refers to the possibility that an investment cannot be easily sold or converted into cash without incurring a significant loss in value. In this case, if Mary wants to withdraw cash from her investment in the structured ILP, she may face difficulty if the structured fund lacks liquidity. Since 95% of the assets are invested in 4 properties, it is possible that these properties may not be easily sold or converted into cash, leading to liquidity issues for Mary.

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  • 27. 

    In a structured product, derivatives ________.

    • A.

      Invest in fixed income

    • B.

      Provide upside potential

    • C.

      Provide the return of principal

    • D.

      All of the above

    Correct Answer
    B. Provide upside potential
    Explanation
    In a structured product, derivatives provide upside potential. This means that the derivatives within the structured product have the potential to generate positive returns for investors. They are designed to provide exposure to the performance of an underlying asset or index, allowing investors to benefit from any increase in value. This upside potential is one of the key features of structured products and can make them attractive to investors seeking higher returns.

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  • 28. 

    Structured ILPs can only be issued by ________.

    • A.

      Insurance companies

    • B.

      Banks

    • C.

      Fund managers

    • D.

      Brokerages

    Correct Answer
    A. Insurance companies
    Explanation
    Structured ILPs, or Structured Investment-Linked Policies, are investment products offered by insurance companies. These products combine insurance coverage with investment opportunities, allowing policyholders to invest in a range of assets such as stocks, bonds, and mutual funds. Insurance companies are the only entities authorized to issue these policies as they have the necessary expertise and regulatory approval to offer both insurance and investment services. Banks, fund managers, and brokerages may offer other investment products, but they cannot issue structured ILPs.

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  • 29. 

    A structured ILP with valuation done _________ will pose MORE liquidity risk for investors.

    • A.

      Daily

    • B.

      Every 2 weeks

    • C.

      Monthly

    • D.

      Quarterly

    Correct Answer
    D. Quarterly
    Explanation
    A structured ILP with valuation done quarterly will pose more liquidity risk for investors because the longer the valuation period, the less frequently investors can access their funds. With quarterly valuations, investors will have to wait longer to receive updates on the value of their investments and will have limited opportunities to make changes or withdraw their funds. This lack of liquidity can be risky for investors who may need to access their funds quickly in case of emergencies or changing financial circumstances.

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  • 30. 

    Which one of the following is LEAST likely to be an investor�s reason for investing in structured products?

    • A.

      They allow investors to have a tailor-made product

    • B.

      They offer investors access to exotic asset classes

    • C.

      They allow investors to have direct access to restricted markets

    • D.

      They provide investors with a financial product that is easy to understand

    Correct Answer
    D. They provide investors with a financial product that is easy to understand
  • 31. 

    Which of the following investment assets are the usual make-up of structured products?

    • A.

      Equities and bonds

    • B.

      Derivatives

    • C.

      Bonds and notes

    • D.

      Bonds and options

    Correct Answer
    D. Bonds and options
    Explanation
    Structured products are financial instruments created by combining different investment assets to offer customized investment opportunities to investors. Bonds and options are commonly used to create structured products. Bonds provide a fixed income stream and options provide the opportunity to buy or sell an underlying asset at a predetermined price. This combination allows investors to have exposure to both fixed income and potential capital gains, making it a usual make-up of structured products. Equities, derivatives, and notes are not mentioned as part of the usual make-up of structured products.

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  • 32. 

    An investor placed S$40,000 into a structured Investment-linked Life Insurance policy with a sum assured of S$50,000. If an early redemption event is triggered, the investor will MOST likely receive the:

    • A.

      Initial capital amount with the accrued payouts

    • B.

      Amount of total sum assured with accrued payouts

    • C.

      Amount based on the total sum assured plus initial capital amount

    • D.

      Accrued payouts but the initial capital amount is kept by the insurance company

    Correct Answer
    A. Initial capital amount with the accrued payouts
    Explanation
    If an early redemption event is triggered, the investor will most likely receive the initial capital amount with the accrued payouts. This means that the investor will receive the original investment of S$40,000 along with any additional payouts that have accumulated over time. The sum assured of S$50,000 is not relevant in this scenario, as it is the guaranteed amount that would be paid out upon the death or maturity of the policy. Since an early redemption event is triggered, the investor would not receive the full sum assured amount.

