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Question 1 of 20
1. Question
How the direct additional costs are associated with the guarantee?
I. These costs can be substantial
II. Prepare accounts and reports for unit-holders
III. These direct additional costs may include the cost of a call option
IV. This cost will all be subject to ongoing scrutiny during an annual auditCorrect
Answer is A as These direct additional costs may include the cost of a call option, the cost of the guarantee, the legal cost of setting up the vehicle, and any additional administrative costs associated with the running of the fund. These costs can be substantial. While they will all be subject to ongoing scrutiny during an annual audit, this audit will not determine whether they represent good value for the investor.
Incorrect
Answer is A as These direct additional costs may include the cost of a call option, the cost of the guarantee, the legal cost of setting up the vehicle, and any additional administrative costs associated with the running of the fund. These costs can be substantial. While they will all be subject to ongoing scrutiny during an annual audit, this audit will not determine whether they represent good value for the investor.
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Question 2 of 20
2. Question
Which of the following statement(s) are true for After Sales?
I. Guaranteed hedge funds clearly have a useful part to play in the world of alternative investments
II. Prices of retail hedge funds are published in the newspapers
III. The strategy takes advantage of expected price movements that occur after a merger or acquisition offer is announced
IV. Investors may also go to the respective manager’s or distributor’s website to obtain the pricing informationCorrect
Answer is A as prices of retail hedge funds are published in the newspapers. Investors may also go to the respective manager’s or distributor’s website to obtain the pricing information.
Incorrect
Answer is A as prices of retail hedge funds are published in the newspapers. Investors may also go to the respective manager’s or distributor’s website to obtain the pricing information.
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Question 3 of 20
3. Question
Which of the following statement(s) are true for the advantages of Lack of Liquidity in hedge fund?
I. The use of leverage, short selling and derivatives introduces additional risks
II. Relieves the manager from short-term cash flow concerns for better long-term performance
III. Some hedge funds have minimum lock-up periods
IV. The manager’s freedom to invest in almost anything makes risk assessment difficult on the part of the investorsCorrect
Answer is C as lack of liquidity gives advantages by relieving the manager from short-term cash flow concerns for better long-term performance
Incorrect
Answer is C as lack of liquidity gives advantages by relieving the manager from short-term cash flow concerns for better long-term performance
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Question 4 of 20
4. Question
When Are Hedge Funds Unsuitable For Investors?
I. Investors may not have sufficient or timely information to make investment decisions
II. Hedge funds typically have high minimum subscription amounts, making them inaccessible to many retail investors
III. Those who can afford to lose the principal of investments
IV. Inexperienced investors should refrain from investing in something that they do not understandCorrect
Answer is B as Hedge funds typically have high minimum subscription amounts, making them inaccessible to many retail investors. Inexperienced investors should refrain from investing in something that they do not understand.
Incorrect
Answer is B as Hedge funds typically have high minimum subscription amounts, making them inaccessible to many retail investors. Inexperienced investors should refrain from investing in something that they do not understand.
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Question 5 of 20
5. Question
How global macro is the common examples of Hedge Funds?
I. It seeks to reduce market risk and generate a profit, regardless of the direction of the market
II. It aims to profit from changes in global economies, typically brought about by shifts in government policies that impact interest rates
III. The long / short positions are taken on related stocks to create a hedge
IV. Leverage and derivatives are used to accentuate the impact of market movementsCorrect
Answer is B as global macro aims to profit from changes in global economies, typically brought about by shifts in government policies that impact interest rates. These in turn affect currency, stock and bond markets. Leverage and derivatives are used to accentuate the impact of market movements.
Incorrect
Answer is B as global macro aims to profit from changes in global economies, typically brought about by shifts in government policies that impact interest rates. These in turn affect currency, stock and bond markets. Leverage and derivatives are used to accentuate the impact of market movements.
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Question 6 of 20
6. Question
Which of the following statement(s) are true Long, Short and Leveraged ETFs?
I. Instead of making investments, an ETF may be set up to pass the cash raised from the investors directly to the swap counterparty in exchange for the returns on the index
II. An ETF is a long ETF when it moves in the same direction as the index
III. A short ETF tracks the underlying index in the opposite direction
IV. Leveraging allows funds to achieve multiple times the performance of an index, either long or shortCorrect
Answer is C as most ETFs are index funds, tracking the performance of an underlying index. An ETF is a long ETF when it moves in the same direction as the index. On the other hand, a short ETF tracks the underlying index in the opposite direction. Leveraging allows funds to achieve multiple times the performance of an index, either long or short.
Incorrect
Answer is C as most ETFs are index funds, tracking the performance of an underlying index. An ETF is a long ETF when it moves in the same direction as the index. On the other hand, a short ETF tracks the underlying index in the opposite direction. Leveraging allows funds to achieve multiple times the performance of an index, either long or short.
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Question 7 of 20
7. Question
How Realtime Price Discovery brings advantages of Structured ETFs?
