CMFAS: M9A Mock Exam! Quiz
Are you familiar with CMF AS M9A, and would you be interested in taking this quiz? This statement may sound like gibberish, but it has to do with life insurance and investment-linked policies. This insurance is intended for those who need to comply with MAS requirements. Collective investment schemes are to test people on their knowledge and understanding of structured products' criteria. If you want to learn more, this is the quiz for you.
- 1.C1 / S1 / Pg2) 1. Which of the following investment assets is the usual make-up of structured products?
- A.
equities and bonds
- B.
Bonds and options
- C.
Bonds and notes
- D.
derivatives
- 2.(C1 / S1.1 / Pg2) 2. Which of the following statements about structured products is FALSE?
- A.
These are unsecured debt securities of the issuer
- B.
They are equity securities
- C.
He payouts of the structured products may be based on equity price movements
- D.
They are also known as hybrid products
- 3.(C1 / S1.2 / Pg4) 3. Which statement is FALSE?
- A.
Structured deposits have low risks
- B.
Structured deposits are issued only by banks
- C.
Structured deposits are excluded in the Deposit Insurance Scheme in Singapore
- D.
Structured notes are unsecured debentures
- 4.(C1 / S3.2 & S3.3 / Pg13-Pg17) 4. One similarity between structured products designed for yield enhancement and those for performance participation is
- A.
They have limited downside protection
- B.
They have unlimited downside protection
- C.
They have capital protection
- D.
There is a cap on the upside return
- 5.C1 / Fig1.7 / Pg16) 5. Bonus certificates have conditional downside protection which hinges on a pre-determined level. The feature where protection no longer applies is called
- A.
Kick-in
- B.
Kick-out
- C.
Knock-in
- D.
Knock-out
- 6.C1 / S4.4 /Pg19) 6. Which statement is FALSE?
- A.
Structured notes can be listed and traded on the Singapore Exchange (SGX)
- B.
All structured products are liquid
- C.
All listed structured products on SGX come under the generic umbrella of Exchange- Traded Funds
- D.
SGX requires that listed structured products have at least 75% of the securities spread out to a minimum of 100 investors for Exchange-Traded Notes and Certificates
- 7.(C1 / S4.3 / Pg19) 7. Senior bonds are
- A.
older bonds that are near maturity
- B.
Rated lower than subordinated bonds by rating agencies
- C.
Given priority over shares and subordinated bonds during liquidation
- D.
also known as junk bonds
- 8.(C1 / S4.2 / Pg18) 8. Which statement about callable securities is TRUE?
- A.
When the interest rate drops, the issuer is likely to exercise his right to ‘call’
- B.
Callable securities are more expensive than non-callable securities
- C.
The price of a callable bond is the price of a straight bond, plus the price of a call option
- D.
The call price is typically lower than the par value
- 9.C1 / Table1.1 / Pg5) 9. Structured deposits are different from structured ILPs in that structured deposits
- A.
Are typically outsourced by the issuer for their structuring
- B.
Are issued only by banks
- C.
Have higher administrative costs
- D.
Are distributed by a wide distribution network
- 10.(C1 / Fig1.3 / Pg9) 10. Investments that offer high return at low risk are called
- A.
Bold investments
- B.
Unworthy investments
- C.
Safe investments
- D.
rare gems
- 11.C2 / S3 / Pg28) 11. Liquidity risk from the investor’s standpoint refers to
- A.
the ease of converting his investments into cash
- B.
being in a situation where he lacks cash and may not be able to stay invested
- C.
Price volatility
- D.
profit margin
- 12.(C2) 12. Factors that can affect price fluctuations include A. business risk B. economic conditions C. foreign exchange risk D. all of the above
- A.
Business risk
- B.
economic conditions
- C.
Foreign exchange risk
- D.
all of the above
- 13.(C2 / S1.b / Pg26) 13. STAR Company, due to internal strife, has seen some major movements in the upper rung of management. Over a period, it has been the subject of discussion among investors. Investors of securities invested into STAR are exposed to
- A.
liquidity risk
- B.
issuer-specific risk
- C.
