Quiz-summary
0 of 30 questions completed
Questions:
- 1
- 2
- 3
- 4
- 5
- 6
- 7
- 8
- 9
- 10
- 11
- 12
- 13
- 14
- 15
- 16
- 17
- 18
- 19
- 20
- 21
- 22
- 23
- 24
- 25
- 26
- 27
- 28
- 29
- 30
Information
CMFAS Module 9A Premium Access
You have already completed the quiz before. Hence you can not start it again.
Quiz is loading...
You must sign in or sign up to start the quiz.
You have to finish following quiz, to start this quiz:
Results
0 of 30 questions answered correctly
Your time:
Time has elapsed
You have reached 0 of 0 points, (0)
Categories
- Not categorized 0%
- 1
- 2
- 3
- 4
- 5
- 6
- 7
- 8
- 9
- 10
- 11
- 12
- 13
- 14
- 15
- 16
- 17
- 18
- 19
- 20
- 21
- 22
- 23
- 24
- 25
- 26
- 27
- 28
- 29
- 30
- Answered
- Review
-
Question 1 of 30
1. Question
How can structured products be used in traditional asset classes?
Correct
It is stated that in traditional asset classes, structured products can be used as an alternative to direct investment , particularly in markets where direct access is restricted. For example, when a market is closed to foreign investors, structured products may be the only way to replicate that market ‘s output, without investing directly in that market’s securities.
Incorrect
It is stated that in traditional asset classes, structured products can be used as an alternative to direct investment , particularly in markets where direct access is restricted. For example, when a market is closed to foreign investors, structured products may be the only way to replicate that market ‘s output, without investing directly in that market’s securities.
-
Question 2 of 30
2. Question
What does a reverse convertible bond consists of, in terms of structure? Choose from the following:
I. a new targeted population
II. an unwritten target
III. a written put option
IV. a bond, providing the periodic interest paymentsCorrect
Please note that generally, the kick-in point is 20 to 30 percent below the price of the underlying stock on the date of issue. In terms of form, a reverse convertible bond consists of a bond providing the annual interest payments (if any) and the par value at maturity; and a signed put option (i.e. the holder buys a put option), offering the securities at maturity instead of the par value if the kick-in price is infringed.
Incorrect
Please note that generally, the kick-in point is 20 to 30 percent below the price of the underlying stock on the date of issue. In terms of form, a reverse convertible bond consists of a bond providing the annual interest payments (if any) and the par value at maturity; and a signed put option (i.e. the holder buys a put option), offering the securities at maturity instead of the par value if the kick-in price is infringed.
-
Question 3 of 30
3. Question
What is the difference between the discount certificate and reverse convertible when they have the same risk-return profile?
Correct
It is to be acknowledged that a discount certificate has the same risk-return profile as a reverse conversion, except that it is uniquely configured. A discount certificate allows investors to participate up to a pre-determined maximum point in the performance of the underlying stock, called the “price-strike” or simply “limit.” The drug is being sold at a discount to counter the caped upside.
Incorrect
It is to be acknowledged that a discount certificate has the same risk-return profile as a reverse conversion, except that it is uniquely configured. A discount certificate allows investors to participate up to a pre-determined maximum point in the performance of the underlying stock, called the “price-strike” or simply “limit.” The drug is being sold at a discount to counter the caped upside.
-
Question 4 of 30
4. Question
What are the similarities between the reverse convertible bonds and discount certificates? Choose from the following:
I. both can be chosen for expiry purposes
II. both offer capped upside potential without a downside protection
III. both have the same financial level
IV. both share the same risk-return profilesCorrect
Please learn that both reverse convertible bonds and discount certificates offer capped upside potential with no defense against downside. We share the same risk-return characteristics, though somewhat different in form. Discount certificates are formed when two different types of choices are combined. (Transaction costs will decrease actual product returns.)
Incorrect
Please learn that both reverse convertible bonds and discount certificates offer capped upside potential with no defense against downside. We share the same risk-return characteristics, though somewhat different in form. Discount certificates are formed when two different types of choices are combined. (Transaction costs will decrease actual product returns.)
-
Question 5 of 30
5. Question
What techniques are included in the “Leverage” (also called “gearing”)? Choose from the following:
I. borrowing money to trade
II. use of derivatives to trade on price differentials
III. trading on margin
IV. borrowing money for investmentCorrect
Please note that “Leverage” (also known as “gearing”) refers to methods used to improve the future return rate. These strategies include margin lending, the use of derivatives for price differential lending, and borrowing money for trade. Know it works both ways. Although “leverage” increases gains, it magnifies losses, too. Most derivative contracts are leveraged, or geared, by design.
