M9A Structured Questions

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  • 1/79 Questions

    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 structured note
    • A structured fund
    • A structured ILP
    • A structured deposit
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M9A Structured Questions - Quiz
About This Quiz

The 'm9a structured questions' quiz assesses understanding of structured products, focusing on their security nature, composition, risk mitigation, and specific types like tracker certificates and market-linked products. Essential for learners in finance and investment sectors.

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  • 2. 

    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 structured note

    • A structured fund

    • A structured ILP

    • A structured deposit

    Correct Answer
    A. 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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  • 3. 

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

    • Tracker certificate

    • Bonus certificate

    • Discount certificate

    • 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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  • 4. 

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

    • Interest rate-linked

    • Equity-linked

    • Credit-linked

    • Market-linked

    Correct Answer
    A. 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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  • 5. 

    In a structured product, derivatives are typically not used to provide investors with

    • regular income

    • upside participation

    • principal guarantee

    • downside protection

    Correct Answer
    A. regular income
    Explanation
    In a structured product, derivatives are typically not used to provide investors with regular income. Instead, structured products are designed to offer various features such as upside participation, principal guarantee, and downside protection. These features aim to provide investors with potential returns, protection of their initial investment, and safeguard against market downturns. However, generating regular income is not a common objective of structured products, as they are more focused on offering specific benefits and investment strategies.

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  • 6. 

    Which of the following is the most common consideration when structured products adopt different structures?

    • Product complexity

    • Pricing

    • Tax treatment

    • Investment Objectives

    Correct Answer
    A. Tax treatment
    Explanation
    When structured products adopt different structures, the most common consideration is tax treatment. This means that the way the product is taxed, such as the capital gains tax or income tax, is an important factor to consider. The tax treatment can greatly impact the overall return and profitability of the structured product, so it is crucial to analyze and understand the tax implications before making any investment decisions.

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  • 7. 

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

    • Structured ILPs have simple structures

    • Structured ILP investors are exposed to little downside risk

    • Structured ILP sub-funds are in tailor-made products

    • Structured ILPs have relatively high insurance element

    Correct Answer
    A. Structured ILP sub-funds are in tailor-made products
    Explanation
    One of the characteristics of structured Investment-linked Life Insurance policies (ILPs) is that the sub-funds are in tailor-made products. This means that the ILP allows investors to choose from a range of investment options that are customized to their individual needs and risk appetite. This customization allows investors to have more control over their investments and tailor them to their specific goals and preferences.

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  • 8. 

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

    • Mutual funds

    • Structured funds

    • Bond funds

    • Portfolio funds

    Correct Answer
    A. 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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  • 9. 

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

    • Interest rate-linked

    • Equity-linked

    • Credit-linked

    • Market-linked

    Correct Answer
    A. 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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  • 10. 

    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:

    • Initial capital amount with the accrual payouts

    • Amount of total sum assured with accrual payouts

    • Amount based on the total sum assured plus initial capital amount

    • 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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  • 11. 

    Mr. Teng brought a structured Investment-linked Life Insurance policy (ILP) in 1 Oct 2010. It will mature in 1 Oct 2018. It has the following features: � 100% capital guaranteed � 2.5% of NAV as annual payout at each policy anniversary. Mr. Teng is assured of which of the following?

    • 100% of capital if held till maturity

    • 2.5% of NAV as annual payout regardless of underlying fund performance

    • 20% of NAV as total annual payout regardless of underlying fund performance

    • None of the above

    Correct Answer
    A. 100% of capital if held till maturity
  • 12. 

    Structured products are ___________ of the issuer.

    • Unsecured debt securities

    • Financial derivatives

    • Fixed income instruments

    • 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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  • 13. 

    Structured deposits are different from structured ILPs in that structured deposits

    • Are typically outsourced by the issuer for their structuring

    • Are issued only by banks

    • Have higher administrative costs

    • Are distributed by a wide distribution network

    Correct Answer
    A. Are issued only by banks
    Explanation
    Structured deposits are different from structured ILPs because they are only issued by banks. This means that only banks have the authority to offer and distribute structured deposits to customers. On the other hand, structured ILPs may be offered by various financial institutions and are not limited to banks.

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  • 14. 

    Structured products are ________ of the issuer

    • Unsecured debt securities

    • Financial derivativies

    • Fixed income instruments

    • 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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  • 15. 

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

    • Counterparty risk

    • Liquidity risk

    • Market risk

    • All of the above

    Correct Answer
    A. 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. 

