Test
Chapter 5
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Preguntas del test (18)
1Which of the following types of investment incurs a liability for capital gains tax once sold?
- AClassic car
- BGovernment bonds
- CUnits in unit trusts
- DPrimary residence
2Which of the following implications will help to ensure financial advisers act in their clients'
best interest?- AFirms that give investment advice must address the potential for adviser remuneration to
distort consumer outcomes - BInvestment firms will need to switch clients into products that have no trailing
commissions - CFirms that give investment advice must charge fees within a guidance range set by the FCA
- DInvestment firms will need to change their price lists to remove all percentage based fees
- AFirms that give investment advice must address the potential for adviser remuneration to
3What are the possible implications for investment performance of investing in an ethical fund?
- AThe fund may be more volatile because of the increased exposure to smaller company
holdings - BEthical funds invest primarily in large companies producing lower total returns
- CThere are no suitable benchmarks for the client to measure performance against
- DTotal returns are likely to be higher due to the increased level of diversification in ethical
funds
- AThe fund may be more volatile because of the increased exposure to smaller company
4Jackie is a private client investor and you ascertain that her investment objective and risk
tolerance are capital growth and cautious. During the meeting she asks you for your thoughts
on the use of derivatives. You respond that, in your opinion, derivatives:- Aare normally appropriate only where there is a high risk tolerance
- Bonly generate an income stream and so are not compatible with her objective
- Ccan generate capital growth and are suitable where there is a low risk tolerance
- Dcan be traded only on an execution only basis as firms cannot offer any advice or opinion
5Which of the following rules applying to financial intermediaries is directly underpinned by the
principle of fiduciary responsibility?- ACommission disclosure
- BMoney laundering
- CProfessional indemnity
- DBest execution
6Corporation tax is a factor when considering investment as it can:
- Ablock investment opportunities
- Bdiffer between countries
- Cbe deferred indefinitely
- Dbe subject to a different accounting period
7When recommending an investment product to a client, what material information MUST the
adviser disclose in order to satisfy the fiduciary relationship that exists between the two
parties?- AOnly details which have been specifically requested by the client
- BWhatever is needed to produce a guaranteed return
- COnly details which are considered to affect the investment risk
- DWhatever is needed in order for the client to make an informed decision
8An independent financial adviser would make recommendations on which type of product?
- AThe firm's own products
- BProducts of one other provider
- CProducts from across the market place
- DA range of products from a limited number of providers
9A consumer purchases a designated investment and the firm provides the consumer with
detailed cancellation rights over the telephone, immediately after the purchase. How has the
firm contravened the rules?- ADesignated investments require notice of cancellation rights to be signed by the customer
- BCancellation rights must be given in writing
- CConsumers must be informed of cancellation rights before a purchase is confirmed in all
cases - DConsumers must receive cancellation rights in writing before identification checks are
undertaken
10Which is the MOST important reason for an adviser to conduct regular reviews of a client's
circumstances and arrangements?- ATo help the client complete any tax documentation
- BTo ensure that the adviser complies with any regulatory requirements
- CTo ensure that any products continue to meet a client's needs
- DTo ensure that the adviser retains any repeat business from the client
11Paulo is a non-resident investor. How is he likely to benefit from a double taxation treaty?
- ABy incurring tax at a reduced concessionary rate
- BBy opting for the country with the lowest tax rate
- CBy avoiding the need to register with the tax authorities
- DBy obtaining a refund of withholding tax
12When conducting investment business for a private customer, what must a firm do?
- AOnly invest in products that are classified as low risk
- BMake the customer aware of costs and commissions
- CMeet face to face with the client
- DDisclose the underlying investments in the investment products
13Which of the following would provide the lowest level of risk for risk averse investors with
short term horizons?- ALong term gilts
- BCash deposits
- COrdinary shares
- DWarrants
14How does asset allocation help meet a client's needs?
- AIt enables clients to invest wholly in one of the MAIN asset classes to maximise returns
- BIt reduces the investor's risk by investing across a range of asset classes, sectors and individual stocks
- CIt provides a benchmark for a client to assess how well his investments have performed
- DIt enables investors to pool their investments with others and reduce the risk of direct
investment in shares
15Which of the following is a factor that must be considered when constructing a portfolio?
- AVerification of the client's identity
- BThe client's risk tolerance
- CThe category of investment service required
- DPerformance measurement
16If clients approach a firm knowing exactly which product they wish to purchase, and ask the
firm simply to arrange the purchase, this type of transaction is normally described as:- Abest advice
- Binstruction processing
- Cnominal dealing
- Dexecution only
17Which mix of investments is most appropriate for a risk averse investor?
- A50% commodities and 50% equities
- B50% cash and 50% gilts
- C50% foreign exchange and 50% CFD's
- D50% property and 50% PIBS
18The relationship between an adviser and a client means that the adviser has a duty to:
- Aensure suitable compensation is available if the client suffers a loss
- Bcheck with a third party before providing advice to the client
- Creport any wrong-doings to the authorities
- Dalways act in the best interests of the client
Información
- Descripción
- El usuario ha eliminado su información de asignaturas Test sobre Chapter 5, creado por Usuario eliminado el 03/09/2021.
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- Creado el 3 sep 2021 · actualizado el 17 sep 2021
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