Incorrect
Please note that “Leverage” (also known as “gearing”) refers to methods used to improve the future return rate. These strategies include margin lending, the use of derivatives for price differential lending, and borrowing money for trade. Know it works both ways. Although “leverage” increases gains, it magnifies losses, too. Most derivative contracts are leveraged, or geared, by design.
-
Question 6 of 30
6. Question
How are the futures contracts traded?
Correct
Future contracts are sold on a spread, i.e. buyers only have to put up a fraction of the contract’s value to enjoy the full price appreciation, or suffer the full price decline. Margin investing is analogous to equity lending, where the lender borrows from the broker in essence. Interest on margin accounts is paid, which affects overall returns on investment.
Incorrect
Future contracts are sold on a spread, i.e. buyers only have to put up a fraction of the contract’s value to enjoy the full price appreciation, or suffer the full price decline. Margin investing is analogous to equity lending, where the lender borrows from the broker in essence. Interest on margin accounts is paid, which affects overall returns on investment.
-
Question 7 of 30
7. Question
What is the main simple solution to concentration risk?
Correct
Please learn that diversification is the solution to concentration risk. Diversification, sadly, isn’t easy for an individual investor alone. For example, to diversify one’s equity portfolio it takes considerable resources to study and review the universe of stocks. For this reason, the traditional advice is to invest in diversified unit trusts for individual investors.
Incorrect
Please learn that diversification is the solution to concentration risk. Diversification, sadly, isn’t easy for an individual investor alone. For example, to diversify one’s equity portfolio it takes considerable resources to study and review the universe of stocks. For this reason, the traditional advice is to invest in diversified unit trusts for individual investors.
-
Question 8 of 30
8. Question
What does the coefficient of –1 indicate?
Correct
It is to be acknowledged that when one security’s price moves up or down, the other security’s price moves in the same direction, by the same amount. A coefficient of -1 means that the two securities are in complete agreement with each other. When one security’s price price goes up or down, the other security’s price shifts in the opposite direction, by the same percentage.
Incorrect
It is to be acknowledged that when one security’s price moves up or down, the other security’s price moves in the same direction, by the same amount. A coefficient of -1 means that the two securities are in complete agreement with each other. When one security’s price price goes up or down, the other security’s price shifts in the opposite direction, by the same percentage.
-
Question 9 of 30
9. Question
If the correlation is 0, what kind of correlation do the movements of the securities have?
Correct
It is stated that unless the correspondence is 0, the securities movements have no correlation; they are completely random. Perfectly correlated securities are infrequent in real life. Also within the same sector, individual stock prices are in some degree linked because they are subject to common market risk factors but in complete equilibrium they do not go up and down.
Incorrect
It is stated that unless the correspondence is 0, the securities movements have no correlation; they are completely random. Perfectly correlated securities are infrequent in real life. Also within the same sector, individual stock prices are in some degree linked because they are subject to common market risk factors but in complete equilibrium they do not go up and down.
-
Question 10 of 30
10. Question
In the case of what, does the SGX requires that at least 75% of the securities must be spread out to a minimum of 100 investors to ensure liquidity? Choose from the following:
I. ETFs
II. Targeted areas
III. Certificates
IV. Listed productCorrect
To ensure liquidity, in the case of ETNs and certificates, SGX requires that at least 75 percent of the securities be spread out to at least 100 investors. For ETFs, the size of the fund must be at least S$20 million, and at least 25 percent of the total number of issued shares of the fund, excluding treasury shares, must be held by at least 50 public shareholders (100 for a venture capital fund).
Incorrect
To ensure liquidity, in the case of ETNs and certificates, SGX requires that at least 75 percent of the securities be spread out to at least 100 investors. For ETFs, the size of the fund must be at least S$20 million, and at least 25 percent of the total number of issued shares of the fund, excluding treasury shares, must be held by at least 50 public shareholders (100 for a venture capital fund).
-
Question 11 of 30
11. Question
What does a professional investment manager do in a CIS? Choose from the following:
I. directs the whole field of employees
II. directs the investments
III. directs the daily operation of the fund
IV. directs the costumers to their interested departmentsCorrect
It is to be acknowledged that a CIS is a pooled investment mechanism in which individual investors invest in a mutual fund, and a qualified investment manager manages the fund’s investments and day to day operations. A Standardized Fund is a CIS and must comply with the CIS regulatory requirements, in particular the MAS-issued CIS Code (the “Code”).
Incorrect
It is to be acknowledged that a CIS is a pooled investment mechanism in which individual investors invest in a mutual fund, and a qualified investment manager manages the fund’s investments and day to day operations. A Standardized Fund is a CIS and must comply with the CIS regulatory requirements, in particular the MAS-issued CIS Code (the “Code”).
