Friday Five Focus on Investments – 5 Questions in 5 Minutes – 27 Mar 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.

1. During the global financial crisis, the majority of shares on the London Stock Exchange fell; this is known as
   1. systematic risk.
   2. bail in risk.
   3. non-systematic risk.
   4. downgrade risk.

2. Yvonne’s SAYE matured in July 2025 with a value of £5,500. She wishes to transfer this directly into her ISA. As her adviser, you inform her that the
   1. value of the shares at the date of transfer counts towards the annual limit.
   2. transfer can only go into a cash ISA up to the value of £5,000.
   3. transfer value will not affect her ISA entitlement.
   4. transfer is a chargeable event and may give rise to a CGT liability.

3. Which of the following is considered under Modern Portfolio Theory when creating the optimum portfolio?
   1. Correlation of asset classes.
   2. Fund management styles.
   3. Charges.
   4. Economic conditions.

4. Commercial bills differ from Treasury bills in that they
   1. are issued at a discount to their maturity value.
   2. are short-term.
   3. usually have higher yields.
   4. fund daily cash flow needs.

5. James has consulted a financial adviser, who has advised him of the need to gather a range of soft facts. This would include all of the following except James’
   1. full name and address.
   2. views on socially responsible investments.
   3. attitude to investment risk.
   4. future financial priorities.

Answers

1. A; See R02 Study Text, Chp 6; Rationale: Systematic risk is the risk that there may be a reduction in returns as result of a fall in the stock market generally. During the financial crisis virtually all shares on the London Stock Exchange fell.
2. A; See R03 Study Text, Chp 8; Rationale: If Yvonne transfers shares from her SAYE to an ISA, this will be a CGT-free transfer, but the £5,500 will count towards her £20,000 ISA limit.
3. A; See R02 Study Text, Chp 10; Rationale: Modern Portfolio Theory suggests that portfolios can be constructed so the expected return is maximised for the given level of risk. These optimum portfolios take into consideration historic return rates and volatility of the investments but also the correlation between the asset classes.
4. C; See R02 Study Text, Chp 1; Rationale: Treasury bills are issued by the government whilst commercial bills are issued by companies; both serve to meet short-term (daily) cash flow requirements, and both are issued at a discount to their maturity value. Commercial bills have higher yields than the government-backed treasury bills as they are higher risk.
5. A; See R02 Study Text, Chp 9; Rationale: Soft facts are the client’s thoughts, views and beliefs which cannot be scientifically quantified. Name and address are factual and would therefore be considered a ‘hard’ fact.

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