BAFI 1016 – MCT Practice Questions
1. Managed funds are popular because they allow investors to gain:
a. access to a wide range of different asset classes
b. exposure to industry segments
c. diversification across a range of different investment types
d. all of the above
2. Given the information provided below, which of the following share
investments is clearly preferred to the others?
Investment Return/Standard Deviation
Bee Enterprises 13% 6%
Sanda Trading 12% 6%
Trouble Holdings 13% 9%
a. Bee Enterprises
Higher returns at lower risk
b. Sanda Trading
c. Trouble Holdings
d. Insufficient information to make an informed decision
3.
If you were to deposit $1,500 today into an investment account earning
8% p.a. compounded annually, approximately how much will you have in your
account at the end of 7 years?
a. $1,706
b. $2,340
c. $2,571
d. $875
4.
Which of the following is generally not true about the calculation of an
individual’s equity or net worth ratio?
a. For a young person, it is expected that their equity ratio would be
relatively low as they are likely to have a high level of debt
b. For a young person, it is expected that their equity ratio would be
relatively high as they are likely to have a low level of debt
c. the ratio shows the percentage of total debt to total assets
d. both b and c
5
The highest level of business activity occurs during which of the following
phases in the business cycle?
e. boom or expansion phase
f. recession phase
Pg15,16 gives definition for all 4 stages of the business cycle
g. recovery phase
h. contraction phase
6
The prudent investor is characterised by:
a. need for income
b. their willingness to devote time and care to the selection of sound and
attractive investments even though they may not be fully trained experts in
the field
c. the conservation of capital
d. both a and c
7.
When there is more than one compounding period per annum the nominal
and effective rates of interest for an investment will be:
a. greater for the effective rate of interest
b. greater for the nominal rate of interest
c. equivalent for each of the nominal and effective rates of interest
d. unable to be determined without additional information
8.
The importance of the efficient frontier lies in the fact that it:
a. identifies where the most efficient portfolios are
b. the fact that the efficient frontier is a curve is the key to how
diversification lets investors improve their efficient risk / return ratio
c. represents the optimal mix of return and risk for a portfolio of investments
given a required level of risk
d. all of the above
9.
The effect of an increase in the general level of interest rates on the
capital values of traded fixed-interest securities is:
a. A decreases in the capital values of traded fixed-interest securities
b. An increase in the capital values of traded fixed-interest securities
c. No change in the capital values as the initial investment is guaranteed
d. It depends on how long the investment has until maturity.
10. The personal balance sheet would not generally include which of the
following items:
a. dividends received during the year
b. motor vehicle
c. collection of rare banknotes
d. both a and b
11. Which of the following items would not generally be included in the
calculation of an individual’s liquidity ratio?
a. total balance of an outstanding 25-year mortgage loan taken out in the
last year
b. debt repayments over the next 12 months
c. amount of outstanding telephone account
d. both a and c
12.
In the calculation of the savings ratio, savings is defined as:
a. the amount left over after deducting expenditure from income
b. the balance of an individual’s funds on deposit at a bank
c. the amount left over after deducting expenditure from income after we
add back items that may be regarded as an investment
d. both a and b
13.
The term personal financial planning generally implies:
a. the achievement of a financial outcome within a specified time period
b. successfully gaining a job promotion
c. winning the lottery within a specified time period
d. both a and b
14.
The real rate of return is an indicative measure of an investments
exposure to:
a. credit risk
b. inflation risk
c. liquidity risk
d. all of the above
15. The currency risk effects from holding an investment valued in an overseas
currency will result in:
a. a rise in the Singapore dollar value of the investment if the Singapore
dollar falls relative to the overseas currency
b. a rise in the Singapore dollar value of the investment if the Singapore
dollar rises relative to the overseas currency
c. a fall in the Singapore dollar value of the investment if the Singapore
dollar rises relative to the overseas currency
d. both a and c
16.
Gibson (2000) studied the effects of multiple asset class investing. He
concluded that:
a. by using a combination of three asset classes over a period of time an
investor would achieve a long-term average return with a lower level of risk
which was higher than using four asset classes
b. by using a combination of the asset classes of shares, property and cash
over a period of time an investor would achieve a higher long-term average
return with a lower level of risk
c. by using a combination of all four asset classes over a period of time an
investor would achieve a higher long-term average return with a lower level
of risk
d. by using a combination of all four asset classes over a period of time an
investor would achieve a higher long-term average return but it would have
a higher level of risk
17.
The price/earnings (P/E) ratio:
a. indicates investors’ valuation of the future prospects of a financial
security rather than present performance
b. represents a calculation which is typically lower where there is a
promise of strong earnings gains
c. is measured by the market capitalisation divided by the current share
price
d. provides a good indication to the value of company
18.
Which of the following is not a key consideration/s in selecting a managed
fund for investment include:
a. the unique investment objective and philosophy of the fund
b. the asset allocation matches the investor’s risk profile
c. performance for the past year was positive
d. the skills and experience of the investment team
19.
Active fund managers attempt to:
a. out-perform the market
b. keep their investment risk low
c. replicate the performance of the benchmark
d. none of the above
20.
The risks of investing in managed funds include:
a. mismatch
b. alpha
c. systematic
d. all of the above
21.
Different types of managed funds include:
a.
actively managed
b.
multi sector
c.
passively managed
d.
all of the above