-
Question 12 of 30
12. Question
What are the three basic investment objectives of the investors? Choose from the following:
I. safety of principal
II. the stability of investment income
III. potential for capital appreciation
IV. daily training targetsCorrect
Please learn that investors have three basic investment goals, namely principal safety, investment income stability and capital appreciation potential. Furthermore, if need arises, investors want to be able to convert their investments into cash at a reasonable price. Although liquidity is not directly linked to return on investment, it is still necessary and logical expectation.
Incorrect
Please learn that investors have three basic investment goals, namely principal safety, investment income stability and capital appreciation potential. Furthermore, if need arises, investors want to be able to convert their investments into cash at a reasonable price. Although liquidity is not directly linked to return on investment, it is still necessary and logical expectation.
-
Question 13 of 30
13. Question
Baes on what the advisers should clients to determine their investment objectives? Choose from the following:
I. the limited area for there economists
II. their personal circumstances
III. their risk appetites
IV. their own financial statusCorrect
It is stated that advisors should assist clients in determining their investment goals 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. However, most structured products are not liquid and it’s difficult to determine the “fair” market value.
Incorrect
It is stated that advisors should assist clients in determining their investment goals 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. However, most structured products are not liquid and it’s difficult to determine the “fair” market value.
-
Question 14 of 30
14. Question
Structured products are highly complex. On what does it depend on the extent to which the clients are able to understand the products? Choose from the following:
I. their investment experience
II. level of productive limits
III. their level of financial literacy
IV. level of educational literacyCorrect
It is to be acknowledged that structured products are very complex. The extent to which the customers understand the products depends on their investment experience and financial literacy level. It is difficult for customers, for example, to grasp the workings of structured products without prior experience with derivatives.
Incorrect
It is to be acknowledged that structured products are very complex. The extent to which the customers understand the products depends on their investment experience and financial literacy level. It is difficult for customers, for example, to grasp the workings of structured products without prior experience with derivatives.
-
Question 15 of 30
15. Question
What should the advisers do while advising the clients with little investment experience or financial knowledge?
Correct
Please note that in advising the clients with little investment experience or financial knowledge, Advisers should take extra steps in assessing the clients’ understanding of the recommended products before implementing the recommendation. Financial institutions should have internal policies and procedures in place to guide their Advisers on the steps to take when dealing with inexperienced clients.
Incorrect
Please note that in advising the clients with little investment experience or financial knowledge, Advisers should take extra steps in assessing the clients’ understanding of the recommended products before implementing the recommendation. Financial institutions should have internal policies and procedures in place to guide their Advisers on the steps to take when dealing with inexperienced clients.
-
Question 16 of 30
16. Question
On what basis are the financial institutions required to train their Advisers?
Correct
It is stated that financial institutions are required to train their Advisers on the features and risk-return profile of any investment products that they recommend. Although the financial institutions have the duty to provide the training, the responsibility of product knowledge resides with the Advisers. All financial products have trade-offs between risk and return. Advisers should present products in a balanced way, highlighting the benefits, as well as the risks.
Incorrect
It is stated that financial institutions are required to train their Advisers on the features and risk-return profile of any investment products that they recommend. Although the financial institutions have the duty to provide the training, the responsibility of product knowledge resides with the Advisers. All financial products have trade-offs between risk and return. Advisers should present products in a balanced way, highlighting the benefits, as well as the risks.
-
Question 17 of 30
17. Question
Which scenarios should be highlighted for yield enhancement type of structured products? Choose from the following:
I. the limitless-scenario
II. the best-case scenario
III. the worst-case scenario
IV. the middle targeted scenarioCorrect
Please learn that two scenarios for yield enhancement types of engineered products should be outlined as follows: (a) the best-case scenario in which the underlying outperforms and the return to the consumer is restricted to the cap-strike level, and (b) the worst-case scenario in which the underlying outperforms and the consumer loses a portion or all of its principal value. This is especially important when customers are opting for such products as an alternative to traditional fixed-income investments.
Incorrect
Please learn that two scenarios for yield enhancement types of engineered products should be outlined as follows: (a) the best-case scenario in which the underlying outperforms and the return to the consumer is restricted to the cap-strike level, and (b) the worst-case scenario in which the underlying outperforms and the consumer loses a portion or all of its principal value. This is especially important when customers are opting for such products as an alternative to traditional fixed-income investments.
