Friday Five Focus on Investments – 12 August – 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. They do not relate to tax year 2022/23 which is only examinable by the CII from 1 September 2022.

1. An investor buys shares in a FTSE 100 company electronically through the CREST system at a cost of £900. Which of the following is true regarding their liability to stamp duty reserve tax?
   1. As the transaction is below £1,000, they will not be liable.
   2. They will be liable to SDRT of £4.50.
   3. As they are buying shares rather than selling them, they will not be liable.
   4. They will be liable to SDRT of £5.

2. Which of the following are perceived to be advantages of with profit funds? (Tick all that apply)
   1. Transparency
   2. Reduced reversionary bonuses
   3. Exposure to equity markets for risk-averse investors
   4. Ownership rights in the life office

3. Which of the following purchases of property would NOT be liable for stamp duty land tax?
   

   Name	Scenario	Purchase Price
   Yvonne	First Time Buyer	£575,000
   Simone	Buyer buying a second ‘buy to let’ property	£125,000
   Andrea	Non-residential property	£140,000
   Elizabeth	Commercial property	£160,000

   1. Yvonne
   2. Simone
   3. Andrea
   4. Elizabeth

4. Modified duration is the measure of the sensitivity of a bond or bond portfolio to a move in interest rates. If a fixed rate bond has a duration of 5 and interest rates move by 1%, it will move by:
   1. 5% in the same direction.
   2. 5% in the opposite direction.
   3. 1% in the same direction.
   4. 1% in the opposite direction.

5. Company A and B are both telecoms companies. Company A has a PE ratio of 8 and company B has a PE ratio of 4. If the sector average is 5, this tells us that:
   1. Company A is definitely overpriced in the marketplace.
   2. Company B is definitely under-priced in the marketplace.
   3. Company A is expected to achieve above average growth.
   4. Company B is a potential and imminent takeover target.

Answers

1. B – See R02 Study Text, Chp 10/2
   Grab our taster mock exam paper for CII R02. Click here to download.

2. CD – See R02 Study Text, Chp 8
   Grab our taster mock exam paper for CII R02. Click here to download.

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

4. B – See J10 Study Text, Chp 9
   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.