Futures are distinguished from generic forward contracts in that they have which of the following characteristics?
I. They contain standardised terms
II. They trade on a formal exchange
III. They are regulated by overseeing agencies
IV. They are guaranteed by clearing houses
Correct
Futures are distinguished from generic forward contracts in that they contain standardised terms, trade on a formal exchange, are regulated by overseeing agencies, and are guaranteed by clearing houses.
Incorrect
Futures are distinguished from generic forward contracts in that they contain standardised terms, trade on a formal exchange, are regulated by overseeing agencies, and are guaranteed by clearing houses.
Question 2 of 20
2. Question
In a complete market, any and all identifiable payoffs can be obtained by trading which of the following in the market?
I. The bonds
II. The securities
III. The commodities
IV. The unit trusts
Correct
In a complete market, any and all identifiable payoffs can be obtained by trading the securities in the market.
Incorrect
In a complete market, any and all identifiable payoffs can be obtained by trading the securities in the market.
Question 3 of 20
3. Question
Instead of buying a security outright, an investor can also do which of the following in regards to options?
I. Buy a right to purchase at a future date
II. Sell a security at a future date
III. Trade a commodity at a future date
IV. Swap a currency at a future date
Correct
Instead of buying a security outright, an investor can buy a right to purchase or sell a security at a future date.
Incorrect
Instead of buying a security outright, an investor can buy a right to purchase or sell a security at a future date.
Question 4 of 20
4. Question
The life of an option may vary, but which of the following are the common duration?
I. Three months
II. Six months
III. Nine months
IV One year
Correct
The life of an option may vary, but the common durations adopted are three, six and nine months.
Incorrect
The life of an option may vary, but the common durations adopted are three, six and nine months.
Question 5 of 20
5. Question
Any investment involves a trade-off with which of the following, including the stock market?
I. Risk and return
II. Supply and demand
III. Interest and income
IV. Inflation and return
Correct
Any investment involves a trade-off between risk and return. The stock market is no different.
Incorrect
Any investment involves a trade-off between risk and return. The stock market is no different.
Question 6 of 20
6. Question
The unit trust is essentially an arrangement among which of the following?
I. Investors
II. The fund manager
III. The government
IV. The trustee
Correct
The unit trust is essentially a three-way arrangement among investors, the fund manager and the trustee.
Incorrect
The unit trust is essentially a three-way arrangement among investors, the fund manager and the trustee.
Question 7 of 20
7. Question
Some life insurance products can also serve as savings/investment instruments. These include which of the following?
I. Whole Life Insurance
II. Endowment Insurance
III. Health Insurance
IV. Savings Insurance
Correct
Some life insurance products can also serve as savings/investment instruments. These include the following two main types of life insurance policies:
Whole Life Insurance; and
Endowment Insurance.
Incorrect
Some life insurance products can also serve as savings/investment instruments. These include the following two main types of life insurance policies:
Whole Life Insurance; and
Endowment Insurance.
Question 8 of 20
8. Question
Corporations acquire equity funds by selling ownership shares to the following except?
I. Individuals
II. The public
III. The government
IV. Other corporations
Correct
Corporations acquire equity funds by selling ownership shares to either very few individuals or to the public.
Incorrect
Corporations acquire equity funds by selling ownership shares to either very few individuals or to the public.
Question 9 of 20
9. Question
A company goes public for which of the following reason(s)?
I. To raise capital
II. To have more liquidity
III. To invest on other stocks
IV. To have cash on hand
Correct
A company goes public to raise capital and have more liquidity or cash on hand by selling shares publicly.
Incorrect
A company goes public to raise capital and have more liquidity or cash on hand by selling shares publicly.
Question 10 of 20
10. Question
Yield to maturity takes into account the following except?
I. Maturity date
II. The coupon payment
III. The frequency of coupon payment
IV. The face value
Correct
Yield to maturity takes into account the maturity date, the coupon payment, the frequency of coupon payment, and the face value.
Incorrect
Yield to maturity takes into account the maturity date, the coupon payment, the frequency of coupon payment, and the face value.
Question 11 of 20
11. Question
Conservative investors tend to choose securities with shorter maturities in order to reduce risks, such as?
I. Interest rate risk
II. Default risk
III. Reinvestment risk
IV. Sovereign risk
Correct
Conservative investors tend to choose securities with shorter maturities in order to reduce risks, such as interest rate risk, default risk and reinvestment risk.
Incorrect
Conservative investors tend to choose securities with shorter maturities in order to reduce risks, such as interest rate risk, default risk and reinvestment risk.
Question 12 of 20
12. Question
Unlike ordinary shareholders, buyers of fixed income securities issued by a company are unlike ordinary shareholders because of which of the following factors?
I. They do not participate in the profits of the company.
II. They do not have other shareholder rights.
III. They do not participate in shareholders voting in company meetings.
IV. They do not have complete access to the accounts.
Correct
Unlike ordinary shareholders, buyers of fixed income securities issued by a company do not participate in the profits of the company. They also do not have other shareholder rights, such as those of shareholders voting in company meetings.
Incorrect
Unlike ordinary shareholders, buyers of fixed income securities issued by a company do not participate in the profits of the company. They also do not have other shareholder rights, such as those of shareholders voting in company meetings.
Question 13 of 20
13. Question
Which of the following statements is(are) not true in regards to government bonds?
I. Interest payments and repayment of principal are guaranteed by the government because of its flexibility in fiscal policy.
II. They are the safest type of investments, carrying almost no default or credit risk.
III. Government bond yields are usually the highest among fixed income securities of similar maturity period.
IV. They are used by the government to borrow money from the public.
Correct
Incorrect
Question 14 of 20
14. Question
Securities have various characteristics which are detailed in the indenture. Some of the more frequently encountered characteristics include the following except?