-
Question 18 of 30
18. Question
Financial investments do not exist outside of the economy. By what are they affected?Choose from the following:
I. targeted area compilation
II. open market rate
III. general economic conditions
IV. market outlookCorrect
Please note that there is no such thing as financial investment outside the economy. They have affected market outlook and general economic conditions. Given the global connectivity that exists today, it is not only domestic conditions that affect market prices, but also the global environment. Factors like interest rates , inflation, exchange rates, commodity prices and others may cause price fluctuations because they have a direct impact on profitability.
Incorrect
Please note that there is no such thing as financial investment outside the economy. They have affected market outlook and general economic conditions. Given the global connectivity that exists today, it is not only domestic conditions that affect market prices, but also the global environment. Factors like interest rates , inflation, exchange rates, commodity prices and others may cause price fluctuations because they have a direct impact on profitability.
-
Question 19 of 30
19. Question
As investment return from structured products is mainly supported by derivative contracts, in what does the failure of the counterparties to deliver their commitment results in?
Correct
Regulatory action or restriction may also preclude a counterparty from performing its obligations. Because investment returns from structured products are predominantly backed by derivative contracts, failure by counterparties to meet their commitments results in losses to investors in the structured products. There are two ways of mitigating risk to the counterparty.
Incorrect
Regulatory action or restriction may also preclude a counterparty from performing its obligations. Because investment returns from structured products are predominantly backed by derivative contracts, failure by counterparties to meet their commitments results in losses to investors in the structured products. There are two ways of mitigating risk to the counterparty.
-
Question 20 of 30
20. Question
What are the ways to mitigate the counterparty risk? Choose from the following:
I. use publicly-traded derivative products
II. link the items with the targeted products
III. use traded products for the linked items
IV. use non-publicly traded derivative productsCorrect
One way of mitigation is to make use of publicly traded derivatives. When the transaction takes place on an exchange, the counterparty risk is reduced as the exchange offers the assurance that contractual obligations are met through the central clearing party principle. Note that there is still a risk that even though the risk may be low the exchange itself may default. For non-publicly traded derivatives products , i.e. over the counter ( OTC), it is becoming increasingly common to require counterparties to put up collateral to support the promises.
Incorrect
One way of mitigation is to make use of publicly traded derivatives. When the transaction takes place on an exchange, the counterparty risk is reduced as the exchange offers the assurance that contractual obligations are met through the central clearing party principle. Note that there is still a risk that even though the risk may be low the exchange itself may default. For non-publicly traded derivatives products , i.e. over the counter ( OTC), it is becoming increasingly common to require counterparties to put up collateral to support the promises.
-
Question 21 of 30
21. Question
For which products is the Payment netting commonly used to reduce counterparty risk? Choose from the following:
I. targeted products
II. aligned products
III. OTC products
IV. exchange-traded productsCorrect
It is to be acknowledged that payment netting is commonly used to reduce the risk of counterparties for both OTC and traded exchange products. Payment netting minimizes the need for funds and securities to change hands, maximizing the likelihood that each party will receive what it is supposed to get at the end of the day.
Incorrect
It is to be acknowledged that payment netting is commonly used to reduce the risk of counterparties for both OTC and traded exchange products. Payment netting minimizes the need for funds and securities to change hands, maximizing the likelihood that each party will receive what it is supposed to get at the end of the day.
-
Question 22 of 30
22. Question
What are the components of every investment transaction? Choose from the following:
I. the principal invested
II. latest version of the software developer
III. the targeted population granter
IV. the investment return generatedCorrect
It is stated that in each investment transaction there are two components, namely the principal invested, and the investment return generated. The investment purpose is to maximize return while preserving the principal. An aggressive investor might be willing to do so at the risk of losing all or part of its principal. A more cautious investor may be willing to accept a lower return to protect its principal
Incorrect
It is stated that in each investment transaction there are two components, namely the principal invested, and the investment return generated. The investment purpose is to maximize return while preserving the principal. An aggressive investor might be willing to do so at the risk of losing all or part of its principal. A more cautious investor may be willing to accept a lower return to protect its principal
-
Question 23 of 30
23. Question
What kind of instrument is a reverse convertible bond?
Correct
Please note that as all other structured goods, an unsecured debt instrument is an inverse convertible bond. This is published as a note of which a single stock is associated. In normal circumstances, it has characteristics of a fixed income instrument: regular interest payments (if the note so provides), and payment of the note’s par value upon maturity.
Incorrect
Please note that as all other structured goods, an unsecured debt instrument is an inverse convertible bond. This is published as a note of which a single stock is associated. In normal circumstances, it has characteristics of a fixed income instrument: regular interest payments (if the note so provides), and payment of the note’s par value upon maturity.
-
Question 24 of 30
24. Question
Why are the derivatives contracts used for both principal and return components?
