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Question 1 of 30
1. Question
What type of agreement is a derivative?
Correct
It is to be acknowledged that a derivative contract is a deferred delivery deal where the value depends on certain underlying properties, or is derived from them. The proprietor of a derivative arrangement does not own the underlying assets.
Incorrect
It is to be acknowledged that a derivative contract is a deferred delivery deal where the value depends on certain underlying properties, or is derived from them. The proprietor of a derivative arrangement does not own the underlying assets.
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Question 2 of 30
2. Question
For whom are the derivatives useful hedging tools? Choose from the following:
I. commodities targets
II. commodities consumers
III. commodities persons
IV. commodities producersCorrect
Incorrect
Please note that derivatives are important hedging tools for producers and buyers of commodities. For example, oil producers and airlines (aircraft absorbs jet fuel) may use futures and forward contracts respectively to ensure their revenue and expenses stability.
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Question 3 of 30
3. Question
How are the derivative contracts often used for speculators?
Correct
It is stated that the speculators also use derivative contracts as directional bets of the underlying price change. For example , if an investor anticipates that a certain stock’s price will go up over a certain time period, rather than direct investment in that stock, he may purchase an option on that stock.
Incorrect
It is stated that the speculators also use derivative contracts as directional bets of the underlying price change. For example , if an investor anticipates that a certain stock’s price will go up over a certain time period, rather than direct investment in that stock, he may purchase an option on that stock.
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Question 4 of 30
4. Question
What is the difference between the spot and the forward price often referred to?
Correct
Please learn that the spot-to-forward price differential is often referred to as the premium or discount. That is, when it is positive, the cost of carry is referred to as a premium; is referred to as a discount if it is negative.
Incorrect
Please learn that the spot-to-forward price differential is often referred to as the premium or discount. That is, when it is positive, the cost of carry is referred to as a premium; is referred to as a discount if it is negative.
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Question 5 of 30
5. Question
Separated in what three stages of the product life cycle, communication with customers is continuous? Choose from the following:
I. ongoing disclosure after policy inception
II. disclosure at policy inception
III. disclosure at the point of sale
IV. disclosure at the risk management timeCorrect
Please note that before making an investment decision an investor should have sufficient information and be kept up-to-date on the performance of his investments. Communication with consumers is continuous, divided into the product life cycle into three stages:
· Divulgation at the point of sale;
· Disclosure at the start of the policy; and
· Continued transparency after the start of the program.Incorrect
Please note that before making an investment decision an investor should have sufficient information and be kept up-to-date on the performance of his investments. Communication with consumers is continuous, divided into the product life cycle into three stages:
· Divulgation at the point of sale;
· Disclosure at the start of the policy; and
· Continued transparency after the start of the program. -
Question 6 of 30
6. Question
Who is allowed under a CIS Retail? Choose from the following:
I. the CIS manager
II. liquid investments
III. those subject to the reliable and verifiable valuation on a daily basis
IV. those who have invested in new targetsCorrect
It is to be accepted that only liquid investments are permitted under a retail CIS and those subject to correct and verifiable standard valuation. It includes shares, debt, deposits, money market instruments, and financial derivatives. A CIS seller is not required to invest in another hedge fund or a mutual fund.
Incorrect
It is to be accepted that only liquid investments are permitted under a retail CIS and those subject to correct and verifiable standard valuation. It includes shares, debt, deposits, money market instruments, and financial derivatives. A CIS seller is not required to invest in another hedge fund or a mutual fund.
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Question 7 of 30
7. Question
When does the structured product yield investors a return? Choose from the following:
I. the new updates are recorded
II. anticipated market view is correct
III. strategy or structure to capture the market view is appropriate
IV. pricing on the structure is reasonableCorrect
Please note that the investors too are attracted by high-potential return products. Nevertheless, a structured product only returns investors if: (A) correctly expected market view; (B) acceptable market view strategy or structure; and (C) pricing on a program is fair. The products involved are among the most volatile of the three, because they they provide no downside security at all; all the investments are placed into performance pursuance.
Incorrect
Please note that the investors too are attracted by high-potential return products. Nevertheless, a structured product only returns investors if: (A) correctly expected market view; (B) acceptable market view strategy or structure; and (C) pricing on a program is fair. The products involved are among the most volatile of the three, because they they provide no downside security at all; all the investments are placed into performance pursuance.
