CMFAS M8a Exam Free Trial Set Two
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Question 1 of 20
1. Question
Which of the following statement(s) are true for Enhanced Index Fund?
I. The use of customised indexes, or dynamic instead of static indexes
II. Enhanced index funds are designed to enhance the return potential of index funds
III. Enhanced index funds add elements of active portfolio management to passively managed index funds
IV. As a result, the cost advantage of indexing is reduced, in exchange for potentially higher returnCorrect
Answer is D as Enhanced index funds are designed to enhance the return potential of index funds. Enhanced index funds add elements of active portfolio management to passively managed index funds. As a result, the cost advantage of indexing is reduced, in exchange for potentially higher return.
Incorrect
Answer is D as Enhanced index funds are designed to enhance the return potential of index funds. Enhanced index funds add elements of active portfolio management to passively managed index funds. As a result, the cost advantage of indexing is reduced, in exchange for potentially higher return.
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Question 2 of 20
2. Question
Which of the following is the Role of The Trustee?
I. Trustee acts on behalf of unit-holders and oversees the proper operation of the trust
II. Protects the interests of unit-holders by ensuring that the fund is run in accordance with the trust deed, the regulations, and the prospectus
III. Create and maintain the register of unit-holders or delegate this function to the fund manager
IV. Report any breaches to the MASCorrect
Answer is D as the following are the Roles of The Trustee are;
• protect the interests of unit-holders by ensuring that the fund is run in accordance with the trust deed, the regulations, and the prospectus
• act as custodian for the trust assets, or to delegate this function to a third-party custodian. The trust assets are registered in the name of the trustee who also holds the trust income
• create and maintain the register of unit-holders or delegate this function to the fund manager
• replace the managers if they are deemed not to be acting in unitholders’ interests, become insolvent, or if the majority of unit-holders vote to remove them
• send reports and accounts to the unit-holders, or delegate this function to the fund manager
• report any breaches to the MASIncorrect
Answer is D as the following are the Roles of The Trustee are;
• protect the interests of unit-holders by ensuring that the fund is run in accordance with the trust deed, the regulations, and the prospectus
• act as custodian for the trust assets, or to delegate this function to a third-party custodian. The trust assets are registered in the name of the trustee who also holds the trust income
• create and maintain the register of unit-holders or delegate this function to the fund manager
• replace the managers if they are deemed not to be acting in unitholders’ interests, become insolvent, or if the majority of unit-holders vote to remove them
• send reports and accounts to the unit-holders, or delegate this function to the fund manager
• report any breaches to the MAS -
Question 3 of 20
3. Question
Which of the following statement(s) are advantages of Structured ILPs as a wrapper?
I. Less sophisticated investors or those with little prior experience with structured products may find formula funds easier to understand
II. A wide and ready distribution network through existing insurance distribution channels
III. Insurance coverage being provided, albeit typically very small
IV. ILPs operates like a term insurance plus a structured fundCorrect
Answer is C as the following statement(s) are advantages of Structured ILPs as a wrapper
• A wide and ready distribution network through existing insurance distribution channels
• Insurance coverage being provided, albeit typically very smallIncorrect
Answer is C as the following statement(s) are advantages of Structured ILPs as a wrapper
• A wide and ready distribution network through existing insurance distribution channels
• Insurance coverage being provided, albeit typically very small -
Question 4 of 20
4. Question
Which of the following statement(s) are true for absolute return in hedge fund?
I. The MAS considers a fund to be a hedge fund if it uses leverage
II. A hedge fund usually aims for a risk-adjusted absolute return
III. A hedge fund doesn’t aim in outperforming a standard market benchmark
IV. Information on the NAV of the fund is made available on the manager’s websiteCorrect
Answer is B as a hedge fund usually aims for a risk-adjusted absolute return. A hedge fund does not aim in outperforming a standard market benchmark.
Incorrect
Answer is B as a hedge fund usually aims for a risk-adjusted absolute return. A hedge fund does not aim in outperforming a standard market benchmark.
