Friday Five Focus on Investments – 2 October – 5 Questions in 5 Minutes

Friday Five Focus on Investments – 5 Questions in 5 Minutes Every Friday

What’s this all about?

Check out the new format of our Friday Five quiz. Each week, we will ask questions relating to one of these topics: Investments, Taxation, Pensions, Protection, or Regulation. This week, our Friday Five is relevant to the CII’s investment-related exams, specifically R02, AF4, and J10. 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.

1. Susan has invested in four gilts, the details of which are below. Which gives her the best interest yield?
   

   Gilt	Price	Coupon
   1	109.2	4.2%
   2	111.4	4.8%
   3	123.8	5.2%
   4	119.6	5.0%

   1. Gilt 1
   2. Gilt 2
   3. Gilt 3
   4. Gilt 4

2. Limetree has earnings per share of 18.24p and a dividend per share of 7.52p. What is their dividend cover?
   1. 2.43 times
   2. 2.43%
   3. 4.12 times
   4. 4.12%

3. The Capital Asset Pricing Model (CAPM) provides the relationship between a security’s systematic risk and its expected return so that:
   1. securities with a low beta would provide the highest returns.
   2. securities with high beta can be expected to provide a higher return.
   3. non-systematic risk can be eliminated through diversification.
   4. the risk premium can be determined.

4. If risk is present in all investments, we need to consider how to measure it and identify the risk premium needed by investors. The best definition of ‘risk premium’ is the:
   1. reward that investors would want to compensate for the extra risk taken.
   2. extra premium an investor is prepared to pay to guarantee performance.
   3. increased premium paid by an investor to avoid risk within their portfolio.
   4. reward that an investor requires to avoid risk within their portfolio.

5. The FTSE100 is made up of the 100 largest companies by capitalisation. How often is membership revised?
   1. Monthly
   2. Quarterly
   3. Six-monthly
   4. Annually

Answers

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

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

3. B – See R02 Study Text, Chp 4
   Grab our taster mock exam paper for CII R02. Click here to download.

4. A – See J10 Study Text, Chp 9
   Grab our taster mock exam paper for CII J10 Click here to download.

5. B – See J10 Study Text, Chp 11
   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.