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Question 8 of 30
8. Question
What are the three basic investment objectives of the investors? Choose from the following:
I. potential for capital appreciation
II. stability of investment income
III. safety of principal
IV. increase in economyCorrect
Please note that investors have three basic investment goals, namely principal protection, investment income stability and capital appreciation potential. Therefore, if need arises, investor wants to be able to turn his investments into cash atreasonable price. Although liquidity is not directly linked to return on investment, it is nevertheless an significant factor, and fair expectations.Please note that investors have three basic investment goals, namely principal protection, investment income stability and capital appreciation potential. Therefore, if need arises, investor wants to be able to turn his investments into cash atreasonable price. Although liquidity is not directly linked to return on investment, it is nevertheless an significant factor, and fair expectations.
Incorrect
Please note that investors have three basic investment goals, namely principal protection, investment income stability and capital appreciation potential. Therefore, if need arises, investor wants to be able to turn his investments into cash atreasonable price. Although liquidity is not directly linked to return on investment, it is nevertheless an significant factor, and fair expectations.Please note that investors have three basic investment goals, namely principal protection, investment income stability and capital appreciation potential. Therefore, if need arises, investor wants to be able to turn his investments into cash atreasonable price. Although liquidity is not directly linked to return on investment, it is nevertheless an significant factor, and fair expectations.
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Question 9 of 30
9. Question
Based on what should the advisers help clients to determine their investment objectives? Choose from the following:
I. financial conditions
II. general matters
III. personal circumstances
IV. risk appetitesCorrect
It is to be acknowledged that advisors can assist clients in assessing their investment targets based on their personal circumstances and risk appetites. The pool of organized goods is large enough to suit most health, revenue, and growth targets combinations. Many structured goods are not liquid, however, and the “fair” value of the mark is difficult to evaluate.
Incorrect
It is to be acknowledged that advisors can assist clients in assessing their investment targets based on their personal circumstances and risk appetites. The pool of organized goods is large enough to suit most health, revenue, and growth targets combinations. Many structured goods are not liquid, however, and the “fair” value of the mark is difficult to evaluate.
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Question 10 of 30
10. Question
On what does the extent to which the clients are able to understand the products depends? Choose from the following:
I. target level
II. investment experience
III. achievement economy-level
IV. level of financial literacyCorrect
It is to be acknowledged that structured goods are highly complex. The degree to which the consumers understand the goods depends on their investment knowledge and financial literacy level. Clients have trouble, without previous experience with derivatives.
Incorrect
It is to be acknowledged that structured goods are highly complex. The degree to which the consumers understand the goods depends on their investment knowledge and financial literacy level. Clients have trouble, without previous experience with derivatives.
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Question 11 of 30
11. Question
What does the “Market price of a security” specifically refer to?
Correct
It is to be acknowledged that a security’s market price is the prevailing price the security will purchase or sell at. The stock price is, in principle, the current value of potential earnings for the lender. Profitability-related factors-existing and future-impact the current market price. In reality, supply and demand are, to a large degree, dictated by market price.
Incorrect
It is to be acknowledged that a security’s market price is the prevailing price the security will purchase or sell at. The stock price is, in principle, the current value of potential earnings for the lender. Profitability-related factors-existing and future-impact the current market price. In reality, supply and demand are, to a large degree, dictated by market price.
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Question 12 of 30
12. Question
Financial investments do not exist outside of the economy. By what are they affected? Choose from the following:
I. the latest economy setup
II. the market outlook
III. the personal outlook
IV. the general economic conditionsCorrect
It is stated that there is no such thing as a financial investment outside the economy. The general economic conditions and the business outlook influence them. Because of today’s global globalization, consumer prices are influenced not only by domestic factors but also by the global climate.
Incorrect
It is stated that there is no such thing as a financial investment outside the economy. The general economic conditions and the business outlook influence them. Because of today’s global globalization, consumer prices are influenced not only by domestic factors but also by the global climate.
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Question 13 of 30
13. Question
What risk factors are there while general market risks affect the prices of all securities?
Correct
Please note that though general market risks affect all the securities’ values, there is risk f actors can only affect the price of the protection of a specific issuer. An obvious example is a downgrade in a company’s credit rating, which creates downward pressure on its share and bond prices. This in effect allows certain derivative contracts to lose value, depending on the stock or bonds of that firm.
