Friday Five Focus on Investments – 9 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 2020/21, examinable by the CII until 31 August 2021. They do not relate to tax year 2021/22 which is only examinable by the CII from 1 September 2021.

1. James has one buy-to-let property and is currently looking to invest in a second. He has been warned that he may suffer liquidity risk. You can tell him that this refers to:
   1. the risk of the tenants’ being unable to pay the rent and him having to take legal action.
   2. a new government changing fiscal policy resulting in a reduced rental yield.
   3. the potential of his being forced to sell a security at a price below its fair value.
   4. the risk of his not being able to find tenants when an existing tenant vacates the property.

2. Tanya has two unit trusts. She has received income from them as follows:
   

   Unit Trust A		Unit Trust B
   	Interest of £200	Dividend of £300

   Tanya is a higher rate taxpayer; how much tax will she pay assuming she has used all her dividend allowance but none of her personal savings allowance?
   1. £22.50
   2. £97.50
   3. £125.00
   4. £177.50

3. What is a key issue to be considered in Discretionary Management Services?
   1. Use of historic portfolio date
   2. Tax management
   3. The range of funds / investments available
   4. The tax incentives for this service

4. A portfolio achieves the following returns:
   

   5%

   7%

   8%

   9%

   What is the range?
   1. 4%
   2. 5%
   3. 9%
   4. 14%

5. Elevator PLC’s year end accounts contain the following information:
   Fixed Assets £8,450
   Current assets £2,300
   Current liabilities £1,875
   Long-term debt £1,950
   They have 1,250 ordinary shares issued. What is their net asset value?
   1. £2.66
   2. £5.54
   3. £1.86
   4. £6.34

Answers

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

2. B – See R02 Study Text, Chp 7
   Grab our taster mock exam paper for CII R02. Click here to download.

3. B – See R02 Study Text, Chp 10
   Grab our taster mock exam paper for CII R02. Click here to download.

4. A – See J10 Study Text, Chp 12
   Grab our taster mock exam paper for CII J10 Click here to download.

5. B – 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.