Friday Five Focus on Investments – 16 September – 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.

1. Alex has a portfolio almost entirely invested in open-ended investment companies (OEIC). Which of the following characteristics can you tell him apply to OEICs? (Tick all that apply)
   1. Generally, OEICs carry an initial charge and an annual management fee.
   2. OEIC assets are held for investors by trustees.
   3. OEICs allow investors to participate in a large portfolio of shares.
   4. The value of the OEIC will depend upon the value of the underlying assets.

2. Kerry has been advised that her investment portfolio has a money-weighted rate of return of 9%. You can tell her that this (Tick all that apply)
   1. reflects cash inflows as well as outflows into the fund.
   2. includes any additional investment she has made.
   3. does not reflect inflows or outflows of money into the fund.
   4. figure enables her to compare performance with different fund managers.

3. What does a country’s ‘real exchange rate’ measure?
   1. The price at which two currencies trade on the foreign exchange markets.
   2. The price of domestic goods relative to foreign prices taking into account the exchange rate.
   3. A country’s competitiveness.
   4. The effective exchange rates between countries’ currencies.

4. Harry paid £98 per £100 nominal for a gilt with a 4% coupon. His friend Fred paid £105 per £100 nominal for a gilt with a 5% coupon. How much higher is the interest yield on Fred’s gilt than on Harry’s?
   1. 0.68%
   2. 0.80%
   3. 1.00%.
   4. 1.05%.

5. Your new clients, Tony and Barbara, have asked why they need to enter into a client agreement with you. You explain to them that the purpose of the client agreement is to
   1. ensure they have a clear understanding of issues such as the amount of reporting, frequency of reviews etc.
   2. outline how you go about the investment process and the industry’s compensation scheme.
   3. provide the administrative template for Tony and Barbara’s actions and your recommendations.
   4. identify and obtain Tony and Barbara’s agreement to a portfolio designed to meet their key needs and objectives.

Answers

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

2. AB – 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 11
   Grab our taster mock exam paper for CII J10 Click here to download.

5. A – See J10 Study Text, Chp 1
   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.