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  • 33. 

    Which one of the following is NOT a drawback of investing in structured Investment-linked Life Insurance policies (ILPs)?

    • A.

      Ability to diversify portfolio

    • B.

      Exposure to counterparty risk

    • C.

      Several layers of fees and charges

    • D.

      Loss of investment control by the investor

    Correct Answer
    A. Ability to diversify portfolio
    Explanation
    Investing in structured Investment-linked Life Insurance policies (ILPs) has several drawbacks, including exposure to counterparty risk, several layers of fees and charges, and loss of investment control by the investor. However, the ability to diversify the portfolio is not a drawback of investing in ILPs. Diversification is a strategy that helps to reduce risk by spreading investments across different assets. Therefore, having the ability to diversify the portfolio is actually a benefit of investing in ILPs, rather than a drawback.

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  • 34. 

    Which one of the following statements about structured Investment-linked Life Insurance policies (ILPs) is FALSE?

    • A.

      They offer death benefits on top of investment gains

    • B.

      They are offered as a short-term investment instrument

    • C.

      They typically have higher fees than a normal unit trust

    • D.

      They typically suffer a capital loss if an early redemption is carried out

    Correct Answer
    B. They are offered as a short-term investment instrument
    Explanation
    ILPs are not typically offered as a short-term investment instrument. They are long-term insurance policies that combine investment and life insurance. They offer death benefits in addition to investment gains, and they often have higher fees compared to normal unit trusts. Additionally, if an early redemption is carried out, ILPs may suffer a capital loss.

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  • 35. 

    A structured product manager purchased a zero-coupon bond at $20 for every $100 invested in the structured product. The structured product aims to provide a return of the capital portion to investors at maturity. Assuming the zero-coupon bond matures at the same time as the structured product, what must the maturity value of the zero-coupon be in order to return the principal to the investor?

    • A.

      $20

    • B.

      $80

    • C.

      $100

    • D.

      $120

    Correct Answer
    C. $100
    Explanation
    The maturity value of the zero-coupon bond must be $100 in order to return the principal to the investor. This is because the structured product manager purchased the bond at a discount of $20 for every $100 invested, so the maturity value needs to be equal to the principal amount invested.

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  • 36. 

    A structured note which is an intermediate term debt security is __________.

    • A.

      Interest rate-linked

    • B.

      Equity-linked

    • C.

      Hybrid-linked

    • D.

      Market-linked

    Correct Answer
    C. Hybrid-linked
    Explanation
    A structured note is a type of debt security that combines features of both debt and equity instruments. It is called "hybrid-linked" because it is linked to multiple underlying assets or indices, such as interest rates, equities, or market performance. This means that the returns on the structured note will be influenced by the performance of these underlying assets, making it a hybrid investment product.

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  • 37. 

    A form of funded credit derivative, structured as a security with an embedded credit default swap is known as a/an ___________ structured product.

    • A.

      Interest rate-linked

    • B.

      Equity-linked

    • C.

      Credit-linked

    • D.

      Market-linked

    Correct Answer
    C. Credit-linked
    Explanation
    A form of funded credit derivative, structured as a security with an embedded credit default swap is known as a credit-linked structured product. This type of structured product is designed to transfer credit risk from one party to another, typically involving a credit default swap as a form of insurance against the default of a specific underlying asset or reference entity.

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  • 38. 

    This structured product works like a term insurance plus a structured fund, where the term insurance provides insurance coverage and the other portion provides investment returns. This description best describes:

    • A.

      A structured note

    • B.

      A structured fund

    • C.

      A structured ILP

    • D.

      A structured deposit

    Correct Answer
    C. A structured ILP
    Explanation
    The given description states that the structured product combines term insurance coverage with an investment component. This aligns with the features of a structured ILP (Investment-Linked Policy), which typically includes both insurance coverage and an investment fund. Therefore, the correct answer is A structured ILP.

