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Question 1 of 30
1. Question
Which are the ways to make the payments to the policy owner under a formal ILP? Choose from the following:
I. Health Benefits
II. Death benefits
III. Finance increased benefits
IV. Maturity/ Survival benefitsCorrect
Please note that there are several options to make payments under a structured ILP to the policy owner: (a) Death Benefits: if the policy owner dies while the policy is still in service, the greater the amount of life insurance for the policy; or the cash value for the policy; is paid to the stated beneficiary. When the death benefit is paid the policy is discontinued and there will be no further payout. (b).Maturity / Survival Benefits: If the policy owner survives to maturity, the insurance term expires and the policy owner is paid the maturity value.
Incorrect
Please note that there are several options to make payments under a structured ILP to the policy owner: (a) Death Benefits: if the policy owner dies while the policy is still in service, the greater the amount of life insurance for the policy; or the cash value for the policy; is paid to the stated beneficiary. When the death benefit is paid the policy is discontinued and there will be no further payout. (b).Maturity / Survival Benefits: If the policy owner survives to maturity, the insurance term expires and the policy owner is paid the maturity value.
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Question 2 of 30
2. Question
Which factors can cause a fluctuation in prices according to the general market risk? Choose from the following:
I. general market price
II. exchange rate and commodity price
III. common interests for profit
IV. interest rates and inflationCorrect
Please know that variables such as interest rates , inflation, exchange rates, product prices and so on can cause fluctuations in prices as they directly affect profitability. Consider , for example, the stock price of an company. As interest rates rise, the cost of borrowing rises, and profits decline. When a local currency appreciates, after conversion, the cost of imported materials becomes cheaper, and the profit increases if the goods are sold locally at the same price.
Incorrect
Please know that variables such as interest rates , inflation, exchange rates, product prices and so on can cause fluctuations in prices as they directly affect profitability. Consider , for example, the stock price of an company. As interest rates rise, the cost of borrowing rises, and profits decline. When a local currency appreciates, after conversion, the cost of imported materials becomes cheaper, and the profit increases if the goods are sold locally at the same price.
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Question 3 of 30
3. Question
Which are the ways of handling collateral risk? Choose from the following:
I. remove risky steps from the collateral
II. set the adequate level of collateral required
III. add security codes to the process
IV. require additional collateral when its value has depreciatedCorrect
It should be recognized that the way to handle collateral risk is to maintain an appropriate level of collateral needed, and provide additional collateral after its value has been depreciated. Since most organized goods are non-standard OTC contracts, the sum of collateral is subject to private bargaining.
Incorrect
It should be recognized that the way to handle collateral risk is to maintain an appropriate level of collateral needed, and provide additional collateral after its value has been depreciated. Since most organized goods are non-standard OTC contracts, the sum of collateral is subject to private bargaining.
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Question 4 of 30
4. Question
Poor investments deliver poor returns for the risk taken. By the same token, are there incentives at low risk to generate high returns? What’s Investment Art? Choose from the following:
I. to correctly assess the risk-return profile of each opportunity
II. to add more participants into the investment procedures
III. to decide whether the trade-off between risk and return is acceptable
IV. to wait for the increase in the currency rate for more profitCorrect
It should be remembered that not all risky investments offer high potential for yield. There are bad investments that offer low payoff for the high risk. In the same way, it is possible but unlikely, that low-risk opportunities deliver high returns. The investment firm is to correctly determine the risk-return profile of each opportunity and to assess if the risk-return ratio is acceptable.
Incorrect
It should be remembered that not all risky investments offer high potential for yield. There are bad investments that offer low payoff for the high risk. In the same way, it is possible but unlikely, that low-risk opportunities deliver high returns. The investment firm is to correctly determine the risk-return profile of each opportunity and to assess if the risk-return ratio is acceptable.
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Question 5 of 30
5. Question
What does the market price of security refer to?
Correct
A security’s market price is the current price the security can buy or sell at. Market price is, in theory, the present value of future profits for the issuer. Profitability-related considerations-existing and future-impact the current market price. In reality, supply and demand are, to a large degree, dictated by the market price.
Incorrect
A security’s market price is the current price the security can buy or sell at. Market price is, in theory, the present value of future profits for the issuer. Profitability-related considerations-existing and future-impact the current market price. In reality, supply and demand are, to a large degree, dictated by the market price.
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Question 6 of 30
6. Question
What does a decline in the value of the underlying assets do on the date of expiry?
Correct
It is claimed that, at the expiry date, a sudden decline in the value of the underlying assets that wipe out the entire cumulative benefit over the contract period. There is no way for the buyer to ride out the inevitable downturn as the contract expires after expiry. This is unlike a direct investment in stocks, where investors can opt to keep stocks in the hope of price recovery at a later date.
