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Friday Five Focus on Investments – 29 April – 5 Questions in 5 Minutes

Friday Five Focus on Investments – 29 April – 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. They do not relate to tax year 2022/23 which is only examinable by the CII from 1 September 2022.

  1. The following investments have recently been made:
    InvestorProduct
    Clare Unit linked investment bond
    Stan Maximum Investment Plan
    Maggie Guaranteed Income Bond
    Tom Term Insurance Policy
    Which investor(s) will benefit from pound-cost averaging?

    1. Clare and Tom only
    2. Stan only
    3. Stan and Maggie
    4. Tom only
  1. Julianne’s financial adviser has carried out a review of her portfolio, which has resulted in it being rebalanced. The primary purpose of rebalancing is to:
    1. maximise portfolio performance over the long term.
    2. minimise the client’s capital gains tax liabilities both now and in the future.
    3. reduce the client’s exposure to risk.
    4. maintain the portfolio in line with the client’s stated needs and risk tolerance.
  1. If a portfolio was worth £12,000 at the start of the period and £12,500 at the end of the period, with £1,500 being received during the period, it is true to say that: Tick all that apply.
    1. the holding period return of the portfolio is 16.67%.
    2. the money weighted rate of return would allow a comparison to be made between fund managers.
    3. the holding period return of the portfolio is 16.00%.
    4. the money weighted rate of return is a modified form of the holding period return formula.
  1. Caren has savings in her local building society of £100,000. She feels that cash is the only safe place for her money and is fearful of the stock market. You explain to her that, in fact, her savings are exposed to each of the following risks with the exception of:
    1. inflation risk.
    2. investment risk.
    3. default risk.
    4. interest rate risk.
  1. Within the broad heading of risks to capital, there are a number of risks that need to be considered. Which of the following would be considered an event risk?
    1. Credit agency downgrading a bond
    2. Investors coming out of corporate bonds and into gilts
    3. Issuers defaulting on their obligations
    4. An industrial accident

 

Answers

  1. B – See R02 Study Text, Chp 8
    Grab our taster mock exam paper for CII R02. Click here to download.
  1. D – See R02 Study Text, Chp 9
    Grab our taster mock exam paper for CII R02. Click here to download.
  1. AD – See R02 Study Text, Chp 11
    Grab our taster mock exam paper for CII R02. Click here to download.
  1. B – See J10 Study Text, Chp 2
    Grab our taster mock exam paper for CII J10 Click here to download.
  1. D – 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?

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