Axa M9A Mock Exam 6

50 Questions | Total Attempts: 210

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Questions and Answers
  • 1. 
    (C1/S4) 1 One similarity among the various structured products is that there is:
    • A. 

      No lock-in period

    • B. 

      The use of financial derivatives

    • C. 

      Guaranteed returns for the investors

    • D. 

      High dividend income for the investors

  • 2. 
    (C2/S6.1) 2 Which of the following statements BEST describes legal risk?
    • A. 

      Change of regulations on selling of structured products

    • B. 

      Hedging of investments in structured products with derivatives

    • C. 

      Interest rate environment changes due to market conditions

    • D. 

      Investment in various structured products with the same underlying assets

  • 3. 
    (C3/S3.6) 3 Which of the following option strategies should you use if you are not sure about the direction of the stock price?
    • A. 

      Covered calls

    • B. 

      Protective puts

    • C. 

      Bear straddle

    • D. 

      Long puts

  • 4. 
    (C2/S5.4) 4 One of the solutions to investment concentration risk is:
    • A. 

      Dollar Cost Averaging

    • B. 

      Drip-Feeding

    • C. 

      Diversification

    • D. 

      None of the above

  • 5. 
    (C3/S2.8) 5 Given the following information; Value of portfolio = S$1 million; Portfolio beta = 2; Multiplier = S$10 per point The index is currently at 1,600 points and the futures contract is priced at 1,500. Calculate the hedge ratio.
    • A. 

      50 contracts

    • B. 

      67 contracts

    • C. 

      100 contracts

    • D. 

      134 contracts

  • 6. 
    (C3/S3.4) 6 Which of the following is/are NOT bullish strategies? I. Long calls II. Covered calls III. Protective puts IV. Selling naked puts
    • A. 

      I and II

    • B. 

      III and IV

    • C. 

      II and IV

    • D. 

      None of the above

  • 7. 
    (C3/S3) 7 Which of the following is NOT traded on a margin?
    • A. 

      Futures

    • B. 

      Options

    • C. 

      Contract for Differences

    • D. 

      None of the above

  • 8. 
    (C3/S3) 8 A put warrant is said to be ________ when the strike price is more than the market price.
    • A. 

      In-the-money

    • B. 

      At-the-money

    • C. 

      Out-of-the-money

    • D. 

      None of the above

  • 9. 
    (C4/S1.2) 9 Which one of the following options does NOT fall under the soft dollar commission?
    • A. 

      Management fee

    • B. 

      Research services

    • C. 

      Economic analyses

    • D. 

      Entertainment expense

  • 10. 
    (C5/S1) 10 Portfolio of investments with an insurance element may be known as
    • A. 

      Term insurance

    • B. 

      Unit Trust

    • C. 

      Portfolio bond

    • D. 

      Equity Bond

  • 11. 
    (C1/S1.1) 11 A structured product manager purchased a zero-coupon bond at $80 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. 

      $0

    • B. 

      $80

    • C. 

      $100

    • D. 

      120

  • 12. 
    (C2/S5.2) 12 A highly geared structured product _________.
    • A. 

      Is also called a portfolio bond

    • B. 

      Uses equities

    • C. 

      Increase the potential rate of return of an investment asset

    • D. 

      Reduces losses

  • 13. 
    (C3/S3.2) 13 At expiry, the option-holder receives another option. This best describes a/an _________.
    • A. 

      Asian option

    • B. 

      Forward-start option

    • C. 

      Compound option

    • D. 

      Binary option

  • 14. 
    C4/S6.2) 14 Which of the following is NOT required at the point-of-sale for a structured ILP?
    • A. 

      Product highlights sheet

    • B. 

      Benefit Illustration

    • C. 

      Product summary

    • D. 

      Fund report

  • 15. 
    (C4/S2.4) 15 This fund pays out annually 3.5% of Initial Unit Price per unit held by policy owner as at each policy anniversary and is 100% capital protected on maturity. This best describes an
    • A. 

      ILP providing regular payments

    • B. 

      ILP linked to index returns

    • C. 

      ILP with capital appreciation potential

    • D. 

      ILP with term insurance component

  • 16. 
    (C3/S3) 16 Which of the following gives the investor the right to sell the underlying security?
    • A. 

      Call option

    • B. 

      Put warrant

    • C. 

      European style option

    • D. 

      American style warrant

  • 17. 
    (C3/S3.2) 17 Which of the following allows the investor to exercise the option only on expiry date?
    • A. 

      Asian option

    • B. 

      Swaption

    • C. 

      European style option

    • D. 

      American style warrant

  • 18. 
    (C4/S6.4) 18 A common method to reduce market risks is using securities with _______. A. Positive correlation B. Negative correlation C. Zero correlation D. Higher correlation
    • A. 

      Positive correlation

    • B. 

      Negative correlation

    • C. 

      Zero correlation

    • D. 

      Higher correlation

  • 19. 
    (C1/S1) 19 Structured products are _________ of the issuer.
    • A. 

      Unsecured debt securities

    • B. 

      Financial derivatives

    • C. 

      Fixed income instruments

    • D. 

      Equity-like products

  • 20. 
    (C3/S3.2) 20 The investor decides whether the option will become a call or a put by a specified choice date. This best describes a/an _________.
    • A. 

      Asian option

    • B. 

      Forward-start option

    • C. 

      Chooser option

    • D. 

      Binary option

  • 21. 
    (C3/S3.2) 21 This option pays off either nothing or predetermined amount. This best describes a/an _________.
    • A. 

      Asian option

    • B. 

      Forward – start option

    • C. 

      Chooser option

    • D. 

      Binary option

  • 22. 
    (C5/S1.1) 22 Portfolio rebalancing is essential to maintain original level of
    • A. 

      Diligence

    • B. 

      Ratio

    • C. 

      Capital

    • D. 

      Risk exposure

  • 23. 
    (C6/S1.4) 23 Ms Tan placed $10,000 in a structured ILP with sum assured of $12,500. If there is an early redemption, she will most likely receive
    • A. 

      Total sum assured plus initial capital amount

    • B. 

      Accrued payout only

    • C. 

      Initial capital with accrued payout

    • D. 

      Amount of total sum assured with accrued payout

  • 24. 
    (C1/S3.2) 24 A reverse convertible bond consist of a bond and a
    • A. 

      Put option

    • B. 

      Call option

    • C. 

      Chooser option

    • D. 

      Swap option

  • 25. 
    (C3/S3.7) 25 As a seller of a call option, you have _________.
    • A. 

      An obligation to buy the underlying assets

    • B. 

      An obligation to sell the underlying assets

    • C. 

      A right to buy the underlying assets

    • D. 

      A right to sell the underlying assets

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