Friday Five Focus on Investments – 10 December – 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. Harry is interested in money market funds. Which of the following types of risk should he be particularly aware of?
   1. Event risk
   2. Interest rate risk
   3. Systematic risk
   4. Diversification risk

2. Elevator PLC’s year-end accounts contain the following information:
   Fixed assets £8,450
   Current assets £2,300
   Current liabilities £1,875
   Long-term debt £1,950They have 1,250 ordinary shares issued. What is their net asset value?

1. 1. £2.66
   2. £5.54
   3. £1.86
   4. £6.34

3. Ed manages a large index tracker fund. He uses a computerised model to track the index his fund follows. This suggests that he is therefore using:
   1. Optimisation
   2. Replication
   3. Inversion
   4. Stratification

4. If an investment portfolio has an annualised return of 8% compared to a 3% return from a risk-free investment and the standard deviation of the portfolio is 7%, what is the Sharpe ratio?
   1. 0.5
   2. 0.71
   3. 3.5
   4. 7.1

5. Company A has paid a dividend of 20p this year and is expected to continue at this level. Its return on equity is 10%. Using the dividend discount model, we can say that its share price should be:
   1. 2p.
   2. 100p.
   3. 200p.
   4. 400p.

Answers

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

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

3. A – See R02 Study Text, Chp 7
   Grab our taster mock exam paper for CII R02. Click here to download.

4. B – See J10 Study Text, Chp 11
   Grab our taster mock exam paper for CII J10 Click here to download.

5. C – See J10 Study Text, Chp 14
   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.