Incorrect
It is claimed that, at the expiry date, a sudden decline in the value of the underlying assets that wipe out the entire cumulative benefit over the contract period. There is no way for the buyer to ride out the inevitable downturn as the contract expires after expiry. This is unlike a direct investment in stocks, where investors can opt to keep stocks in the hope of price recovery at a later date.
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Question 7 of 30
7. Question
Why do investors expect higher returns from risky investments?
Correct
It is stated that if an investment is considered to be of high risk, it means that the probability of the expected return that might not be achieved is greater than other investments. It also means the principal can be lost in whole or in part. Of course, investors are demanding proper compensation for the risk they take on. This is the reason why investors expect higher returns from risky investments, i.e. compensate for the higher probability that the returns may not materialize.
Incorrect
It is stated that if an investment is considered to be of high risk, it means that the probability of the expected return that might not be achieved is greater than other investments. It also means the principal can be lost in whole or in part. Of course, investors are demanding proper compensation for the risk they take on. This is the reason why investors expect higher returns from risky investments, i.e. compensate for the higher probability that the returns may not materialize.
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Question 8 of 30
8. Question
How are the assets of a CIS held?
Correct
A CIS’s assets are held by a custodian of third parties such as the trustee. Therefore, investors in structured funds do not need to be worried about the product issuer’s credit risk, although they are also subject to CIS investment default risk. By comparison, investors in structured deposits and structured notes are general creditors of financial institutions selling the securities in the event of bankruptcy.
Incorrect
A CIS’s assets are held by a custodian of third parties such as the trustee. Therefore, investors in structured funds do not need to be worried about the product issuer’s credit risk, although they are also subject to CIS investment default risk. By comparison, investors in structured deposits and structured notes are general creditors of financial institutions selling the securities in the event of bankruptcy.
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Question 9 of 30
9. Question
How can one meet the Fair Dealing Outcome?
Correct
It is to be acknowledged that the financial background and literacy of the client influence what is considered “clear”. Explaining a complicated product in plain language isn’t easy. One way of achieving the Fair Dealing Outcome is to explain the product features by presenting a range of possible product outcomes.
Incorrect
It is to be acknowledged that the financial background and literacy of the client influence what is considered “clear”. Explaining a complicated product in plain language isn’t easy. One way of achieving the Fair Dealing Outcome is to explain the product features by presenting a range of possible product outcomes.
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Question 10 of 30
10. Question
To where are the risk drivers for the derivatives component linked?
Correct
Please learn that the risk drivers for the derivatives component are linked to the derivatives contracts’ underlying assets, as the price movement of the derivatives contracts follows the price movement of the underlying assets, whether it is an equity index or a specific commodity, or a stock or currency basket. The price of the derivatives is often determined by the counterpart’s creditworthiness.
Incorrect
Please learn that the risk drivers for the derivatives component are linked to the derivatives contracts’ underlying assets, as the price movement of the derivatives contracts follows the price movement of the underlying assets, whether it is an equity index or a specific commodity, or a stock or currency basket. The price of the derivatives is often determined by the counterpart’s creditworthiness.
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Question 11 of 30
11. Question
What happens when the counterparty’s ability to fulfill his contractual obligation is doubtful?
Correct
It is to be learned that the price of the derivatives is also determined by counterparty creditworthiness. The price of the derivative contract goes down when there is uncertainty as to the willingness of the counterparty to fulfill its contractual obligation. Another risk factor is the foreign exchange rate, insofar as foreign currencies are involved in either part.
Incorrect
It is to be learned that the price of the derivatives is also determined by counterparty creditworthiness. The price of the derivative contract goes down when there is uncertainty as to the willingness of the counterparty to fulfill its contractual obligation. Another risk factor is the foreign exchange rate, insofar as foreign currencies are involved in either part.
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Question 12 of 30
12. Question
Payment netting is also commonly used to reduce counterparty risk for both OTC and exchange-traded products. What does it minimize?
Correct
It is to be learnt that the payment netting is also commonly used to reduce the risk of counterparties for both OTC and traded exchange products. Payment netting minimizes the need for funds and shares to change hands, increasing the probability that each party will get what it is expected to get at the end of the day.
Incorrect
It is to be learnt that the payment netting is also commonly used to reduce the risk of counterparties for both OTC and traded exchange products. Payment netting minimizes the need for funds and shares to change hands, increasing the probability that each party will get what it is expected to get at the end of the day.
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Question 13 of 30
13. Question
Why do buying calls appeal to aggressive investors?
