M9A Quiz Mock Exam 4 CMFAS
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- 1.(C2/S5.4) 1 One of the ways to reduce concentration risk is __________.
- A.
Increase risk tolerance
- B.
Liquidity
- C.
Diversification
- D.
Management
- 2.(C1/S2) 2 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
- 3.(C1/S3.3) 3 A __________ comes with conditional downside protection which depends on a pre-determined barrier.
- A.
Contract for differences
- B.
Tracker certificate
- C.
Discount certificate
- D.
Bonus certificate
- 4.(C1/S3) 4 A structured note which is an intermediate term debt security is __________.
- A.
Interest rate-linked
- B.
Equity-linked
- C.
Hybrid-linked
- D.
Market-linked
- 5.(C5/S1) 5 Which one of the following statements about portfolio bonds is FALSE?
- A.
Portfolio bonds are used for protection purposes
- B.
Portfolio bonds offer a wide range of investment choices
- C.
The principal of portfolio bonds is not guaranteed
- D.
Policyowners can appoint their own portfolio managers who are within the insurer’s platform
- 6.(C1/S2.2) 6 Those investments that carry a low probability of returns while carrying a low probability of loss can be said to be:
- A.
Rare gems
- B.
Bold investments
- C.
Safe instruments
- D.
Unworthy investments
- 7.(C1/S3) 7 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
- 8.(C1/S4.3) 8 Which of the following is FALSE regarding callable and non-callable securities?
- A.
Callable securities are cheaper than straight, non-callable securities
- B.
Callable securities pay higher coupons than non-callable securities
- C.
Callable securities expose investors to reinvestment risk
- D.
Callable securities do not involve interest rate risk
- 9.(C1/S1.2) 9 This is an unsecured debenture of the issuer. By purchasing this, the investors are lending money to the issuer. This best describes:
- A.
A structured deposit
- B.
A structured note
- C.
A structured ILP
- D.
A structured fund
- 10.(C3/S2.6) 10 John opened a margin account with an initial margin of $30,000 and a maintenance margin of $25,000. The broker will issue a margin call if the price of the futures contract falls by _________.
- A.
$1,000
- B.
$3,000
- C.
$4,950
- D.
$5,050
- 11.(C3/S2.5) 11 The June futures price for oil is US$150 per barrel, but the cash price is US$120 per barrel. Which for the following statements BEST describes this situation?
- A.
Basis is “US$30 in June”
- B.
Basis is “US$150 in June”
- C.
Basis is “US$30 over June”
- D.
Basis is “US$30 under June”
- 12.(C1/S3) 12 An investment instrument that combines the characteristics of a zero coupon bond with a return component based on the performance of a single stock is said to be _________.
- A.
Interest rate-linked
- B.
Equity-linked
- C.
Hybrid-linked
- D.
Market-linked
- 13.(C3/S3.4) 13 Which of the following option strategies would be LEAST appropriate if an investor is bullish on a certain stock?
- A.
Long call
- B.
Long stock
- C.
Selling naked put
- D.
Bull straddle
- 14.C3/S2.5) 14 Which of the following is the correct definition of Backwardation?
- A.
The futures price is higher than the spot price
- B.
The futures price is lower than the spot price
- C.
The futures price is equal to the spot price
- D.
The spot price is higher than the futures price
- 15.(C2/S1) 15 Which of the following is NOT an issuer-specific risk?
- A.
Interest rate risk
- B.
Regulatory action
- C.
Business risk
- D.
Operational risk
- 16.(C1/S3) 16 Which of the following was created to reduce the impact of knock-out?
- A.
Discount certificates
- B.
Tracker certificates
- C.
Bonus certificates
- D.
Airbag certificates
- 17.(C3/S3.2) 17 There are two or more underlying assets with this type of options. This best describes a/an _______.
- A.
Rainbow option
- B.
Forward start option
- C.
Compound option
- D.
Binary option
- 18.(C5/S1) 18 A portfolio bond is NOT suitable for investors who
- A.
Want to invest in bonds
- B.
Have a long investment time horizon
- C.
Want the flexibility of a wide range of investment choices
- D.
Are looking to invest in 10 different funds
- 19.(C3/S1) 19 A pension fund with a diversified holding in the stock market faces considerable risk from general fluctuation of the stock price. ___________ may be used to reduce / eliminate the risk exposure.
- A.
Bonds
- B.
Stocks
- C.
Derivatives
- D.
Unit Trusts
- 20.(C1/S1.2) 20 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
- 21.(C3/S2) 21 Which one of the following statements about futures is TRUE?
- A.
All contracts are settled through physical delivery
- B.
They are non-standardised contracts traded on exchanges
- C.
They are subject to margin requirements
- D.
All of the above
- 22.(C3/S3.7) 22 A seller of a call option has
- A.
The right to buy the underlying asset
- B.
The right to sell the underlying asset
- C.
The obligation to sell the underlying asset
- D.
The obligation to buy the underlying asset
- 23.(C1/S3.3) 23 Airbag certificates can be designed to have different airbag levels to suit an investor’s particular __________.
- A.
Preference
- B.
Participation
- C.
Risk tolerance
- D.
Expected return
- 24.(C1/S3.1) 24 Which of the following products is NOT designed to protect capital?
- A.
Structured deposits
- B.
Portfolio bonds
- C.
Capital guaranteed funds
- D.
Equity-linked notes
- 25.(C4/S2.1) 25 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
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