Friday Five Focus on Investments – 14 April – 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 2022/23, examinable by the CII until 31 August 2023. They do not relate to tax year 2023/24 which is only examinable by the CII from 1 September 2023.

1. Kim is considering the purchase of an investment trust ISA or a unit trust ISA. In comparing them, she should be aware that
   1. investment trust ISAs provide a much broad spread of holdings for relatively small investment.
   2. the ISA structure allows the unit trust manager to receive interests from corporate bonds without any tax being deducted.
   3. unit trust ISAs are eligible to invest in any UK UCITS scheme recognised by the FCA.
   4. investment trust ISAs generally have a smaller investment choice.

2. A client has invested £5,000 in each of the following equity-based ISA funds
   

   Investment	Charge	Return per annum
   A	5% initial charge	4%
   B	4% exit charge	4.9%
   C	4.5% exit charge	5.1%

   If at the end of two years, the three funds are encashed, which investment will be worth the most?
   1. Investment A.
   2. Investment B.
   3. Investment C.
   4. They are all worth the same.

3. Pippa is a higher-rate taxpayer. Why is the tax position of a Guaranteed Growth Bond attractive for her? (Tick all that apply)
   1. The underlying funds are taxed at basic rate on income from gilts.
   2. The life fund pays 25% tax on any capital gains made in the fund.
   3. They have the ability to postpone encashment.
   4. Any gain on encashment is not grossed up.

4. Which of the following clients is/are likely to be hardest hit by inflation?
   1. Geraldine, age 55, who has a significant proportion of her portfolio invested in commercial property.
   2. Arthur, age 22, whose portfolio contains a number of hedge funds.
   3. Jack and Jan, a high net worth couple, who have a significant proportion of their portfolio in emerging markets.
   4. Ella and Tim, an elderly couple, whose wealth is mostly held in cash and fixed interest investments.

5. When considering methods of sampling, which method divides the population into subgroups and selects a sample from each subgroup?
   1. Simple random sample.
   2. Systematic random sampling.
   3. Data-mining sampling.
   4. Stratified random sampling.

Answers

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

2. B – See R02 Study Text, Chp 5/8
   Grab our taster mock exam paper for CII R02. Click here to download.

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

4. D – 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 12
   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.