M9A Quiz Mock Exam 4 CMFAS

50 Questions | Total Attempts: 1020

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M9A Quiz Mock Exam 4 CMFAS

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Questions and Answers
  • 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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