Friday Five Focus on Investments – 18 February – 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. The public sector net cash requirement is growing. What does this indicate?
   1. The economy is expanding.
   2. Spending on unemployment is falling.
   3. The economy is in recession.
   4. Tax revenues are rising.

2. A savings account pays a nominal rate of interest at 6%; this is compounded monthly. What is the effective rate of interest?
   1. 6.72%
   2. 6.47%
   3. 6.17%
   4. 6.62%

3. How does the pragmatic approach to asset allocation differ from Modern Portfolio Theory?
   1. Modern portfolio theory uses diversification to reduce risk.
   2. Modern portfolio theory is concerned with the interaction of different asset classes.
   3. Pragmatists use forward-looking judgements of likely returns and volatility to determine portfolio weightings.
   4. Pragmatists use asset allocation as a defensive strategy to preserve capital.

4. Investment banks and brokers publish research on investments providing investors with valuable insight into a company’s prospects. What is a potential limitation of this?
   1. Research is not tailored to a client’s individual needs
   2. If they are written by professionals, they provide a valuable insight.
   3. The information usually comes with a subscription cost.
   4. Information is usually only available to subscribers to the research.

5. If a client is a charity and wishes a firm to act on their instructions and execute trades on their behalf, they will need to obtain a:
   1. legal entity identifier code.
   2. charity identifier statement.
   3. tax exemption identifier code.
   4. legal structure statement.

Answers

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

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

3. C – See R02 Study Text, Chp 10
   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 6
   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.