Correct
It is stated that buying calls is appealing for aggressive investors because of the leverage. Assume Michael has a strong sense that a particular stock is about to move higher. His cash outlay if he buys the stock is S$1,000 for every 100 shares and his overall loss is S$1,000. When he buys a call he charges S$100 (100 shares X S$1 per right), and his risk is limited to S$100. We see leverage working here-the call is just 10 percent of the S$1,000 needed to buy the stock directly.
Incorrect
It is stated that buying calls is appealing for aggressive investors because of the leverage. Assume Michael has a strong sense that a particular stock is about to move higher. His cash outlay if he buys the stock is S$1,000 for every 100 shares and his overall loss is S$1,000. When he buys a call he charges S$100 (100 shares X S$1 per right), and his risk is limited to S$100. We see leverage working here-the call is just 10 percent of the S$1,000 needed to buy the stock directly.
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Question 14 of 30
14. Question
What kinds of choices fall into the category of the barrier option? Pick from the following:
I. up-and-beyond
II. Up-and-out
III. Up-and-about
IV. Up-and-inCorrect
Please note that a barrier option is employed in the Barrier Certificates. In this option the exercise option depends on a crossing or attainment at a specified barrier of the underlying properties. There are four variations of these options as follows: – Up-and-out: The spot price begins below the barrier level and the knock-out alternative has to climb to the barrier level– Down-and-out: Spot prices start above the barrier level and have to drop down to the barrier level for the knock-out option;
– Up-and-in: the spot price begins below the barrier level and has to go up to the barrier level
– Down-and-in: the spot price begins above the barrier level and has to descend to the barrier level to enable it.Incorrect
Please note that a barrier option is employed in the Barrier Certificates. In this option the exercise option depends on a crossing or attainment at a specified barrier of the underlying properties. There are four variations of these options as follows: – Up-and-out: The spot price begins below the barrier level and the knock-out alternative has to climb to the barrier level– Down-and-out: Spot prices start above the barrier level and have to drop down to the barrier level for the knock-out option;
– Up-and-in: the spot price begins below the barrier level and has to go up to the barrier level
– Down-and-in: the spot price begins above the barrier level and has to descend to the barrier level to enable it. -
Question 15 of 30
15. Question
Under what security condition do the Options and Warrants give both the right to buy or sell? Choose from the following:
I. under the risk limited area
II. on or before a specified date
III. in a specified quantity
IV. at a specified priceCorrect
Please learn that the options and warrants are close. Both entitle to buy (“call” contract) or sell the underlying security (“put” contract):
· By specified quantity;
. At a given price (called the “exercise price” or “strike price”)
. On or before a given date (referred to as the “expiry date”) Options and warrants give the right to purchase or sell the underlying content, but not the obligation. The warrant holder or the alternative will determine whether or not he exercises the contractual rights.Incorrect
Please learn that the options and warrants are close. Both entitle to buy (“call” contract) or sell the underlying security (“put” contract):
· By specified quantity;
. At a given price (called the “exercise price” or “strike price”)
. On or before a given date (referred to as the “expiry date”) Options and warrants give the right to purchase or sell the underlying content, but not the obligation. The warrant holder or the alternative will determine whether or not he exercises the contractual rights. -
Question 16 of 30
16. Question
Which is the target of the choice fund? Choose from the following:
I. to develop good relations with the funds’ raisers
II. to achieve the best possible result
III. for long-term capital appreciation
IV. for greater investment projectsCorrect
Please note that the Choice Fund is a closed fund with a fixed maturity date. At least the Secure Value maturity value is equal to. It aims at ensuring long-term capital appreciation and producing the best possible outcome such that at least the secure price is equal to the payout of each unit on the maturity date.
Incorrect
Please note that the Choice Fund is a closed fund with a fixed maturity date. At least the Secure Value maturity value is equal to. It aims at ensuring long-term capital appreciation and producing the best possible outcome such that at least the secure price is equal to the payout of each unit on the maturity date.
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Question 17 of 30
17. Question
What is the reason behind the six stocks to be used only as reference benchmarks? Choose from the following:
I. to improve the conditions of formating related to the six stocks
II. to determine the level of annual payout
III. to determine the flow level of the six stocks in the market
IV. to determine the occurrence of early redemptionCorrect
Please learn that due to the initial payments, the fund will receive at least 5 percent for breakeven only. It should be remembered that the underlying investments in the six stocks are NOT. The six stocks are only used as a reference benchmark to determine annual payout levels and early redemption occurrences.
