Selena M9A Mock Exam 2
- 1.The main difference between portfolio bonds and unit trusts is the presence of
- A.
Fund manager.
- B.
Dealing account
- C.
Early withdrawal charge
- D.
Set-up charges
- 2.2. Which of the following can be used to mitigate counterparty risk of a portfolio bond?
- A.
Invest in publicly traded derivative products.
- B.
Invest in shares with high trading volume
- C.
Ask counterparty for margin
- D.
All of the above
- 3.3. Which RISK relates to the return component of a structured product?
- A.
Market Volatility
- B.
Interest Rate
- C.
Counterparty defaults
- D.
Credit Risk of the issuer
- 4.4. Which of the following applies to the investment component of a structured ILP fund?
- A.
Banking Act
- B.
Company Act
- C.
Insurance Act
- D.
Code on Collective Investment Scheme
- 5.5. The price volatility of investments product can be significantly greater than direct
- A.
Hedged
- B.
Leveraged
- C.
Unleveraged
- D.
Pooled investment
- 6.6. Which of the following is NOT a characteristic of dealing account?
- A.
Set up when investors elects to invest in External and Family funds
- B.
Set up when there is cash investment
- C.
Need to maintain positive balance at all times
- D.
All of the above
- 7.7 Structured Investment Link Plan Issuer: Insurance Company B Death Benefit: 120% of initial investment Credit rating: AA Investment Portfolio: None Asset Allocation: None Fund Objective: Capital appreciation with guaranteed 10% returns on annual basis. Inception Date: Since 2000 Inception Price: $1.00 Current Price: $0.90 Which of the following advice is the LEAST appropriate by the advisor?
- A.
It is difficult to determine the market risk of the product as fund managers are given 1110 the full discretion to invest.
- B.
This investment is not suitable for investors who have low risk tolerance.
- C.
Investors who has initial investment of $10,000 will have death benefit of $12,000.
- D.
It is highly possible that fund managers invested in very risky derivatives in order to guarantee the 10% returns.
- 8.8. Which of the following has the least impact on the value of the derivatives?
- A.
The spot price of the underlying asset
- B.
The number of investor for the underlying asset
- C.
The price volatility for the underlying asset
- D.
The dividend rate of the underlying asset
- 9.9. Investment amount: $10,000 at $10 per unit Which of the following will result in the least amount of early withdrawal fee?
- A.
Bid-offer spread of 5%
- B.
Single price with 3% redemption charge
- C.
10 units deducted at market value at the time of withdrawal
- D.
10% of the market value of the investment at the time of withdrawal
- 10.10. A structured Investment-linked Life Insurance policy has the following features: Issuer = Company A Underlying Asset = Basket of 5 stocks Tenure = 5 years Structure of the product = Annual payout plan Maturity value = Initial capital amount + Guaranteed 1% of the capital Payout = 1.5% of the initial capital every year if the price of all 5 stocks has increased by 10% on maturity as compared to the price on the start date of the investment Assume that an investor invests $150,000 in this structured ILP Calculate the total amount that the investor will receive at the end of the 5 years under the BEST possible market performance scenario.
- A.
$150,000
- B.
$160,500
- C.
$161,250
- D.
$162,750
- 11.11. Performance participation products offer
- A.
High returns low risk
- B.
full upside potential
- C.
downside protection
- D.
A fixed income instrument for the principal component
- 12.12. Which of the following is a non-standardized contract?
- A.
Options traded in an exchange
- B.
Unit trusts issued by a bank
- C.
Forward Contract over the counter
- D.
An Exchange Traded Fund that tracks the STI index
- 13.13. The forward price of a barrel of oil is S$220. The current spot price is S$260. The cost of • carry is therefore equal to a:
- A.
Premium of S$20
- B.
Premium of S$40
- C.
Discount of S$20
- D.
Discount of S$40
- 14.14. Structured Fund is :
- A.
Issued by a bank
- B.
Issued by an insurance company
- C.
A collective investment scheme
- D.
Principal protected
- 15.15. An investor of a structured ILP should be least concerned about :
- A.
The payoff under the worst case scenario
- B.
The risk nature of the product
- C.
Expected returns of the product
- D.
The technicalities and mechanics of how the investment works
- 16.16. The main benefit of the portfolio bond is:
- A.
Making changes to the fund selection after maturity
- B.
Regular withdrawals when financial needs change
- C.
Flexibility of terminating the insurance protection and still continue with the investment portion
- D.
Capital is guaranteed at maturity
- 17.17. Structured Deposits are:
- A.
Issued by fund managers
- B.
Not investment products
- C.
Structured products
- D.
Covered by Deposit Insurance Scheme in Singapore
- 18.18. In a long put, the option is when the strike price is less than the market price.
- A.
"in-the-money"
- B.
"at-the-money"
- C.
"out-of-the-money"
- D.
Intrinsically positive
- 19.19. Which of the following is FALSE?
- A.
A call seller pays the premium
- B.
A call buyer has the right to buy
- C.
Buyer determines the time to exercise the options
- D.
Seller has the obligation to buy or sell
- 20.20. Which of the following is NOT TRUE about Structured Products?
- A.
They are unsecured debt securities of the issuer.
- B.
They have equity-like structures and participate in the profits of the issuer.
- C.
They are hybrid products.
- D.
They are more complex products.
- 21.21. On 1 January 2011, John decides to invest S$300,000 in the following structured Investment-linked Life Insurance policy from his life insurer: Capital preservation fund (maturing on 1 January 2021) seeks to provide policy owners with: Annual payout of 4.5% of the initial NAV as at each policy anniversary; and 100% capital guarantee on maturity Which of the following may likely happen?
- A.
The 4.50% annual payouts which are independent of the performance of the investment in the underlying sub-fund.
- B.
Capital is guaranteed upon maturity.
- C.
Capital is guaranteed from the second year onwards.
- D.
he annual payout of 4.5% is cumulative and payable on maturity date.
- 22.22. Automated trading helps fund managers with market pricing by :
- A.
Producing research paper S
- B.
Replacing the expertise of fund managers
- C.
Exercising judgment calls
- D.
Identifying profit opportunities arising from subtle anomalies
- 23.23. The statement to Policy Owners will show
- A.
Transactions occurred during the statement period
- B.
Fund Management Charges
- C.
How units are redeemed
- D.
Fees and charges payable through deduction of premiums or units for the next period
- 24.24. John expects stock price not to move much in either direction. He will:
- A.
Long a call option
- B.
Long a put option
- C.
Apply bull straddle strategy
- D.
Apply bear straddle strategy
- 25.25. The Forwards contract is priced at $10 for physical delivery. Which is more beneficial to the buyer?
- A.
AForward price increased by $20
- B.
Spot price increased by $20
- C.
Forward price decreased by $10
- D.
Spot price decreased by $10
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