Structural risk
- D.
interest rate risk
- 14.(C2 / S6.2 / Pg33) 14. For greater portfolio diversification two securities should have a correlation of
- A.
0
- B.
+1
- C.
-1
- D.
Between 0 and -1
- 15.(C2) 15. The price of derivatives can be influenced by
- A.
the price movements of the underlying assets
- B.
the credit worthiness of the counterparty
- C.
foreign exchange movements
- D.
all of the above
- 16.C2 / S2 / Pg27 & Pg28) 16. To reduce counterparty risk, the following can be applied: A. Use of payment netting B. Requiring the counterparty to put up collaterals C. Using publicly traded derivative products D. All of the above
- A.
Use of payment netting
- B.
Requiring the counterparty to put up collaterals
- C.
Using publicly traded derivative products
- D.
All of the above
- 17.C2 / S5.2 / Pg30) 17. Which of the following statements is FALSE? A. Leveraging is used to decrease the risk exposure B. One technique of leveraging is margin trading C. In margin trading, the investor is borrowing from the broker to invest D. Interest is charged on margin accounts
- A.
Leveraging is used to decrease the risk exposure
- B.
One technique of leveraging is margin trading
- C.
In margin trading, the investor is borrowing from the broker to invest
- D.
Interest is charged on margin accounts
- 18.C2 / Table2.3 / Pg35) 18. The redemption amount for structured notes may be affected negatively by A. the decrease in market value of the collateral B. the issuer of notes not receiving any payments because the notes counterparty defaulted C. the issuer becomes insolvent D. all of the above
- A.
The decrease in market value of the collateral
- B.
the issuer of notes not receiving any payments because the notes counterparty defaulted
- C.
The issuer becomes insolvent
- D.
All of the above
- 19.(C3 / S2.2a / Pg41) The option for the delivery of energy in the futures contract is A. cash delivery B. physical delivery C. contract delivery D. credit delivery
- A.
Cash delivery
- B.
physical delivery
- C.
contract delivery
- D.
credit delivery
- 20.(C3 / S2.2a / Pg41) The process where forward contracts are cleared by buyers and sellers in a series of trade to cancel mutual contracts by cash settlement is called A. kick-in B. backwardation C. contango D. book-out
- A.
Kick-in
- B.
Backwardation
- C.
Contango
- D.
book-out
- 21.(C3 / S2.1 / Pg40) The forward price for a contract is the sum of the spot price at the time of transaction and the __________
- A.
Loading
- B.
Cost of carry
- C.
Difference between the highest and lowest price for a given period
- D.
the average price for a given period
- 22.(C3 / S2.6 / Pg43) The initial margin of a gold futures contract is S$ 3000 and maintenance margin is S$ 2 200. If the value of the contract drops by S$ 400, how much is the margin call?
- A.
S$ 400
- B.
S$ 600
- C.
S$ 800
- D.
S$0
- 23.(C3 / Table 3.3 / Pg44) Which statement describes a hedger?
- A.
He puts money where he can make a profit from anticipated price change
- B.
He provides market liquidity
- C.
He buys or sells in the futures market to lock in the price to protect against movement in prices
- D.
He buys low and sells high
- 24.(C3 / S2.7b / Pg47) A portfolio beta of 1.1 means that for every increase of 1% in the market index,
- A.
The portfolio holdings will increase by 1.1%
- B.
the portfolio holdings will increase by 1 %
- C.
the portfolio holdings will decrease by 1 %
- D.
the portfolio holdings will decrease by 1.2 %
- 25.C3 / S3 / Pg48) 25. Which of the following statements about options is TRUE?
- A.
A ‘put’ option gives the holder the right to buy
- B.
A ‘call’ option gives the holder the right to sell
- C.
An option has no maturity date
- D.
A holder of an option can choose not to exercise his contractual rights
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