Incorrect
Please note that though general market risks affect all the securities’ values, there is risk f actors can only affect the price of the protection of a specific issuer. An obvious example is a downgrade in a company’s credit rating, which creates downward pressure on its share and bond prices. This in effect allows certain derivative contracts to lose value, depending on the stock or bonds of that firm.
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Question 14 of 30
14. Question
What does the liquidity from investor’s perspective refer to?
Correct
Please learn that investor liquidity refers to the ease with which to turn its assets into cash. Publicly traded goods appear to have greater liquidity over OTC traded products, as the market is primed. However, it does not guarantee liquidity only because a commodity is listed on an exchange, as the buyer may not be able to sell his investments at a fair price due to lack of demand.
Incorrect
Please learn that investor liquidity refers to the ease with which to turn its assets into cash. Publicly traded goods appear to have greater liquidity over OTC traded products, as the market is primed. However, it does not guarantee liquidity only because a commodity is listed on an exchange, as the buyer may not be able to sell his investments at a fair price due to lack of demand.
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Question 15 of 30
15. Question
On what is the value of being a delayed delivery arrangement based on a derivative contract?
Correct
Please note that a derivative contract is a deferred delivery deal where its value depends on, or is derived from, other underlying property. A derivative contract holder doesn’t own the assets that underlie it. Use home buying as an example is a derivative contract as an option to purchase a flat. You pay for the right to buy the flat a fraction of the price of the flat, You will not own the apartment though until years later when you pay the purchase balance.
Incorrect
Please note that a derivative contract is a deferred delivery deal where its value depends on, or is derived from, other underlying property. A derivative contract holder doesn’t own the assets that underlie it. Use home buying as an example is a derivative contract as an option to purchase a flat. You pay for the right to buy the flat a fraction of the price of the flat, You will not own the apartment though until years later when you pay the purchase balance.
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Question 16 of 30
16. Question
Between what is a trade-off in an upside performance?
Correct
For an upside result, there is a trade-off between principal protection and participation. The degree of protection in return for greater involvement in results may be reduced. For example, a product can be designed to provide a return of 75 percent of the principal, by reducing investment in the instrument of fixed income by 25 percent, allowing for greater investment in derivatives, and therefore a greater upside potential. The drug also provides defense against risk, but not 100 percent of the principal.
Incorrect
For an upside result, there is a trade-off between principal protection and participation. The degree of protection in return for greater involvement in results may be reduced. For example, a product can be designed to provide a return of 75 percent of the principal, by reducing investment in the instrument of fixed income by 25 percent, allowing for greater investment in derivatives, and therefore a greater upside potential. The drug also provides defense against risk, but not 100 percent of the principal.
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Question 17 of 30
17. Question
What does it mean when it is said that investment is of high risk?
Correct
Incorrect
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Question 18 of 30
18. Question
How is a payment set formed in a commodity swap? Choose from the following:
I. by the price of a commodity
II. by the price of a commodity index
III. by the agreement of the two senior employees
IV. through the process of swapping within the limited timeCorrect
It must be recognized that a commodity swap is a transaction where one collection of payments is determined by the price of a commodity or the price of a commodity indice. Plain vanilla OTC transactions for a fixed-for-floating risk exchange, in which no physical commodity is offered, are the most common examples of commodity swaps.
Incorrect
It must be recognized that a commodity swap is a transaction where one collection of payments is determined by the price of a commodity or the price of a commodity indice. Plain vanilla OTC transactions for a fixed-for-floating risk exchange, in which no physical commodity is offered, are the most common examples of commodity swaps.
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Question 19 of 30
19. Question
What kind of instrument is a reverse convertible bond?
Correct
Please note that like all other structured products, an unsecured debt instrument is an inverse convertible bond. It is issued as a note to which a single stock is associated. In normal circumstances it has characteristics of a fixed income instrument: annual interest payments (if the bond so provides), and payment of the note’s par value upon maturity.
Incorrect
Please note that like all other structured products, an unsecured debt instrument is an inverse convertible bond. It is issued as a note to which a single stock is associated. In normal circumstances it has characteristics of a fixed income instrument: annual interest payments (if the bond so provides), and payment of the note’s par value upon maturity.