I. Secured
II. Debenture
III. Callable
IV. Accountable
Correct
Securities have various characteristics which are detailed in the indenture. Some of the more frequently encountered characteristics include the following:
Secured – a promise backed by specific assets as further
protection to the bondholder should the corporation default on
payment of coupon and/or principal. The interest is normally
quoted as a percentage (coupon rate) of the principal which is
also referred to as face value or face amount. The coupon
payments are normally payable twice a year, on a semi-annual
basis, and the coupon rates are quoted as such.
Debenture – an unsecured promise based only on the issuer’s
general credit status, to pay coupon and principal.
Callable – an option exercisable at the discretion of the issuer
to redeem the bond prior to its maturity date at a specified
price. The price will include compensation to the investor for
the loss associated with the early redemption.
Putable – an option which grants the investor the right to sell
the bond issue back to the issuer at par value on designated
dates. The advantage to the investor is that if interest rates
rise after the issue date, thereby reducing the value of the
bond, the investor can get the issuer to redeem the bond at
par.
Convertible – an option exercisable by the bondholder to
exchange the bond for a predetermined number of common or
preferred shares.
Incorrect
Securities have various characteristics which are detailed in the indenture. Some of the more frequently encountered characteristics include the following:
Secured – a promise backed by specific assets as further
protection to the bondholder should the corporation default on
payment of coupon and/or principal. The interest is normally
quoted as a percentage (coupon rate) of the principal which is
also referred to as face value or face amount. The coupon
payments are normally payable twice a year, on a semi-annual
basis, and the coupon rates are quoted as such.
Debenture – an unsecured promise based only on the issuer’s
general credit status, to pay coupon and principal.
Callable – an option exercisable at the discretion of the issuer
to redeem the bond prior to its maturity date at a specified
price. The price will include compensation to the investor for
the loss associated with the early redemption.
Putable – an option which grants the investor the right to sell
the bond issue back to the issuer at par value on designated
dates. The advantage to the investor is that if interest rates
rise after the issue date, thereby reducing the value of the
bond, the investor can get the issuer to redeem the bond at
par.
Convertible – an option exercisable by the bondholder to
exchange the bond for a predetermined number of common or
preferred shares.
Question 15 of 20
15. Question
Which of the following security is denominated in the local currency, while foreign currency denominated fixed income security is denominated in a foreign currency?
I. Domestic fixed income
II. Foreign fixed income
III. Local fixed income
IV. International fixed income
Correct
Domestic fixed income security is denominated in the local currency, while foreign currency denominated fixed income security is denominated in a foreign currency.
Incorrect
Domestic fixed income security is denominated in the local currency, while foreign currency denominated fixed income security is denominated in a foreign currency.
Question 16 of 20
16. Question
Which of the following is(are) issued by a bank that indicates that a specific sum of money has been deposited with the bank?
I. Deposit agreement
II. Commercial Papaer
III. Banker’s acceptance
IV. Certificate of deposit
Correct
A certificate of deposit is a certificate issued by a bank that indicates that a specific sum of money has been deposited with the bank.
Incorrect
A certificate of deposit is a certificate issued by a bank that indicates that a specific sum of money has been deposited with the bank.
Question 17 of 20
17. Question
The yield on repo can be calculated using the difference between which of the following?
I. The sale
II. Purchase prices
III. The interest rates
IV. The bonds
Correct
The yield on repo can be calculated using the difference between the sale and purchase prices.
Incorrect
The yield on repo can be calculated using the difference between the sale and purchase prices.
Question 18 of 20
18. Question
Which of the following is the first demutualised, integrated securities and derivatives exchange in Asia Pacific?
I. Singapore Exchange Limited
II. Singapore Stock Exchange Limited
III. Singapore Securities Limited
IV. Association of Singapore Exchange
Correct
SGX is the first demutualised, integrated securities and derivatives exchange in Asia Pacific.
Incorrect
SGX is the first demutualised, integrated securities and derivatives exchange in Asia Pacific.
Question 19 of 20
19. Question
Which of the following is(are) functions that SGX carries out regulatory?
I. Issuer regulation
II. Member supervision
III. Market surveillance
IV. Stock management
Correct
SGX also carries out regulatory functions, which include the
following:
Issuer regulation: To review listing applications and monitor
compliance with listing requirements;
Member supervision: To process membership applications,
monitor members’ compliance with SGX rules, provide support
to members on regulatory issues and investigate complaints
concerning members;
Market surveillance: To maintain surveillance of all trading
activities;
Enforcement: To investigate suspected complaints and perform
disciplinary action;
Risk management: To monitor and manage SFX’s counterparty
risk exposure to clearing members for SGX trades.
Incorrect
SGX also carries out regulatory functions, which include the
following:
Issuer regulation: To review listing applications and monitor
compliance with listing requirements;
Member supervision: To process membership applications,
monitor members’ compliance with SGX rules, provide support
to members on regulatory issues and investigate complaints
concerning members;
Market surveillance: To maintain surveillance of all trading
activities;
Enforcement: To investigate suspected complaints and perform
disciplinary action;
Risk management: To monitor and manage SFX’s counterparty
risk exposure to clearing members for SGX trades.
Question 20 of 20
20. Question
After taking into account the general level of interest rates, an investor will consider what other factors when selecting a fixed income security?
I. The Investment quality
II. The Maturity
III. The Currency exchange
IV. The Price volatility
Correct
After taking into account the general level of interest rates, an investor will consider two other factors when selecting a fixed income security.
(a) Investment Quality
(b) Maturity
Incorrect
After taking into account the general level of interest rates, an investor will consider two other factors when selecting a fixed income security.
(a) Investment Quality
(b) Maturity
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