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Question 5 of 20
5. Question
How Special sector funds is the common examples of Hedge funds?
I. Leverage is usually not used
II. Its similar to distressed securities and risk arbitrage funds, but they tend to focus on new or under-followed areas of opportunity
III. The nature of such investments involves greater volatility than other event-driven strategies
IV. It uses a top-down approach to invest long and short in the companies of specific sectors of the economyCorrect
Answer is C as sector funds use a top-down approach to invest long and short in the companies of specific sectors of the economy. Examples of sectors include technology companies, financial institutions, healthcare and biotech companies.
Incorrect
Answer is C as sector funds use a top-down approach to invest long and short in the companies of specific sectors of the economy. Examples of sectors include technology companies, financial institutions, healthcare and biotech companies.
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Question 6 of 20
6. Question
What Are Structured ETFs?
I. The investor has to take note that an ETF may trade at a price that differs from its NAV
II. Structured ETFs are structured funds that are traded on the stock exchange
III. The price on an ETF is set on a willing buyer and willing seller basis
IV. Only synthetic ETFs are structured ETFsCorrect
Answer is D as Structured ETFs are structured funds that are traded on the stock exchange. Only synthetic ETFs are structured ETFs.
Incorrect
Answer is D as Structured ETFs are structured funds that are traded on the stock exchange. Only synthetic ETFs are structured ETFs.
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Question 7 of 20
7. Question
Which of the following statement(s) are true for hedge fund?
I. The MAS considers a fund to be a hedge fund if it uses leverage
II. A structured hedge fund is a subset of hedge funds that uses derivatives to achieve its risk-return profile
III. Market price is affected by market forces and does not always closely match the underlying fund’s NAV
IV. Information on the NAV of the fund is made available on the manager’s websiteCorrect
Answer is D as The MAS considers a fund to be a hedge fund if it uses leverage, short selling, arbitrage, derivatives, or invests in non-mainstream asset classes. A structured hedge fund is a subset of hedge funds that uses derivatives to achieve its risk-return profile.
Incorrect
Answer is D as The MAS considers a fund to be a hedge fund if it uses leverage, short selling, arbitrage, derivatives, or invests in non-mainstream asset classes. A structured hedge fund is a subset of hedge funds that uses derivatives to achieve its risk-return profile.
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Question 8 of 20
8. Question
Which of the following statement(s) are true for Risk Considerations in case of the typical types of documentation and risks?
I. A common method to reduce market risks is diversification of investments across asset classes and geographic locations
II. Investing in negatively correlated securities is another common method of risk mitigation
III. A more appropriate response is to take no risks according to risk tolerance
IV. Credit and FX risks can be shared or transferred to another party using swaps and credit derivativesCorrect
Answer is B as there are various risk management techniques that an investor might adopt to mitigate or manage the investment risks. A common way to reduce market risks is diversification of investments across asset classes and geographic locations. Different asset classes react to changes in economic conditions differently. Investing in negatively correlated securities is another common method of risk mitigation. Credit and FX risks can be shared or transferred to another party using swaps and credit derivatives.
Incorrect
Answer is B as there are various risk management techniques that an investor might adopt to mitigate or manage the investment risks. A common way to reduce market risks is diversification of investments across asset classes and geographic locations. Different asset classes react to changes in economic conditions differently. Investing in negatively correlated securities is another common method of risk mitigation. Credit and FX risks can be shared or transferred to another party using swaps and credit derivatives.
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Question 9 of 20
9. Question
Which of the following statement(s) are true for Difference Between The Price Of ETF And Its NAV?
I. The investor has to take note that an ETF may trade at a price that differs from its NAV
II. The price on an ETF is set on a willing buyer and willing seller basis
III. The NAV of a unit trust is based on forward pricing and the actual NAV is only known after placement of the order
IV. In the process of buying and selling, the participating dealer can create or redeem ETF units to meet the market demandCorrect
Answer is B, as the investor has to take note that an ETF may trade at a price that differs from its NAV. Just like stocks, the price on an ETF is set on a willing buyer and willing seller basis. In the process of buying and selling, the participating dealer can create or redeem ETF units to meet the market demand. This is beneficial to the investors, as it ensures the ETF price is kept close to the NAV of the ETF.