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

    • Access to bulky investments

    • Fees and charges

    • Economies of scale

    • Portfolio diversification

    Correct Answer
    A. 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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  • 17. 

    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

    • Provide a guarantee by a third party

    • Provide a guarantee by itself or a third party

    • Use a fixed income issuer with better credit rating than itself

    Correct Answer
    A. 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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  • 18. 

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

    • Commodities

    • Interest rates

    • Market indices

    • Foreign exchange

    Correct Answer
    A. 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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  • 19. 

    Structured products are for investors who:

    • Have knowledge of investment

    • Want a customized product to suit their specific risk return profile

    • Want a share of the issuers profit

    • Have a demand for high market volatitily

    Correct Answer
    A. 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. 

    Compared to an ILP, a structured ILP

    • Has a more complex structure

    • Has a higher insurance element

    • Is not as heavily regulated

    • 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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  • 21. 

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

    • Interest rates such as LIBOR

    • Foreign exchange such as the US Dollar

    • Market indices such as the Hang Seng Index

    • Precious metals such as gold

    Correct Answer
    A. 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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  • 22. 

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

    • They offer death benefits on top of investment gains

    • They are offered as a short-term investment instrument

    • They typically have higher fees than a normal unit trust

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

    Correct Answer
    A. 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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  • 23. 

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

    • Interest rate-linked

    • Equity-linked

    • Credit-linked

    • Market-linked

    Correct Answer
    A. 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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  • 24. 

    Structured deposits are considered _____________ products and are not protected under the Deposit Insurance Scheme in Singapore.

    • Deposit

    • Leverage

    • Investment

    • Insurance

    Correct Answer
    A. Investment
    Explanation
    Structured deposits are considered investment products because they involve the investment of funds by individuals. These products typically offer a fixed return based on the performance of an underlying asset, such as a stock or a basket of stocks. However, unlike traditional investments, structured deposits do not offer the same level of protection as they are not covered by the Deposit Insurance Scheme in Singapore. Therefore, individuals who invest in structured deposits are exposed to the risk of losing their principal if the underlying asset performs poorly.

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  • 25. 

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

    • Structured ILPs have simple structures

    • Structured ILP investors are exposed to little downside risk

    • Structured ILP sub-funds are in tailor-made products

    • Structured ILPs have relatively high insurance element

    Correct Answer
    A. Structured ILP sub-funds are in tailor-made products
  • 26. 

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

    • Portfolio diversification

    • Access to bulky investments

    • Economies of scale

    • Low fees and charges

    Correct Answer
    A. 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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  • 27. 

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

    • Daily

    • Every 2 weeks

    • Monthly

    • Quarterly

    Correct Answer
    A. 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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  • 28. 

    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,

    • Market risk

    • Counter party risk

    • Interest rate risk

    • Liquidity risk

    Correct Answer
    A. 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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  • 29. 

    Investors of structured deposits

    • Are protected against loss of their capital

    • get higher returns on their investments

    • are unsecured creditors of the issuer in the event liquidation

    • are provided with insurance coverage

    Correct Answer
    A. are unsecured creditors of the issuer in the event liquidation
    Explanation
    Investors of structured deposits are unsecured creditors of the issuer in the event of liquidation. This means that if the issuer goes bankrupt or is liquidated, the investors will have a claim on the assets of the issuer, but they are not guaranteed to receive their full investment back. They will be treated as creditors and will have to wait in line to receive their share of the remaining assets after secured creditors and other obligations have been paid. This makes them vulnerable to potential losses in the event of the issuer's insolvency.

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  • 30. 

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

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

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

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

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

    Correct Answer
    A. 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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  • 31. 

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

    • Tracker certificate

    • Bonus certificate

    • Discount certificate

    • 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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  • 32. 

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

    • Equities and bonds

    • Derivatives

    • Bonds and notes

    • Bonds and options

    Correct Answer
    A. 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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  • 33. 

    Company delta issues a structured product, which is distributed by Company Elite. Subsequently, Company Delta's credit rating is downgraded. What kind of risk does this present to the investor?

    • Liquidity risk

    • Issuer-specific risk

    • General market risk

    • Counterparty credit risk

    Correct Answer
    A. Issuer-specific risk
    Explanation
    When Company Delta's credit rating is downgraded, it presents an issuer-specific risk to the investor. This means that there is a risk specifically associated with the issuer of the structured product, Company Delta. The downgrade in credit rating indicates that there is a higher likelihood of default or inability to meet financial obligations by Company Delta. This poses a risk to the investor as it may result in loss of investment or lower returns.

