Friday Five Focus on Investments – 14 May – 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 2020/21, examinable by the CII until 31 August 2021. They do not relate to tax year 2021/22 which is only examinable by the CII from 1 September 2021.

1. Within a split capital investment trust, the “hurdle rate” is an indication of the:
   1. capital and income return on a particular share until wind-up.
   2. annual growth rate investments must achieve to pay the current purchase price, the pre-determined redemption value or the value at wind-up.
   3. ratio by which the predetermined redemption value for a class of shares is currently covered by those assets of the company that are available for them.
   4. annual percentage rate required to cover each share class at wind-up but based on growing only the equity portion of the portfolio.

2. Milly has recently bought unlisted shares from her savings in a Save As You Earn scheme. How many days does she have to invest these in an ISA for them to be treated as an ‘eligible investment’?
   1. 14 days
   2. 21 days
   3. 28 days
   4. 90 days

3. Which of the following conditions must be satisfied in order for an endowment policy to be qualifying? Tick all that apply.
   1. Premiums paid in any one year must not double those paid in any other year
   2. Term of at least 7½ years
   3. Minimum level of life assurance cover is 80% of the total premium payable
   4. Premiums payable at least annually

4. The main use of a company’s income statement is to show:
   1. the performance of the company over an accounting period.
   2. how the company’s cash has been generated.
   3. the statement of changes in equity.
   4. the financial position for a group of companies.

5. Henry, age 41, has an adventurous attitude to risk and is considering an investment in a Venture Capital Trust. He is a higher rate taxpayer so should be aware that:
   1. dividends from ordinary shares in VCTs are exempt from income tax.
   2. income tax relief will be clawed back if he does not hold the shares for 3 years.
   3. on disposal, he could potentially be liable to capital gains tax at 20%.
   4. dividends from ordinary shares in VCTs are taxable at 32.5% over his dividend allowance.

Answers

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

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

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

4. A – See J10 Study Text, Chp 14
   Grab our taster mock exam paper for CII J10 Click here to download.

5. A – See J10 Study Text, Chp 3
   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.