Friday Five Focus on Investments – 5 Questions in 5 Minutes – 10 Jul 2026

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 2025/26, examinable by the CII until 31 August 2026. They do not relate to tax year 2026/27 which is only examinable by the CII from 1 September 2026.

1. With a unit trust, it is the trustee’s duty to maintain a register of unitholders which must be available for inspection by the unitholders. However, the register may be closed at times during a year for a period of not more than
   1. 10 days.
   2. 12 days.
   3. 21 days.
   4. 30 days.

2. When comparing the difference between a derivative contract which is ‘over-the-counter’ (OTC) and one that is ‘exchange traded’ we can say that the OTC contract
   1. is cheaper to enter into.
   2. will be tailored to the client.
   3. is easier to trade on an exchange.
   4. has standard terms and conditions.

3. Jason is a financial adviser and is explaining to his client why he is considering employing tactical asset allocation. The most likely reason is
   1. that the client’s circumstances have changed.
   2. that Jason wants to ‘time the market’ through judgement calls on asset classes.
   3. to ensure the portfolio conforms to the client’s ideal asset allocation.
   4. there’s been a change in an underlying assumption within the stochastic modelling tool.

4. Alison holds fixed interest securities. One of the gilts she owns has ten years to redemption. The Debt Management Office classifies this as a
   1. short dated gilt.
   2. medium dated gilt.
   3. long dated gilt.
   4. average dated gilt.

5. Sarah is considering an investment in conventional gilts. She should be aware that the “dirty price” refers to the
   1. ‘clean price’ plus an additional amount for junk or high yielding bonds.
   2. ‘clean price’ of the stock plus or minus any interest adjustments.
   3. mid-market price quoted in major newspapers.
   4. value of stock over the period until maturity as it moves above or below par.

Answers

1. D; See R02 Study Text, Chp 7; Rationale: The register of unit holders within a unit trust can be closed by the trustees for up to 30 days in any one year.
2. B; See R02 Study Text, Chp 8; Rationale: An OTC contract is tailored for the client, unlike an exchange-traded derivative, which has standard terms and conditions and hence are cheaper and easier to trade on an exchange.
3. B; See R02 Study Text, Chp 10; Rationale: Tactical asset allocation is an active asset allocation strategy where the aim is to ‘time the market’ through judgement calls on asset classes to try to maximise returns.
4. B; See R02 Study Text, Chp 1; Rationale: Gilts are classified as shorts, mediums or longs depending on their time to redemption. A medium dated gilt has between seven and fifteen years to redemption.
5. B; See R02 Study Text, Chp 1; Rationale: The clean price is the price of a bond excluding any interest accrued since the last settlement date. The dirty price is the full price paid for a bond; it is the clean price adjusted for accrued interest.

Grab the resources you need!

Consistent exposure to exam-standard questions can make a big difference to how confidently you approach R02. Access the free R02 E-Mocks taster to preview the question style, layout and level of detail included in the full set.

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