M9A Mock Exam 2 CMFAS

50 Questions | Total Attempts: 1821

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CMFAS Quizzes & Trivia

Questions and Answers
  • 1. 
    (C1/S1.1) 1. An equity-linked note combines zero-coupon bond with
    • A. 

      an equity

    • B. 

      a swap of an underlying equity asset

    • C. 

      a warrant of an underlying equity asset

    • D. 

      an option of an underlying equity asset

  • 2. 
    (C1/S1.1) 2. A 5-year note is linked to BBD Company and has a share price of S$ 100. 80% of the money of the investor is used to buy a zero-coupon with a par value of S$ 100 maturing in 5 years’ time. The remaining S$ 20 is used to buy a call option with a strike price of S$ 110. If the share price drops to S$ 50 on maturity, the investor would
    • A. 

      Receive his capital of S$ 100 but lost S$ 20 on the price paid for the option

    • B. 

      receive his capital of S$ 100

    • C. 

      receive S$ 50

    • D. 

      not receive any money

  • 3. 
    (C1/S1.2) 3. Which statement regarding wrappers is FALSE?
    • A. 

      Different wrappers can have different regulatory restrictions on the issuers

    • B. 

      Some wrappers are subject to more specific investment restrictions than others

    • C. 

      Wrappers, regardless of their formats, are subject to the same costs

    • D. 

      None of the above

  • 4. 
    (C1/S3.3) 4. A ________ comes with conditional downside protection which depends on a pre-determined barrier.
    • A. 

      Contract for differences

    • B. 

      Bonus certificate

    • C. 

      Discount certificate

    • D. 

      Tracker certificate

  • 5. 
    (C1/S1.2/T1.1) 5. Investors of structured deposits
    • A. 

      Are protected against loss of their capital

    • B. 

      get higher returns on their investments

    • C. 

      are unsecured creditors of the issuer in the event liquidation

    • D. 

      are provided with insurance coverage

  • 6. 
    (C1/S2.2/Fig1.3) 6. Those investments that carry a low probability of returns while carrying a low probability of loss can be said to be:
    • A. 

      Safe instruments

    • B. 

      Rare gems

    • C. 

      Unworthy investments

    • D. 

      Bold investments

  • 7. 
    (C1/S3.3b) 7. When a bonus certificate is knocked-out it means that
    • A. 

      The investor will not be paid anything on maturity

    • B. 

      the investor is paid the principal investment amount and the contract is terminated

    • C. 

      the protection no longer applies and the investor is paid the value of the underlying asset at maturity

    • D. 

      the investor has to top up cash

  • 8. 
    (C1/S3.2b) 8. Which of the following products have a cap on their upside potential ?
    • A. 

      Air-bag certificates

    • B. 

      Discount certificates

    • C. 

      Bonus certificates

    • D. 

      Tracker certificates

  • 9. 
    (C1/S3.1) 9. Which of the following structured products is designed to protect capital?
    • A. 

      Credit-linked notes

    • B. 

      structured funds

    • C. 

      structured notes

    • D. 

      structured ILPs

  • 10. 
    (C1/S2.2/Fig1.3) 10. Investments that offer high return at high risk are called
    • A. 

      Bold investments

    • B. 

      worthy investments

    • C. 

      safe investments

    • D. 

      rare gems

  • 11. 
    (C1/S4.4a) 11. Listed products in Singapore are under the oversight of the
    • A. 

      Associated Banks of Singapore

    • B. 

      Singapore Exchange

    • C. 

      Investment Managers of Singapore

    • D. 

      Brokers Association of Singapore

  • 12. 
    (C1/S5.1) 12. Which of the following statements is TRUE?
    • A. 

      The market fair value of structured products are not easy to determine

    • B. 

      One of the advantages is that structured products are liquid

    • C. 

      Structured products are generally not as complicated as they are made out to be

    • D. 

