Friday Five Focus on Investments – 1 October – 5 Questions in 5 Minutes

Friday Five Focus on Investments – 5 Questions in 5 Minutes Every Friday

What’s this all about?

Each week, we ask questions relating to one of these topics: Investments, Taxation, Pensions, Protection, or Regulation. This week, our Friday Five is relevant to Investments; this is useful as you prepare for any of the CII’s R02, AF4, or J10 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 2021/22, examinable by the CII until 31 August 2022.

1. Why has residential property investment been a popular investment over the past 20 years? Tick all that apply.
   1. Falling yields on other asset classes made rental yields attractive
   2. Prospect for capital growth
   3. Introduction of deferred CGT for landlords
   4. Abolition of stamp duty land tax on buy-to-let properties

2. When applying the information ratio (IR), which of the following factors are used in the formula? Tick all that apply.
   1. Fund return
   2. Benchmark return
   3. Beta
   4. Tracking error

3. Which of the following is an example of the government trying to smooth the economic cycle through fiscal policy?
   1. Controlling the supply of money
   2. Influencing levels of demand through taxation
   3. Controlling interest rates
   4. Influencing inflation expectations

4. Modern Portfolio Theory categorises risk as being one of two types: systematic and non-systematic. Non-systematic is the risk:
   1. of a single financial institution defaulting.
   2. of disruption throughout the financial system.
   3. of not achieving a financial target.
   4. that returns will be affected by stagnant growth.

5. Behavioural finance is an area of research that explores how emotional and psychological factors affect investment decisions. In Behavioural Finance Prospect Theory deals with the fact that:
   1. behavioural abnormalities will eventually be priced out of the market.
   2. the effect of human behaviour on the market can be predicted.
   3. behavioural finance is a collection of explanations of anomalies.
   4. people do not always behave rationally.

Answers

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

2. ABD – See R02 Study Text, Chp 11
   Grab our taster mock exam paper for CII R02. Click here to download.

3. B – See R02 Study Text, Chp 3
   Grab our taster mock exam paper for CII R02. Click here to download.

4. A – See J10 Study Text, Chp 9
   Grab our taster mock exam paper for CII J10 Click here to download.

5. D – See J10 Study Text, Chp 10
   Grab our taster mock exam paper for CII J10. 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.