Incorrect
Answer is B, as the investor has to take note that an ETF may trade at a price that differs from its NAV. Just like stocks, the price on an ETF is set on a willing buyer and willing seller basis. In the process of buying and selling, the participating dealer can create or redeem ETF units to meet the market demand. This is beneficial to the investors, as it ensures the ETF price is kept close to the NAV of the ETF.
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Question 10 of 20
10. Question
What are the advantages of investing in a CIS?
I. Professional Management
II. Portfolio Diversification
III. Access To Bulky Investments
IV. Accounting Of ScaleCorrect
Answer is A as the following are the advantages of investing in a CIS;
• Professional Management
• Portfolio Diversification
• Access To Bulky Investments
• Economies Of ScaleIncorrect
Answer is A as the following are the advantages of investing in a CIS;
• Professional Management
• Portfolio Diversification
• Access To Bulky Investments
• Economies Of Scale -
Question 11 of 20
11. Question
Which of the following are the typical types of documentation and risks?
I. Risk Considerations
II. Pre-sale Documentation
III. No Post-sale Disclosure
IV. Redemption PricesCorrect
Answer is B as the following are the typical types of documentation and risks;
• Risk Considerations
• Pre-sale Documentation
• Post-sale Disclosure
• Redemption PricesIncorrect
Answer is B as the following are the typical types of documentation and risks;
• Risk Considerations
• Pre-sale Documentation
• Post-sale Disclosure
• Redemption Prices -
Question 12 of 20
12. Question
Which of the following statement(s) are true for Long Calls?
I. It is often used in executive compensation
II. Buying calls appeals to aggressive investors because of leverage
III. When one considers the combination of leverage it is easy to see that buying call options is an attractive strategy for bullish investors
IV. There are three risky underlying assets associated with this type of optionsCorrect
Answer is B as buying calls appeals to aggressive investors because of leverage. When one considers the combination of leverage, limited downside and unlimited upside potential, it is easy to see that buying call options is an attractive strategy for bullish investors.
Incorrect
Answer is B as buying calls appeals to aggressive investors because of leverage. When one considers the combination of leverage, limited downside and unlimited upside potential, it is easy to see that buying call options is an attractive strategy for bullish investors.
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Question 13 of 20
13. Question
Which of the following are the common examples of structured funds?
I. Index Funds
II. Fund Of Funds (FoF)
III. Unhedged Funds
IV. Enhanced Index FundCorrect
Answer is D as the following are the common examples of structured funds:
• Index Funds
• Fund Of Funds (FoF)
• Hedge Funds
• Enhanced Index Fund
• Formula FundIncorrect
Answer is D as the following are the common examples of structured funds:
• Index Funds
• Fund Of Funds (FoF)
• Hedge Funds
• Enhanced Index Fund
• Formula Fund -
Question 14 of 20
14. Question
What to consider before investing in structured funds?
I. Index Funds
II. Advantages Of Investing In A CIS
III. Disadvantages Of Investing In A CIS
IV. Additional Considerations For Structured FundsCorrect
Answer is C as the following needs to be considered before investing in structured funds:
• Advantages Of Investing In A CIS
• Disadvantages Of Investing In A CIS
• Additional Considerations For Structured FundsIncorrect
Answer is C as the following needs to be considered before investing in structured funds:
• Advantages Of Investing In A CIS
• Disadvantages Of Investing In A CIS
• Additional Considerations For Structured Funds -
Question 15 of 20
15. Question
Which of the following statement(s) is true for pricing of forward contracts?
I. Derivatives are useful hedging tools for commodities producers and consumers
II. The forward price for a contract is determined by taking the spot price at the time of the transaction and adding to it a cost of carry
III. Derivative contracts are integral parts of structured products
IV. Subject to margin requirementsCorrect
Answer is C as the forward price for a contract is determined by taking the spot or cash price at the time of the transaction and adding to it a cost of carry.