      All structured products can be cashed out anytime

  • 13. 
    (C2/S4) 13. In 2006, a US$ investment that is denominated in Singapore dollars was issued at the exchange rate of US$ 1 = S$ 1.5336. In 2010, the investment income earned in the foreign currency is US$ 50, but the US$ exchange rate has dropped against the S$ to US$ 1 = S$ 1.2875. The rate of return of the initial investment when converted back to S$ is ______
    • A. 

      lower than that in US$

    • B. 

      higher than that in US$

    • C. 

      the same as that in US$

    • D. 

      not ascertainable

  • 14. 
    (C2/S5.2) 14. An investment technique used to increase the potential rate of return is
    • A. 

      Switching

    • B. 

      short selling

    • C. 

      gearing

    • D. 

      forward pricing

  • 15. 
    (C2/S5) 15. If the exercise price of an option is S$ 15 and the spot price of a stock is S$ 20, what is the intrinsic value of the option?
    • A. 

      S$ 2

    • B. 

      S$ 5

    • C. 

      S$ 25

    • D. 

      S$ 35

  • 16. 
    (C2/S5) 16. The spot price of a particular company’s share is S$ 12. An option to buy it at S$ 8 has an intrinsic value of S$ 4. What is the percentage change in the intrinsic value of the option if the share price rises 10%?
    • A. 

      10%

    • B. 

      12%

    • C. 

      20%

    • D. 

      30%

  • 17. 
    (C2/S5.5) 17. A collateral risk occurs when
    • A. 

      The collateral increased in value after it was pledged

    • B. 

      the risk exposure was not adequately collateralised from the start

    • C. 

      the risk exposure is reduced

    • D. 

      the contract has been terminated

  • 18. 
    (C2/S6.2) 18. Two securities are perfectly correlated if
    • A. 

      The prices of both move up or down in the same direction, by the same percentage

    • B. 

      the prices of both move up or down in opposite directions, by the same percentage

    • C. 

      the prices move up in the same direction, by different percentages

    • D. 

      the prices of the securities move at random

  • 19. 
    (C2/S6.4) 19. The early redemption of units feature in structured products may be triggered when
    • A. 

      The kick-in levels are breached

    • B. 

      the knock-out levels are breached

    • C. 

      callable bonds are called

    • D. 

      all of the above

  • 20. 
    (C2/S1) 20. Which of the following is NOT an issuer-specific risk?
    • A. 

      Business risk

    • B. 

      Regulatory action

    • C. 

      Interest rate risk

    • D. 

      Operational risk

  • 21. 
    (C3/S1) 21. The value of a derivative contract depends on the value of the underlying assets. These underlying assets could be
    • A. 

      Agricultural products

    • B. 

      currency

    • C. 

      energy

    • D. 

      all of the above

  • 22. 
    (C3/S2) 22. Futures contracts have specified
    • A. 

      settlement dates

    • B. 

      delivery price

    • C. 

      quantity

    • D. 

      all of the above

  • 23. 
    (C3/S2.2b) 23. In a forward contract, Cost-Insurance-Freight (CIF) means that
    • A. 

      the total cost of the contract including delivery is known to the buyer

    • B. 

      the buyer of the forward contract has to arrange for delivery

    • C. 

      the seller of the forward contract will arrange for delivery

    • D. 

      the seller of the forward contract will pay for the delivery arranged by the buyer

  • 24. 
    (C3/S2.5) 24. When the futures price is higher than the spot price, the situation is called a
    • A. 

      Backwardation

    • B. 

      contango

    • C. 

      mark to market

    • D. 

      kick-in

  • 25. 
    (C3/S2.5) 25. If the futures price of a commodity in March is S$ 3.00 and its spot price is S$ 2.70, the basis is said to be
    • A. 

      30 cents on par

    • B. 

      30 cents over March

    • C. 

      30 cents under March

    • D. 

      15 cents on average

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