I. Price information is provided to the market in real time
II. ETFs track the performance of a market index
III. By comparison, unlisted fund prices are, at best, published once a day
IV. Investors can buy and sell ETFs on the market every trading day just like trading stocksCorrect
Answer is B as Price information is provided to the market in real-time. By comparison, unlisted fund prices are, at best, published once a day.
Incorrect
Answer is B as Price information is provided to the market in real-time. By comparison, unlisted fund prices are, at best, published once a day.
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Question 8 of 20
8. Question
How Expenses brings disadvantages of Structured ETFs?
I. Price information is provided to the market in real time
II. By comparison, unlisted fund prices are, at best, published once a day
III. The use of derivative counterparties introduces additional counterparty risk for swap transaction involved
IV. The cost associated with using derivatives in a structured ETF contributes to tracking errors.Correct
Answer is A as the cost associated with using derivatives in a structured ETF contributes to tracking errors.
Incorrect
Answer is A as the cost associated with using derivatives in a structured ETF contributes to tracking errors.
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Question 9 of 20
9. Question
Which of the following statement(s) are true for Illiquid Cash Flow in the determination of fund’s market value?
I. Some derivative products are based on streams of future cash flows
II. Third-party credit data may be available in some cases for valuing credit derivatives
III. The valuation depends on the fund manager’s judgement and experience
IV. MTM is the discounted cash flows, considering probability of the counterparty defaultCorrect
Answer is B as there are no simple solutions to valuing illiquid assets. Third-party credit data may be available in some cases for valuing credit derivatives. In other situations, the valuation depends on the fund manager’s judgement and experience.
Incorrect
Answer is B as there are no simple solutions to valuing illiquid assets. Third-party credit data may be available in some cases for valuing credit derivatives. In other situations, the valuation depends on the fund manager’s judgement and experience.
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Question 10 of 20
10. Question
Which of the following statement(s) are true for Direct Replication (Or Cash-Based) ETF?
I. Some derivative products are based on streams of future cash flows
II. These funds replicate the index through direct investment into the component securities of the indexes that they aim to track
III. These funds may employ the full replication
IV. These funds may employ the sampling methodsCorrect
Answer is C as these funds replicate the index through direct investment into the component securities of the indexes that they aim to track. These funds may employ the full replication, optimisation or sampling methods.
Incorrect
Answer is C as these funds replicate the index through direct investment into the component securities of the indexes that they aim to track. These funds may employ the full replication, optimisation or sampling methods.
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Question 11 of 20
11. Question
Which of the following statement(s) are true for Unit Price?
I. The buying and selling of units of unlisted index funds take place between the investor and the fund manager
II. Unit prices of unlisted index funds are based on the NAV of fund assets
III. The buying and selling of ETFs, on the other hand, take place between investors
IV. ETFs depend on marketmakers to keep prices close to the NAVCorrect
Answer is D as Unit prices of unlisted index funds are based on the NAV of fund assets. While the fundamental value of ETF unit prices is also based on the NAV, actual transaction price is affected by market forces of supply and demand. ETFs depend on marketmakers to keep prices close to the NAV.
Incorrect
Answer is D as Unit prices of unlisted index funds are based on the NAV of fund assets. While the fundamental value of ETF unit prices is also based on the NAV, actual transaction price is affected by market forces of supply and demand. ETFs depend on marketmakers to keep prices close to the NAV.
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Question 12 of 20
12. Question
Which of the following statement(s) are true for Protective Puts?
I. It is often used in executive compensation
II. A protective put strategy calls for buying a put-on stock that one has already owned
III. The protective put benefits investors who are mainly bullish about the stock, but nevertheless want downside protection
IV. A strategy of buying a put option on a stock already owned is considered a conservative strategyCorrect
Answer is D as a protective put strategy calls for buying a put-on stock that one has already owned. the protective put benefits investors who are mainly bullish about the stock, but nevertheless want downside protection. For this reason, a strategy of buying a put option on a stock already owned is considered a conservative strategy.
Incorrect
Answer is D as a protective put strategy calls for buying a put-on stock that one has already owned. the protective put benefits investors who are mainly bullish about the stock, but nevertheless want downside protection. For this reason, a strategy of buying a put option on a stock already owned is considered a conservative strategy.
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Question 13 of 20
13. Question
Which of the following statement(s) are the types of swap instruments?
I. Currency Swaps
II. Credit Default Swap (CDS)
III. No Equity Swaps
IV. Commodity SwapsCorrect
Answer is D as there are five types of swap instruments. They are the following:
• Currency Swaps
• Credit Default Swap (CDS)
• Equity Swaps
• Commodity Swaps
• Interest Rate SwapsIncorrect
Answer is D as there are five types of swap instruments. They are the following:
• Currency Swaps
• Credit Default Swap (CDS)
• Equity Swaps
• Commodity Swaps
• Interest Rate Swaps -
Question 14 of 20
14. Question
Which of the following statement(s) true for Interest Rate Swaps?
