Selena M9A Mock Exam 2

50 Questions | Total Attempts: 129

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MCQ Quizzes & Trivia

Questions and Answers
  • 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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