Friday Five Focus on Investments – 19 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 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. A financial adviser is formulating a client’s investment strategy; what should generally be the last consideration?
   1. Choice of tax wrapper.
   2. Investment objective.
   3. Asset allocation.
   4. Risk profile.

2. Which of the following is a technique of portfolio modelling that incorporates random variations to predict future returns?
   1. Pragmatic assessment.
   2. Stochastic modelling.
   3. Optimised assessment.
   4. Correlation modelling.

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. The term must be at least 7½ years.
   3. The minimum level of life assurance is 80% of the total premium payable.
   4. Premiums must be payable at least annually.

4. The Efficient Market Hypothesis (EMH) was developed by Eugene Fama in the 1960s. He believed that
   1. security price movements are random and therefore predictable.
   2. it should be impossible to achieve returns in excess of average market returns consistently through stock selection or market timing.
   3. security prices reflect some available information in the market and prices slowly adjust to new information.
   4. an investor can only obtain higher than average returns through the skill and expertise of buying low-risk investments.

5. Elevator PLC’s year-end accounts contain the following information
   Fixed Assets £8,450
   Current assets £2,300
   Current liabilities £1,875
   Long-term debt £1,950
   They have 1,250 ordinary shares issued. What is their net asset value?
   1. £2.66
   2. £5.54
   3. £1.86
   4. £6.34

Answers

1. A – See R02 Study Text, Chp 9
   Grab our taster mock exam paper for CII R02. Click here to download.

2. B – See R02 Study Text, Chp 10
   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. B – See J10 Study Text, Chp 10
   Grab our taster mock exam paper for CII J10 Click here to download.

5. B – 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.