I. A swap agreement is exactly what the name suggests, where two parties agree to exchange cash flows at future dates
II. The most common type of swap is a plain vanilla interest rate swap
III. The reason for this exchange is to benefit from comparative advantage
IV. It is the exchange of the interest payments on a fixed rate loan to the payments on a floating rate loanCorrect
Answer is C as the most common type of swap is a plain vanilla interest rate swap. It is the exchange of the interest payments on a fixed rate loan to the payments on a floating rate loan. Since an interest rate swap operates in the same currency, cash flows occurring on same dates can be and are netted. The reason for this exchange is to benefit from comparative advantage.
Incorrect
Answer is C as the most common type of swap is a plain vanilla interest rate swap. It is the exchange of the interest payments on a fixed rate loan to the payments on a floating rate loan. Since an interest rate swap operates in the same currency, cash flows occurring on same dates can be and are netted. The reason for this exchange is to benefit from comparative advantage.
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Question 15 of 20
15. Question
Which of the following statement(s) is true for the Energy being used as a practical example of Forward Contracts?
I. Standardised contracts traded on exchanges
II. Forward markets have developed around benchmark crude oils
III. The majority of trades use a book-in process
IV. The majority of trades use a book-out processCorrect
Answer is A as in the energy markets, forward markets have developed around benchmark crude oils. The majority of trades use a book-out process that means that the contracts are cleared by the buyers and sellers in a series of trades to cancel mutual contracts by cash settlement.
Incorrect
Answer is A as in the energy markets, forward markets have developed around benchmark crude oils. The majority of trades use a book-out process that means that the contracts are cleared by the buyers and sellers in a series of trades to cancel mutual contracts by cash settlement.
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Question 16 of 20
16. Question
Which of the following statement(s) is the examples of Financial Futures?
I. Metals
II. Interest Rates
III. Bond Prices
IV. Equity stock indicesCorrect
Answer is B as for Financial Futures the following are the examples
• Interest rates
• Bond prices
• Currency exchange rates
• Equity stock indicesIncorrect
Answer is B as for Financial Futures the following are the examples
• Interest rates
• Bond prices
• Currency exchange rates
• Equity stock indices -
Question 17 of 20
17. Question
Which of the following are the types of Market Participants?
I. Metals
II. Hedgers
III. Bond prices
IV. SpeculatorsCorrect
Answer is A as there are 2 types of Market Participants. They are:
• Speculators
• HedgersIncorrect
Answer is A as there are 2 types of Market Participants. They are:
• Speculators
• Hedgers -
Question 18 of 20
18. Question
Which of the following statement(s) are true for Swaption in Exotic Option?
I. There are three risky underlying assets associated with this type of options
II. This is an option giving the right to enter into an underlying swap agreement
III. The term swaption typically refers to options on interest rate swaps, although any type of swaps can be used
IV. It is often used in executive compensationCorrect
Answer is B as this is an option giving the right to enter into an underlying swap agreement. The term swaption typically refers to options on interest rate swaps, although any type of swaps can be used.
Incorrect
Answer is B as this is an option giving the right to enter into an underlying swap agreement. The term swaption typically refers to options on interest rate swaps, although any type of swaps can be used.
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Question 19 of 20
19. Question
What are the types of market risk?
I. General Market Risk
II. Issuer-specific Risk
III. Specific Risk
IV. Special Market RiskCorrect
Answer is B as there are 2 types of market risk, they are general market risk and issuer-specific risk.
Incorrect
Answer is B as there are 2 types of market risk, they are general market risk and issuer-specific risk.
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Question 20 of 20
20. Question
Which of the following statement(s) is true for Safety of Principal?
I. Each product is structured to provide full, partial or no return of principal upon maturity
II. There is no guarantee that the intended protection will materialize
III. The credit risk of the protection-provider doesn’t affect the reliability of the protection given
IV. Structured deposits are considered investment products and NOT subject to the protection of Deposit Insurance Scheme in SingaporeCorrect
Answer is D as given the trade-offs in risk and return, products are structured to provide different degrees of principal protection versus capital appreciation. Each product is structured to provide full, partial or no return of principal upon maturity. However, there is no guarantee that the intended protection will materialise. the credit risk of the protection-provider affects the reliability of the protection given. Another reminder is that structured deposits are considered investment products and NOT subject to the protection of Deposit Insurance Scheme in Singapore.
Incorrect
Answer is D as given the trade-offs in risk and return, products are structured to provide different degrees of principal protection versus capital appreciation. Each product is structured to provide full, partial or no return of principal upon maturity. However, there is no guarantee that the intended protection will materialise. the credit risk of the protection-provider affects the reliability of the protection given. Another reminder is that structured deposits are considered investment products and NOT subject to the protection of Deposit Insurance Scheme in Singapore.
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