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Question 20 of 30
20. Question
Both reverse convertible bonds and discount certificates offer capped upside potential without downside protection. What do they both share, although they are structured very differently?
Correct
It is to be acknowledged that all reverse convertible bonds and discount certificates offer capped upside opportunities with no insurance against downside. They share the same risk-return profiles, though very different in structure. Discount certificates are structured by combining options of two different types.
Incorrect
It is to be acknowledged that all reverse convertible bonds and discount certificates offer capped upside opportunities with no insurance against downside. They share the same risk-return profiles, though very different in structure. Discount certificates are structured by combining options of two different types.
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Question 21 of 30
21. Question
What do the Yield enhancement products NOT provide?
Correct
Please note that the products for enhancing yields (generally) do not provide defense against downside. The risk exposure of the investor matches precisely that of the underlying stock if the stock price falls below kick-in point. Investors considering such items should consider the downside risk of the underlying stock and be comfortable with it.
Incorrect
Please note that the products for enhancing yields (generally) do not provide defense against downside. The risk exposure of the investor matches precisely that of the underlying stock if the stock price falls below kick-in point. Investors considering such items should consider the downside risk of the underlying stock and be comfortable with it.
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Question 22 of 30
22. Question
What does the high-risk investment mean? Choose from the following:
I. the probability of the anticipated return which may not be realized is higher as compared to other investments
II. all or part of the principal may be lost
III. all or part of the principal will be doubled up
IV. the probability sample for the risk management will be increasedCorrect
Please know that the risk is of confusion in the finance realm. If an investment is called high risk, it means that the chance of the anticipated return that may not be obtained is greater than other investments. It also means a weakening of the principal in full or in part. Investors are obviously looking for equal rewards for the risk they take on.
Incorrect
Please know that the risk is of confusion in the finance realm. If an investment is called high risk, it means that the chance of the anticipated return that may not be obtained is greater than other investments. It also means a weakening of the principal in full or in part. Investors are obviously looking for equal rewards for the risk they take on.
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Question 23 of 30
23. Question
What are the characteristics of Up-and-out? Choose from the following:
I. Spot price starts below the barrier level
II. includes life-time guarantee for the service
III. the prices increase based on the quality
IV. has to move up and reaches the barrier level for the option to be knocked outCorrect
It is stated that the barrier alternative is considered to be included in the Barrier Certificates. In this choice, the exercise option depends on the attainment or attainment of the underlying assets at a given barrier. Up-and-out: The spot price starts below the barrier level and for the knock-out option (i.e. it is null and void) has to move up to the barrier point.
Incorrect
It is stated that the barrier alternative is considered to be included in the Barrier Certificates. In this choice, the exercise option depends on the attainment or attainment of the underlying assets at a given barrier. Up-and-out: The spot price starts below the barrier level and for the knock-out option (i.e. it is null and void) has to move up to the barrier point.
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Question 24 of 30
24. Question
What are the main products which can be classified as listed products? Choose from the following:
I. Movable products
II. Structured notes
III. Structured funds
IV. Resume fundsCorrect
It is stated that structured notes and the structured funds may be listed. A number of structured notes are listed on the Singapore Exchange (SGX) under the categories Exchange-Traded Notes (ETNs) and Certificates. Structured listed funds come under the umbrella of common Exchange-Traded Funds (ETFs). Bear in mind that not all ETF’s are structured funds.
Incorrect
It is stated that structured notes and the structured funds may be listed. A number of structured notes are listed on the Singapore Exchange (SGX) under the categories Exchange-Traded Notes (ETNs) and Certificates. Structured listed funds come under the umbrella of common Exchange-Traded Funds (ETFs). Bear in mind that not all ETF’s are structured funds.
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Question 25 of 30
25. Question
What is considered by SGX when assessing the eligibility to list of a structured product? Choose from the following:
I. the commitment level of the latest transactions
II. the reputation of the financial institutions issuing the securities
III. its financial strength
IV. the liquidity of the proposed listed securitiesCorrect
Please learn that the goods listed in Singapore shall be subject to inspection by SGX. When deciding the eligibility for a list of structured goods, SGX considers the integrity of financial institutions issuing securities, their financial capacity, and the liquidity of the proposed listed securities. When order to ensure liquidity, SGX needs at least 75 percent of the securities to be allocated to at least 100 investors in the event of an ETN certificates.
