Friday Five – 3 April – 5 Questions in 5 Minutes

Welcome to this week’s Friday Five – 5 Questions in 5 Minutes Every Friday

What’s this all about?

It’s a bit of Friday Fun where we provide you with 5 questions relevant to a mix of CII exams. The challenge is for you to answer them in 5 minutes. Answers at the bottom of the page.

Questions

IMPORTANT!  These questions relate to examinable tax year 2019/20, examinable by the CII until 31 August 2020.  They do not relate to tax year 2020/21 which is only examinable by the CII from 1 September 2020.

1. What is the purpose of the cooling-off period under consumer credit legislation?
   1. To allow the borrower sufficient time to change their mind and withdraw from a loan agreement if required
   2. To allow the lender sufficient time to consider all material facts before making an offer to the borrower
   3. To allow the intermediary sufficient time to complete their research before presenting their recommendations to the client
   4. To allow the borrower to gather all requested documentation and to complete all required paperwork

2. A fund has an average return of 10% per year and a beta of 1.4. This compares to the return on the market of 6% and the risk-free rate of 1.5% Tick all that apply.
   1. The fund’s alpha is 2.2%.
   2. The fund’s Sharpe ratio is 0.60.
   3. Alpha is the part of the return which cannot be explained by movements in the overall market.
   4. A positive alpha indicates that the security has performed better than would be predicted given its information ratio.

3. With regard to taxation, trustees of an interest in possession trust where the asset is a rental property should be aware that:
   1. they will only ever be charged to basic rate tax on the rental income.
   2. a higher rate taxpaying beneficiary will not owe any extra tax on rental income.
   3. they are entitled to tax relief for the expenses they incur in managing the trust.
   4. as trustees, they will be entitled to a personal allowance.

4. Simon has decided to make his own investment decisions and has implemented a Self-Invested Personal Pension (SIPP). This will allow him to use the plan as: Tick all that apply.
   1. a route to invest in commercial property.
   2. a way of making loans to his limited company.
   3. a platform to operate income withdrawals through drawdown.
   4. funding for his buy-to-let properties.

5. Shona has been advised to take out an increasing term assurance as protection for her dependants. The reason for this would be:
   1. to ensure that the sum assured keeps pace with inflation.
   2. to ensure that the premium increases are in line with salary increases each year.
   3. to ensure that the original sum assured can be maintained over the term of the policy.
   4. to ensure that the premiums and the sum assured rise in line with interest rates.

Answers

1. A – See R01 Study Text, Chp 5:2
   Grab our taster mock exam paper for CII R01. Click here to download.

2. AC – See R02 Study Text, Chp 9
   Grab our taster mock exam paper for CII R02. Click here to download.

3. A – See R03 Study Text, Chp 1
   Grab our taster mock exam paper for CII R03. Click here to download.

4. AC – See R04 Study Text, Chp 8
   Grab our taster mock exam paper for CII R04 Click here to download.

5. A – See R05 Study Text, Chp 4
   Grab our taster mock exam paper for CII R05. Click here to download.

How did you find this week’s questions? Did you complete them in 5 minutes? Did you get them all correct? Do you disagree with any?

If you found this quiz useful for your CII exam revision, please do share it with your colleagues.