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  • 34. 

    Structured ILPs can only be issued by ________.

    • Insurance companies

    • Banks

    • Fund managers

    • 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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  • 35. 

    The early redemption of units feature in structured products may be triggered when

    • The kick-in levels are breached

    • the knock-out levels are breached

    • callable bonds are called

    • all of the above

    Correct Answer
    A. all of the above
    Explanation
    The early redemption of units feature in structured products may be triggered when any of the following events occur: the kick-in levels are breached, the knock-out levels are breached, or callable bonds are called. This means that if any of these conditions are met, the structured product can be redeemed early.

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  • 36. 

    The difference between structured ILPs and unit trusts is that

    • Structured ILPs are less regulated

    • The legal owner of the assets in the ILP fund is the insurer

    • unit trusts come with a death benefit but not for a structured ILP

    • Structured ILPs do not carry as much risk as would unit trusts

    Correct Answer
    A. The legal owner of the assets in the ILP fund is the insurer
  • 37. 

    Which statement on the general features of structured ILPs is FALSE?

    • They do not have maturity dates and are renewed at the end of each trading period

    • They are usually complex

    • They are bought with single premiums

    • They are exposed to counterparty and liquidity risks

    Correct Answer
    A. They do not have maturity dates and are renewed at the end of each trading period
    Explanation
    Structured ILPs (Investment-Linked Policies) are investment products that combine life insurance coverage with investment opportunities. They are known for being complex, as they often involve multiple investment options and have various fees and charges. Structured ILPs are typically bought with single premiums, meaning that the policyholder pays a lump sum upfront. Additionally, these policies are exposed to counterparty and liquidity risks, meaning that the policyholder may face potential losses if the issuer or the market experiences financial difficulties. However, the statement that they do not have maturity dates and are renewed at the end of each trading period is false. Structured ILPs do have maturity dates, and policyholders may choose to renew or terminate the policy at that time.

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  • 38. 

    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

    • ILP providing regular payments

    • ILP linked to index returns

    • ILP with capital appreciation potential

    • ILP with term insurance component

    Correct Answer
    A. 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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  • 39. 

    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:

    • Initial capital amount with the accrued payouts

    • Amount of total sum assured with accrued payouts

    • Amount based on the total sum assured plus initial capital amount

    • 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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  • 40. 

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

    • Daily

    • Every 2 weeks

    • Monthly

    • Quarterly

    Correct Answer
    A. 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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  • 41. 

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

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

    • Structured products may suit investors particular investment needs.

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

    • Structured products offer no access to exotic asset classes.

    Correct Answer
    A. 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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  • 42. 

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

    • They allow investors to have a tailor-made product

    • They offer investors access to exotic asset classes

    • They allow investors to have direct access to restricted markets

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

    Correct Answer
    A. They provide investors with a financial product that is easy to understand
  • 43. 

    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?

    • $20

    • $80

    • $100

    • $120

    Correct Answer
    A. $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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  • 44. 

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

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

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

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

    • Diversification of the fund minimizes the opportunity cost

    Correct Answer
    A. 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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  • 45. 

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

    • Product summary

    • Benefit illustration

    • Product highlights sheet

    • Policy document

    Correct Answer
    A. 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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  • 46. 

    A structured product __________.

    • Is guaranteed by issuers

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

    • Is simpler to understand than a traditional investment

    • Is an equity security

    Correct Answer
    A. 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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  • 47. 

    Unlike a structured ILP, a portfolio of investments with an insurance element ___________.

    • Is a conventional bond

    • Is designed to return capital at maturity

    • Allows customers to appoint managers of their portfolio

    • Provides a high death benefit

    Correct Answer
    A. Allows customers to appoint managers of their portfolio
    Explanation
    A portfolio of investments with an insurance element allows customers to appoint managers of their portfolio. This means that customers have the ability to choose and hire professionals to manage their investments within the portfolio. This feature provides customers with more control and flexibility in managing their investments, as they can select managers who have expertise in specific areas or strategies.

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  • 48. 

    Complete the sentence. Structured deposits :

    • Are capable of generating high returns

    • Are a form of investment products

    • Are covered by deposit insurance scheme

    • Generally have their capital guaranteed by an insurance company.

    Correct Answer
    A. 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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  • 49. 

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

    • A structured deposit

    • A structured ILP

    • A structured note

    • 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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Quiz Review Timeline (Updated): Mar 18, 2023 +

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  • Current Version
  • Mar 18, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Nov 21, 2014
    Quiz Created by
    Jensen1980

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