Incorrect
Please learn that the goods listed in Singapore shall be subject to inspection by SGX. When deciding the eligibility for a list of structured goods, SGX considers the integrity of financial institutions issuing securities, their financial capacity, and the liquidity of the proposed listed securities. When order to ensure liquidity, SGX needs at least 75 percent of the securities to be allocated to at least 100 investors in the event of an ETN certificates.
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Question 26 of 30
26. Question
What is directed in CIS by the professional investment manager? Choose from the following:
I. movable objects for fund transfer
II. time limit
III. the investments
IV. daily operation of the fundCorrect
It must be understood that a CIS is a pooled investment mechanism in which individual investors invest in a mutual fund, and a qualified investment manager manages the assets of the fund and the day-to-day operations. A Standardized Fund is a CIS and must comply with the CIS regulatory requirements , especially the CIS Code (the “Code”) provided by the MAS.
Incorrect
It must be understood that a CIS is a pooled investment mechanism in which individual investors invest in a mutual fund, and a qualified investment manager manages the assets of the fund and the day-to-day operations. A Standardized Fund is a CIS and must comply with the CIS regulatory requirements , especially the CIS Code (the “Code”) provided by the MAS.
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Question 27 of 30
27. Question
How are the assets of a CIS held?
Correct
It is claimed that the properties of a CIS are held at third-party custodian such as a trustee. While investors in structured funds do not have to worry about the credit risk of the product-issuer, although they are also subject to CIS investment credit risk. By way of comparison, investors in structured deposits of structured bonds are general lenders of financial institutions that issue good bonds in the event of bankruptcy.
Incorrect
It is claimed that the properties of a CIS are held at third-party custodian such as a trustee. While investors in structured funds do not have to worry about the credit risk of the product-issuer, although they are also subject to CIS investment credit risk. By way of comparison, investors in structured deposits of structured bonds are general lenders of financial institutions that issue good bonds in the event of bankruptcy.
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Question 28 of 30
28. Question
How are the traditional investments classified? Choose from the following:
I. by the quantity of employee force
II. by maturity
III. by asset class
IV. by geographical focusCorrect
Please notice that Financial Item classification is not universal. Traditional investments such as CIS and ILPs can be categorized in a variety of ways: by regional orientation; by asset class; by maturity; etc. Structured securities can also be classified in different ways, e.g. through underlying asset classes; through risk-return profiles; or through investment goals.
Incorrect
Please notice that Financial Item classification is not universal. Traditional investments such as CIS and ILPs can be categorized in a variety of ways: by regional orientation; by asset class; by maturity; etc. Structured securities can also be classified in different ways, e.g. through underlying asset classes; through risk-return profiles; or through investment goals.
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Question 29 of 30
29. Question
For what is the zero-coupon bond typically used for?
Correct
It is stated that for the principal component a zero-coupon bond is typically used. The underlying aspect is most commonly a single stock, a stock basket, or an index. Some examples of these products include structured deposits; equity or credit-linked notes to the degree that the product’s fixed income portion is designed to yield capital returns; and guaranteed capital funds. However, protection against disadvantages is only as good as the creditworthiness of the protective party.
Incorrect
It is stated that for the principal component a zero-coupon bond is typically used. The underlying aspect is most commonly a single stock, a stock basket, or an index. Some examples of these products include structured deposits; equity or credit-linked notes to the degree that the product’s fixed income portion is designed to yield capital returns; and guaranteed capital funds. However, protection against disadvantages is only as good as the creditworthiness of the protective party.
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Question 30 of 30
30. Question
Explain the universal way of classifying financial products?
Correct
It must be remembered that Financial Goods are not uniformly graded. Traditional investments such as CIS and ILPs can be categorized in different ways: by geographical focus; by asset class; by maturity; etc. Structured products may also be classified differently, e.g. through underlying asset classes; through risk-return profiles; or through investment targets.
Incorrect
It must be remembered that Financial Goods are not uniformly graded. Traditional investments such as CIS and ILPs can be categorized in different ways: by geographical focus; by asset class; by maturity; etc. Structured products may also be classified differently, e.g. through underlying asset classes; through risk-return profiles; or through investment targets.