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  • 39. 

    Which of the following is a disadvantage of investing in structured ILPs?

    • A.

      Access to bulky investments

    • B.

      Fees and charges

    • C.

      Economies of scale

    • D.

      Portfolio diversification

    Correct Answer
    B. Fees and charges
    Explanation
    Investing in structured ILPs can have a disadvantage of fees and charges. These fees can include management fees, administration fees, and other charges that can eat into the potential returns of the investment. These fees can vary depending on the specific ILP and can be a significant factor to consider when deciding whether to invest in structured ILPs.

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  • 40. 

    Which of the following documents is not required to be provided to an investor of a structured ILP at the point-of-sale?

    • A.

      Product summary

    • B.

      Benefit illustration

    • C.

      Product highlights sheet

    • D.

      Policy document

    Correct Answer
    D. Policy document
    Explanation
    The policy document is not required to be provided to an investor of a structured ILP at the point-of-sale. This document typically contains detailed information about the terms and conditions of the policy, including coverage details, exclusions, and policyholder rights and obligations. While the other documents listed (product summary, benefit illustration, and product highlights sheet) provide important information about the product's features, benefits, and risks, the policy document is not necessary at the point-of-sale.

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  • 41. 

    An interest rate-linked structured product is linked to performance of __________.

    • A.

      Commodities

    • B.

      Interest rates

    • C.

      Market indices

    • D.

      Foreign exchange

    Correct Answer
    B. Interest rates
    Explanation
    An interest rate-linked structured product is a financial instrument that is designed to provide returns based on the performance of interest rates. This means that the value or returns of the product will be influenced by changes in interest rates. Therefore, the correct answer is interest rates.

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  • 42. 

    Which one of the following statements relating to structured ILPs is TRUE?

    • A.

      All structured ILPs are homogeneous in nature

    • B.

      A structured ILP is designed purely as an investment product

    • C.

      A structured ILP should be valued at least once a month

    • D.

      A structured ILP is a risk free product

    Correct Answer
    C. A structured ILP should be valued at least once a month
    Explanation
    A structured ILP should be valued at least once a month because the value of the ILP may change over time due to various factors such as market conditions, interest rates, and the performance of the underlying assets. Regular valuation helps investors keep track of the value of their investment and make informed decisions.

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  • 43. 

    An investor placed S$100,000 into a structured ILP with a sum assured of S$105,000. If an early redemption event is triggered, the investor would MOST like receive the:

    • A.

      Initial capital amount with the accrual payouts

    • B.

      Amount of total sum assured with accrual payouts

    • C.

      Amount based on the total sum assured plus initial capital amount

    • D.

      Accrued payouts but the initial capital amount is kept by the insurance company

    Correct Answer
    A. Initial capital amount with the accrual payouts
    Explanation
    If an early redemption event is triggered, the investor would receive the initial capital amount with the accrual payouts. This means that the investor will get back their original investment of S$100,000, along with any additional payouts that have accrued over time. The sum assured of S$105,000 is not relevant in this scenario, as it only guarantees a minimum payout in the event of death or maturity of the policy. The option of receiving the amount based on the total sum assured plus the initial capital amount is not applicable, as the sum assured is not relevant in an early redemption event. Finally, the option of receiving accrued payouts but keeping the initial capital amount is not correct, as the investor would receive both their initial capital amount and any accrued payouts.

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  • 44. 

    Structured products are ___________ of the issuer.

    • A.

      Unsecured debt securities

    • B.

      Financial derivatives

    • C.

      Fixed income instruments

    • D.

      Equity-like products

    Correct Answer
    A. Unsecured debt securities
    Explanation
    Structured products are unsecured debt securities of the issuer. This means that they are financial instruments issued by a company or institution that do not have any collateral backing them. Instead, the issuer's creditworthiness and ability to repay the debt are the main factors determining the value and risk of the structured product. These products are not backed by any specific assets or collateral, making them more risky than secured debt securities.

