You are a financial adviser with prospective clients in their fifties with two incomes and few or no liabilities. Your clients have typical lifestyles. Which lifestyle stage BEST represents their present situation?
a. Single employed
b. Family nest
c. Shrinking family / Empty nest
What is the MAIN role of fund research houses in the funds management industry?
a. To rate individual securities
b. To report competitor’s product development
c. To aid investors in selecting or monitoring a fund manager
d. To distribute managed funds via the direct channel
Which of the following statements about diversification is INCORRECT?
a. Diversification is spreading your assets across different asset classes, sectors, countries or issuers of securities
b. Diversification is about purchasing shares with different correlations
c. Diversification is a benefit of investing in managed funds
d. Diversification is about “putting all your eggs in one basket”
Investments in smaller company stock compared to investments in larger company stock are generally:
a. More volatile because they are less liquid, have less stock issued and have less diversified sources of income
b. More volatile because they are less liquid, have less stock issued and have more diversified sources of income
c. Less volatile because they are less liquid, have less stock issued and have less diversified sources of income
d. Less volatile because they are less liquid, have less stock issued and have more diversified sources of income
A broker tells you he has outperformed the market by trading on insider information in the Australian Stock Exchange. You should respond to this situation by which of the following?
a. Not asking for information as any arbitrage opportunities would now have passed
b. Not asking for information and reporting it to the regulator as it is an illegal activity in Australia
c. Asking for information so that you can trade based on that information
d. Asking for information so that a client can trade based on that information
Compared to growth investing, value oriented equities fund managers generally prefer stock with:
a. A higher price earnings ratio and a lower dividend yield
b. A lower price earnings ratio and a lower dividend yield
c. A higher price earnings ratio and a higher dividend yield
d. A lower price earnings ratio and a higher dividend yield
Compared to top-down investing, bottom-up investing:
a. Focuses on macro-economic issues
b. Focuses on fundamentals of shares
c. Is active
d. Is passive
Your client is interested in investing in an equity fund. Which step of the investment management process will require you to understand the investment management style?
a. Defining the investment objectives and constraints
b. Setting the investment strategy
c. Implementing and managing the portfolio
d. Monitoring and reviewing
You propose managing a portfolio of fixed income securities by utilising a passive strategy. Which of the following actions would your strategy involve?
a. Buying inflation linked bonds
b. Buying index linked bonds
c. Matching the fixed income securities to a stated performance benchmark
d. Managing the sector-spread to benefit from a positive sloping yield curve
Which of the following does NOT have both an income return and a growth return?
a. Ordinary shares
b. Term deposits
c. Managed funds
d. Rental property
If the market interest rates on bonds were to rise from 5% to 6%, what would be the impact on an existing fixed-interest investment in bonds?
a. Interest receipts from the bonds would rise and the market price of the bond would also rise
b. Interest receipts from the bonds would fall and the market price of the bond would also fall
c. Interest receipts from the bonds would be unaffected and the market price of the bond would rise
d. Interest receipts from the bonds would be unaffected and the market price of the bond would fall
Which of the following statements is INCORRECT?
a. Investment asset correlation is important because the goal of asset allocation is to combine assets with high correlation
b. A diversified investment is a portfolio of various assets that earns the highest return for the least risk
c. The purpose of asset allocation is to lower portfolio volatility
d. Combining low correlation and/or negatively correlated investments in a portfolio has the effect of lowering the overall volatility of the portfolio
Beta is a measure of:
a. A stock’s volatility in relation to the market
b. How a stock has performed in comparison to a benchmark index
c. A measure the correlation in price moves of any two stocks
d. A measure of how far a stock moves relative to its mean
Which of the following describes an index measure of systematic risk?
a. Standard deviation
b. Coefficient of variation
Which of the following is NOT a characteristic of an ordinary share?
a. Carries no special or preferred rights
b. Voting rights at a general meeting of the company
c. Participates in dividends
d. Unlimited liability
12a ‘low’ correlation
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