Incorrect
Please learn that due to the initial payments, the fund will receive at least 5 percent for breakeven only. It should be remembered that the underlying investments in the six stocks are NOT. The six stocks are only used as a reference benchmark to determine annual payout levels and early redemption occurrences.
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Question 18 of 30
18. Question
What does a typical life insurance policy typically hold? Choose from the following:
I. employee seat power
II. marketing degree
III. protection element
IV. a savings/investment elementCorrect
It is to be acknowledged that a typical life insurance policy has an element of protection and an element of savings/investment. Part of the premium insurance is used to provide protection from death or other misfortunes, such as a disability or terminal illness. The balance of the premium is invested, payable at the policy maturity, early termination of the policy or other occasions in accordance with policy conditions.
Incorrect
It is to be acknowledged that a typical life insurance policy has an element of protection and an element of savings/investment. Part of the premium insurance is used to provide protection from death or other misfortunes, such as a disability or terminal illness. The balance of the premium is invested, payable at the policy maturity, early termination of the policy or other occasions in accordance with policy conditions.
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Question 19 of 30
19. Question
According to the opportunity cost, what happens to the investor by putting money into an ILP?
Correct
It is stated that price of opportunity means an investor loses the ability to spend it elsewhere by bringing money into an ILP. There’s no guarantee of course that putting capital somewhere would yield better returns. Another source of cost of opportunity is from fund diversification. The very nature of diversification means that the good performance of a single security or a single asset class is dragged down by others in the same portfolio.
Incorrect
It is stated that price of opportunity means an investor loses the ability to spend it elsewhere by bringing money into an ILP. There’s no guarantee of course that putting capital somewhere would yield better returns. Another source of cost of opportunity is from fund diversification. The very nature of diversification means that the good performance of a single security or a single asset class is dragged down by others in the same portfolio.
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Question 20 of 30
20. Question
In what stages of the product life cycle is the communication separated? Choose from the following:
I. initial primary stage
II. disclosure at the point of sale
III. disclosure at policy inception
IV. ongoing disclosure after policy inceptionCorrect
It is to be acknowledged 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 customers is continuous, divided into the product life cycle into three stages:
disclosure at the point of sale;
disclosure at policy inception; and
ongoing disclosure after policy inception.Incorrect
It is to be acknowledged 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 customers is continuous, divided into the product life cycle into three stages:
disclosure at the point of sale;
disclosure at policy inception; and
ongoing disclosure after policy inception. -
Question 21 of 30
21. Question
What is the purpose of providing a PHS (Product Highlights Sheet)?
Correct
Please note that the aim of the provision of a PHS is to highlight the main characteristics and risks inherent in the ILP sub-fund. Prospective policy-makers will first read product overview, obtain a clear understanding of product functionality, and then read PHS in question-and-answer format to answer any questions they might have. There should be no details in the PHS which is not in the product summary.
Incorrect
Please note that the aim of the provision of a PHS is to highlight the main characteristics and risks inherent in the ILP sub-fund. Prospective policy-makers will first read product overview, obtain a clear understanding of product functionality, and then read PHS in question-and-answer format to answer any questions they might have. There should be no details in the PHS which is not in the product summary.
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Question 22 of 30
22. Question
How are the fees and charges paid under an ILP? Choose from the following:
I. through deduction of premium or cancellation of units
II. through payment directly from the assets of the ILP sub-fund
III. through online payments through mobile devices
IV. through bank visitsCorrect
An ILP offers two ways of charging fees and charges. One approach is by deducting prime or unit cancellation. For example, before the balance is invested in the underlying ILP subfunds, the upfront sales commission is deducted from the single premiumh. The other way is via payment directly from the ILP subfund ‘s assets. For example, fund management charges and auditor fees are deducted from the net asset value of the fund, before determining the unit price. Marketing and advertising costs can NOT be charged out of the sub-funds.
Incorrect
An ILP offers two ways of charging fees and charges. One approach is by deducting prime or unit cancellation. For example, before the balance is invested in the underlying ILP subfunds, the upfront sales commission is deducted from the single premiumh. The other way is via payment directly from the ILP subfund ‘s assets. For example, fund management charges and auditor fees are deducted from the net asset value of the fund, before determining the unit price. Marketing and advertising costs can NOT be charged out of the sub-funds.
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Question 23 of 30
23. Question
What must be included in the Semi-Annual Report, which the insurance must provide? Choose from the following:
I. the market value of investments
II. top 10 holdings at market value
III. the market value of exposure to derivatives
IV. lowest 5 income charges in the current situationCorrect
Please note that the insurer shall send a ‘Semi-Annual Report’ and a ‘Related Audit Report’ for each of the ILP subfunds. The Semi-Annual Report will include: (a) market value of investments; (b) top 10 market value holdings; and (c) market value of derivatives exposure. All values shall be shown in both dollar amounts and Net Asset Value (NAV) percentage.
