Friday Five Focus on Investments – 6 November – 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 the CII’s R02, AF4, 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.

1. If a bond has a duration of 4 and interest rates fall by 1%, the price of the bond would:
   1. increase by 4%.
   2. increase by 0.25%.
   3. decrease by 4%.
   4. decrease by 0.25%.

2. A retail client wishes to understand the features of an insurance company property fund. You can tell them that one of the features is that:
   1. the fund does not suffer corporation tax.
   2. units can always be encashed easily.
   3. the fund cannot borrow money.
   4. the unit value is linked to the UK housing index.

3. Through the fact-finding process with Mr Smith, it becomes clear his goals are unachievable. How should this be overcome?
   1. Ask Mr Smith to prioritise as soon as possible.
   2. Scale back each goal proportionately.
   3. Make him aware and help to identify needs, priorities, and re-negotiate goals.
   4. The role of prioritising lies with the adviser and he should do this as soon as possible.

4. Glen McArthur Financial Management’s ‘Aggressive Opportunities Fund’ has a Jensen’s alpha of 1.2%. This tells potential investors that:
   1. the manager has outperformed the market.
   2. the fund has a high level of gearing.
   3. beta has been adjusted for alpha.
   4. the standard deviation is the same as beta

5. Under UK regulations an investor is judged to have a notifiable interest in a public company whereby they are obliged to inform the company of this holding if they hold:
   1. 1% or more of its shares.
   2. 2% or more of its shares.
   3. 3% or more of its shares.
   4. 5% or more of its shares.

Answers

1. A – See R02 Study Text, Chp 6
   Grab our taster mock exam paper for CII R02. Click here to download.

2. C – See R02 Study Text, Chp 8
   Grab our taster mock exam paper for CII R02. Click here to download.

3. C – See R02 Study Text, Chp 9
   Grab our taster mock exam paper for CII R02. Click here to download.

4. A – See J10 Study Text, Chp 11
   Grab our taster mock exam paper for CII J10 Click here to download.

5. C – See J10 Study Text, Chp 14
   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.