Friday Five Focus on Investments – 27 August – 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. Fred holds his investments on a platform. He has a stocks and shares ISA, a SIPP and various unit trust and OEIC funds. Which of the following is a potential benefit of him doing this?
   1. The platform may offer automatic portfolio rebalancing.
   2. Platform fees are effectively paid by the product provider.
   3. All future transfers must be carried out ‘in specie’.
   4. He does not need to declare any income received to HMRC.

2. Which of the following are considered to be the main drawbacks of residential property investment? Tick all that apply.
   1. Regional variations in house prices
   2. Competition
   3. Liquidity
   4. Void periods

3. If a company’s share price was 225p and its earnings per share were 42.4p, what is the Price Earnings Ratio?
   1. 18.84
   2. 9.54
   3. 1.88
   4. 5.31

4. In addition to having a robust portfolio review process, how else can an investment manager mitigate portfolio drift?
   1. By periodically rebalancing the investment portfolio
   2. By encashing the highest performing assets
   3. By encashing the lowest performing assets
   4. By encashing 10% of the highest and lowest performers

5. Interest rate risk is particularly important for fixed income or floating/variable rate securities. Which of the following factors would tend to have the effect of reducing short-term interest rates?
   1. Quantitative easing
   2. Government plans to issue gilts to fund a deficit
   3. Expectations of rising inflation
   4. Strong economic activity

Answers

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

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

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

4. A – See J10 Study Text, Chp 6
   Grab our taster mock exam paper for CII J10 Click here to download.

5. A – See J10 Study Text, Chp 9
   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.