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  • 45. 

    To mitigate the credit risk of the fixed income instrument used in structured products, the issuer of the structured product may

    • A.

      Provide a guarantee by itself

    • B.

      Provide a guarantee by a third party

    • C.

      Provide a guarantee by itself or a third party

    • D.

      Use a fixed income issuer with better credit rating than itself

    Correct Answer
    C. Provide a guarantee by itself or a third party
    Explanation
    To mitigate the credit risk of the fixed income instrument used in structured products, the issuer of the structured product may provide a guarantee by itself or a third party. This means that the issuer can either provide its own guarantee or seek a guarantee from a third party to ensure the repayment of the fixed income instrument. By having a guarantee in place, the issuer can reduce the credit risk associated with the instrument and provide more security to investors. This option provides flexibility for the issuer to choose the most suitable guarantee arrangement based on their own creditworthiness and available options in the market.

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  • 46. 

    A __________ is one of the few structured products that may have no expiry date.

    • A.

      Tracker certificate

    • B.

      Bonus certificate

    • C.

      Discount certificate

    • D.

      Airbag certificate

    Correct Answer
    A. Tracker certificate
    Explanation
    A Tracker certificate is one of the few structured products that may have no expiry date. This means that the certificate does not have a predetermined date at which it will mature or be redeemed. Unlike other structured products such as Bonus, Discount, or Airbag certificates, a Tracker certificate does not have a specific end date, allowing investors to hold onto it for an indefinite period of time.

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  • 47. 

    A structured product which is linked to a certain basket of market indices is

    • A.

      Interest rate-linked

    • B.

      Equity-linked

    • C.

      Credit-linked

    • D.

      Market-linked

    Correct Answer
    D. Market-linked
    Explanation
    A structured product that is linked to a certain basket of market indices is referred to as market-linked. This means that the performance and returns of the structured product are tied to the performance of the underlying market indices. The product's value will fluctuate based on the movement of these indices, providing investors with exposure to the broader market.

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  • 48. 

    A structured product that is excluded from the Deposit Insurance Scheme in Singapore. This description best describes:

    • A.

      A structured deposit

    • B.

      A structured ILP

    • C.

      A structured note

    • D.

      A structured fund

    Correct Answer
    A. A structured deposit
    Explanation
    The correct answer is a structured deposit. This is because a structured deposit is a type of financial product that is excluded from the Deposit Insurance Scheme in Singapore. The Deposit Insurance Scheme is a scheme that provides insurance coverage for deposits in the event that a bank fails. Therefore, a structured deposit is not covered by this scheme and does not offer the same level of protection as a regular bank deposit.

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  • 49. 

    A structured product __________.

    • A.

      Is guaranteed by issuers

    • B.

      Is possible to mirror equity-like returns using a fixed income structure

    • C.

      Is simpler to understand than a traditional investment

    • D.

      Is an equity security

    Correct Answer
    B. Is possible to mirror equity-like returns using a fixed income structure
    Explanation
    A structured product is a type of investment that is designed to provide investors with a specific return based on the performance of an underlying asset or index. It is possible to mirror equity-like returns using a fixed income structure in a structured product by using derivatives such as options or swaps to replicate the performance of an equity index. This allows investors to potentially achieve similar returns to investing directly in equities, but with the added benefit of a fixed income structure which may provide more stability and downside protection.

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  • 50. 

    A commodity-linked structured product is linked to the performance of:

    • A.

      Interest rates such as LIBOR

    • B.

      Foreign exchange such as the US Dollar

    • C.

      Market indices such as the Hang Seng Index

    • D.

      Precious metals such as gold

    Correct Answer
    D. Precious metals such as gold
    Explanation
    A commodity-linked structured product is a financial instrument that is tied to the performance of a specific commodity. In this case, the correct answer is precious metals such as gold. This means that the value of the structured product will be influenced by the price movements of gold. As the price of gold increases or decreases, the value of the structured product will also change accordingly. This allows investors to gain exposure to the price movements of precious metals without directly owning them.

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