Friday Five Focus on Investments – 5 Questions in 5 Minutes – 14 Aug 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. A financial adviser is considering a fettered multi-manager fund for a client. They should be aware that a fettered fund can invest
   1. only in funds run by the same management group.
   2. in funds from any management group.
   3. only in funds within the same asset class.
   4. only in multi-manager funds.

2. A fund manager is considering writing call options. She should be aware that the strategy of ‘writing uncovered calls’ specifically refers to
   1. buying derivatives to take an aggressive position in an underlying index.
   2. writing a call option on assets that the writer owns.
   3. writing a call option over assets that the seller does not own.
   4. buying a put option and entering into an obligation to purchase the asset at a fixed price.

3. Which of the following products is usually the most tax efficient and simple way for clients to hold equity-based investments?
   1. A personal pension.
   2. A unit trust or open-ended investment company.
   3. An offshore investment bond.
   4. An onshore investment bond.

4. When considering the differences between Stamp Duty (SD) and Stamp Duty Reserve Tax (SDRT) it is true to say that
   1. SD is applied on sales and SDRT only applies on purchases.
   2. SD is applied on transactions through CREST.
   3. SDRT is rounded to the next multiple of £5.
   4. SDRT is rounded to the nearest penny.

5. The least volatile fixed interest investments are those with a
   1. long period to maturity and a high coupon.
   2. short period to maturity and a high coupon.
   3. long period to maturity and a low coupon.
   4. short period to maturity and a low coupon.

Answers

1. A; See R02 Study Text, Chp 7; Rationale: The term ‘fettered’ fund applies to a type of multi-manager fund that can only invest in funds run by the same management group, whereas an unfettered fund can select from any fund and management group.
2. C; See R02 Study Text, Chp 8; Rationale: Writing uncovered calls is the strategy of writing options over shares (or other assets) that the seller (or writer) does not own. These are much riskier than a covered call where the writer does own the underlying asset.
3. B; See R02 Study Text, Chp 10; Rationale: It is considered that unit trusts and OEICs are the most tax efficient and simple way to hold equity-based investments.
4. D; See R02 Study Text, Chp 2; Rationale: Stamp duty and SDRT are both a 0.5% government tax charge on the transfer of UK shares; however, there are some notable differences between the two. SDRT applies to electronic transactions through the CREST system and is rounded to the nearest penny, and stamp duty applies to transactions over £1,000 using a stock transfer form and is rounded to the nearest £5.
5. B; See R02 Study Text, Chp 1; Rationale: The least volatile fixed interest investments are those with short periods to maturity and a high coupon. A short period to maturity means less exposure to interest rate fluctuations, and a high coupon means a return is received sooner than an investment with a low coupon with a similar date.

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