Incorrect
Answer is C as the forward price for a contract is determined by taking the spot or cash price at the time of the transaction and adding to it a cost of carry.
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Question 16 of 20
16. Question
Which of the following are proper examples of Forward Contracts?
I. Subject to margin requirements
II. Energy
III. Standardised contracts traded on exchanges
IV. CommoditiesCorrect
Answer is A as Energy and Commodities are the practical examples of Forward Contracts.
Incorrect
Answer is A as Energy and Commodities are the practical examples of Forward Contracts.
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Question 17 of 20
17. Question
Which of the following statement(s) are the Options for Bearish Option Strategies?
I. Long calls
II. Long puts
III. Naked calls
IV. Selling naked putsCorrect
Answer is B as there are two basic bearish strategies as follows:
• Long puts
• Naked callsIncorrect
Answer is B as there are two basic bearish strategies as follows:
• Long puts
• Naked calls -
Question 18 of 20
18. Question
What are the similarities and differences in Governance of ILPs?
I. The assets of a CIS are held by a third-party custodian such as the trustee
II. The regulatory framework for ILPs is different from that for CIS which is governed by the Securities and Futures Act
III. Only life insurers licensed under the Insurance Act may issue ILPs
IV. The investment portion of a structured ILP is a CIS by nature, although not by legal structureCorrect
Answer is A as an ILP policy is almost like CIS but the regulatory framework for ILPs is therefore, different from that for CIS which is governed by the Securities and Futures Act (Cap. 289), although both Acts are administered by the MAS. Only life insurers licensed under the Insurance Act (Cap. 142) may issue ILPs. The regulatory framework for ILPs is therefore, different from that for CIS which is governed by the Securities and Futures Act (Cap. 289), although both Acts are administered by the MAS. Only life insurers licensed under the Insurance Act (Cap. 142) may issue ILPs.
Incorrect
Answer is A as an ILP policy is almost like CIS but the regulatory framework for ILPs is therefore, different from that for CIS which is governed by the Securities and Futures Act (Cap. 289), although both Acts are administered by the MAS. Only life insurers licensed under the Insurance Act (Cap. 142) may issue ILPs. The regulatory framework for ILPs is therefore, different from that for CIS which is governed by the Securities and Futures Act (Cap. 289), although both Acts are administered by the MAS. Only life insurers licensed under the Insurance Act (Cap. 142) may issue ILPs.
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Question 19 of 20
19. Question
Which of the following statement(s) are true for Futures?
I. Derivatives are useful hedging tools for commodities producers and consumers
II. Standardised contracts traded on exchanges
III. Subject to margin requirements
IV. There are partial settlements of emerging gains / losses through daily mark-to-market processCorrect
Answer is A as in case of Features the following statements are true:
• Standardised contracts traded on exchanges
• Subject to margin requirements
• There are partial settlements of emerging gains / losses through daily mark-to-market processIncorrect
Answer is A as in case of Features the following statements are true:
• Standardised contracts traded on exchanges
• Subject to margin requirements
• There are partial settlements of emerging gains / losses through daily mark-to-market process -
Question 20 of 20
20. Question
What Types of Investors Would Invest in A Fund of Funds?
I. Professional expertise in fund selection
II. FoFs are useful to investors who do not have time to monitor fund performance
III. For those who are interested in specialty investment areas but do not have enough experience or knowledge to invest in such niche areas on their own
IV. Access to specialty managers that are generally not known or available to retail investorsCorrect
Answer is C as FoFs are useful to investors who do not have time to monitor fund performance. It is essential for those who are interested in specialty investment areas but do not have enough experience or knowledge to invest in such niche areas on their own.
Incorrect
Answer is C as FoFs are useful to investors who do not have time to monitor fund performance. It is essential for those who are interested in specialty investment areas but do not have enough experience or knowledge to invest in such niche areas on their own.
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