Incorrect
Please note that the insurer shall send a ‘Semi-Annual Report’ and a ‘Related Audit Report’ for each of the ILP subfunds. The Semi-Annual Report will include: (a) market value of investments; (b) top 10 market value holdings; and (c) market value of derivatives exposure. All values shall be shown in both dollar amounts and Net Asset Value (NAV) percentage.
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Question 24 of 30
24. Question
In terms of structure, what does a reverse convertible bond consist of? Choose from the following:
I. a targeted area for notice
II. a written put option
III. a certificate of achievement
IV. a bond, providing the periodic interest paymentsCorrect
Please note that in terms of form, a reverse convertible bond consists of a bond containing 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 in terms of form, a reverse convertible bond consists of a bond containing 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.
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Question 25 of 30
25. Question
On what are the financial institutions required to train their Advisers?
Correct
It is to be acknowledged that financial institutions are expected to train their Advisors on the characteristics and risk-return profile of any investment products they suggest. While the financial institutions have the responsibility to provide the preparation, the Advisors are responsible for product information. All financial products show trade in risk and return.
Incorrect
It is to be acknowledged that financial institutions are expected to train their Advisors on the characteristics and risk-return profile of any investment products they suggest. While the financial institutions have the responsibility to provide the preparation, the Advisors are responsible for product information. All financial products show trade in risk and return.
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Question 26 of 30
26. Question
What does the clarity of information contribute to regarding the clients?
Correct
Please note that knowledge transparency contributes a great deal to the comprehension of a financial product by the consumer. The Fair Dealing Guidelines allow consumer statements to be in plain language, avoiding technical and deceptive words and delivered in a simple-to-read and easy-to-understand format.The client’s financial experience and literacy affect what is deemed “clear”.
Incorrect
Please note that knowledge transparency contributes a great deal to the comprehension of a financial product by the consumer. The Fair Dealing Guidelines allow consumer statements to be in plain language, avoiding technical and deceptive words and delivered in a simple-to-read and easy-to-understand format.The client’s financial experience and literacy affect what is deemed “clear”.
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Question 27 of 30
27. Question
Based on what do clients set their investment objectives for the advisers? Choose from the following:
I. the limited area for there economists
II. their personal circumstances
III. their risk appetites
IV. their own financial statusCorrect
This is suggested that advisors will assist clients on the basis of their personal circumstances and risk appetites in deciding their investment objectives. The pool of structured goods is broad enough to match most combinations of health, income, and development goals. However, most structured goods are not liquid and the “fair” market value can hardly be calculated.
Incorrect
This is suggested that advisors will assist clients on the basis of their personal circumstances and risk appetites in deciding their investment objectives. The pool of structured goods is broad enough to match most combinations of health, income, and development goals. However, most structured goods are not liquid and the “fair” market value can hardly be calculated.
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Question 28 of 30
28. Question
What are the ways to minimize risk to the counterparty? 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
Please learn that one way to counter this is to use publicly-traded derivatives. If the transaction takes place at an exchange, the risk of the counterparty is minimized because the exchange provides the guarantee that contractual obligations are satisfied by the policy of the central clearing party. Note that there is still a risk that the exchange itself can default although the risk may be small. 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
Please learn that one way to counter this is to use publicly-traded derivatives. If the transaction takes place at an exchange, the risk of the counterparty is minimized because the exchange provides the guarantee that contractual obligations are satisfied by the policy of the central clearing party. Note that there is still a risk that the exchange itself can default although the risk may be small. 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.
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Question 29 of 30
29. Question
What is Liquidity from an institution’s perspective?
Correct
From the viewpoint of an organization, liquidity refers to insufficient cash to fulfill their cash flow requirements. This may be a temporary issue, and may not suggest a structural problem. For example, market declines may lead to marginal calls for futures contracts, causing a temporary cash crunch for the institution. . A financially strong institution is able to borrow money or sell assets to meet a temporary surge in demand for cash payment or collateral.
Incorrect
From the viewpoint of an organization, liquidity refers to insufficient cash to fulfill their cash flow requirements. This may be a temporary issue, and may not suggest a structural problem. For example, market declines may lead to marginal calls for futures contracts, causing a temporary cash crunch for the institution. . A financially strong institution is able to borrow money or sell assets to meet a temporary surge in demand for cash payment or collateral.
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Question 30 of 30
30. Question
What is the purpose of Bonus Certificates?
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”).