Correct
It is stated that usually, there is no need to include fixed income instruments for the main component of those products without any downside security factor in participation products. Alternatively, derivatives contracts are used to achieve the optimal risk-return pattern for both the principal and return elements. Within this group, there are several examples of the products.
Incorrect
It is stated that usually, there is no need to include fixed income instruments for the main component of those products without any downside security factor in participation products. Alternatively, derivatives contracts are used to achieve the optimal risk-return pattern for both the principal and return elements. Within this group, there are several examples of the products.
-
Question 25 of 30
25. Question
What is the main purpose of a tracker certificate?
Correct
It is to be acknowledged that a certificate tracker monitors the performance of an underlying asset. It has neither an upside limit, nor insurance against downside. This has an equivalent risk profile to the underlying asset this monitors. The reason for its creation is to give investors access to otherwise unlikely or economically feasible investments, such as a tailored-made index.
Incorrect
It is to be acknowledged that a certificate tracker monitors the performance of an underlying asset. It has neither an upside limit, nor insurance against downside. This has an equivalent risk profile to the underlying asset this monitors. The reason for its creation is to give investors access to otherwise unlikely or economically feasible investments, such as a tailored-made index.
-
Question 26 of 30
26. Question
What are the Bonus Certificates designed to do?
Correct
Bonus certificates are tracker certificates with the pre-determined barrier conditional downside defense. These are built to give protection to the downside only at barrier point. So long as the price of the underlying asset does not fall below the threshold, the payout on maturity to the buyer is no less than an negotiated sum (the “bonus”).
Incorrect
Bonus certificates are tracker certificates with the pre-determined barrier conditional downside defense. These are built to give protection to the downside only at barrier point. So long as the price of the underlying asset does not fall below the threshold, the payout on maturity to the buyer is no less than an negotiated sum (the “bonus”).
-
Question 27 of 30
27. Question
What can the airbag certificates be designed to do?
Correct
Please learn that the benefit of an airbag certificate over a bonus certificate is that it gives the underlying stock an opportunity to recover over the certificate ‘s lifespan. Airbag certificates may be configured to have various rates of airbags to match the specific risk tolerance of an individual. The higher the level of security, of course, the lower the risk for return.
Incorrect
Please learn that the benefit of an airbag certificate over a bonus certificate is that it gives the underlying stock an opportunity to recover over the certificate ‘s lifespan. Airbag certificates may be configured to have various rates of airbags to match the specific risk tolerance of an individual. The higher the level of security, of course, the lower the risk for return.
-
Question 28 of 30
28. Question
How is a reverse convertible constructed?
Correct
It is to be acknowledged that structured products that aim to preserve capital typically use bonds as the underlying structure to provide return of all or part of capital at maturityThere are various ways of obtaining the same risk-return profiles using different financial instruments. Reverse convertible is designed by bonding and placing option.
Incorrect
It is to be acknowledged that structured products that aim to preserve capital typically use bonds as the underlying structure to provide return of all or part of capital at maturityThere are various ways of obtaining the same risk-return profiles using different financial instruments. Reverse convertible is designed by bonding and placing option.
-
Question 29 of 30
29. Question
How is a discount certificate constructed?
Correct
Please note that although the types of financial instruments used differ greatly depending on investment goals, structured products aimed at retaining capital usually use bonds as the underlying mechanism to return all or part of capital at maturity. Discount certificate is created using the call method and down-and-out.
Incorrect
Please note that although the types of financial instruments used differ greatly depending on investment goals, structured products aimed at retaining capital usually use bonds as the underlying mechanism to return all or part of capital at maturity. Discount certificate is created using the call method and down-and-out.
-
Question 30 of 30
30. Question
What are the two basic types of assets for which futures contracts exist? Choose from the following:
I. contracted employees
II. Targeted assets
III. Financial futures contracts
IV. Commodity futures contractsCorrect
Please note that futures were initially traded on goods only, in a market dominated by the Chicago Mercantile Exchange ( CME). Nevertheless, contracts on financial instruments became immensely popular after their launch in the 1970s and rapidly overtook commodity futures in terms of trading volume and global market accessibility. There are two basic asset categories, for which there will be future contracts. These are Commodity futures contracts; and Financial futures contracts.
Incorrect
Please note that futures were initially traded on goods only, in a market dominated by the Chicago Mercantile Exchange ( CME). Nevertheless, contracts on financial instruments became immensely popular after their launch in the 1970s and rapidly overtook commodity futures in terms of trading volume and global market accessibility. There are two basic asset categories, for which there will be future contracts. These are Commodity futures contracts; and Financial futures contracts.