Free Sample Question
Investment-linked policies

Which ONE of the following statements is INCORRECT regarding investment-linked insurance policies

A
Net premiums are invested in investment funds that are separated from the company’s general assets
B
Policy value, death benefit or annuity value will depend upon the performance of the underlying investment fund accounts
C
Investment risk is borne by the policyholder
D
Investment losses are borne by the insurer
Risk Types

Rightful Return Investors, an investment fund, is finding it difficult to find a buyer for a holding in a pharmaceutical company.  What type of risk is being displayed?

A
Market risk
B
Liquidity risk
C
Credit risk
D
Operational risk
HKMA

Which entities are governed by the Hong Kong Monetary Authority (HKMA)?

A
Authorised institutions
B
Fund managers
C
Stock brokers
D
Credit rating agencies
Interest Rates

What effect would a cut in US interest rates have on Hong Kong interest rates?

A
Hong Kong interest rates would rise
B
Hong Kong interest rates would fall
C
Hong Kong interest rates would remain stable
D
Hong Kong interest rates could go up or down
Investor Categories

Ivan investor is happy to take some risk but is keen that his capital is protected.  His investment advisor considers Ivan neither conservative nor aggressive.  How would the advisor categorise Ivan?

A
Balanced
B
Middle-of-the-road
C
Non-committed
D
Stable
Rate of Return

Which ONE of the following money market instruments typically has the highest rate of return?

A
Short-term Certificates of Deposit
B
Commercial Paper
C
Government Bills
D
Term deposits
Rights Issue

Rencoe Ltd has 200,000 shares in issue.  The share price before the rights issue is HKD10.  A 1 for 5 rights issue is announced at a subscription price of HKD8.  What will the theoretical share price move to after the rights issue?

A
HKD8.66
B
HKD9.33
C
HKD9.66
D
HKD10.33
Dividend Growth Model

Booker Industries has just paid a dividend of $11.  If the dividend is expected to grow at 3% per year for the foreseeable future, and investors require a 15% rate of return, what is the stock’s expected price?

A
$75.53
B
$91.66
C
$94.42
D
$103.88
Trustee/Custodian

Which of the following are permitted to act as a trustee/custodian of an investment fund?

  1. A bank licensed under the Banking Ordinance
  2. A trust company which is a subsidiary of a licensed bank
  3. A trust company registered under the Trustee Ordinance
  4. A bank or trust company incorporated outside Hong Kong which is acceptable to the SFC
A
i and iii only
B
ii and iv only
C
i, ii and iii only
D
i, ii, ii and iv
Units Purchased

The following applies to a single premium investment-linked life insurance policy:

 

Single premium =  HKD100,000

NAV per unit of investment fund  =  HK$24

Bid-offer spread  =  5%

 

How many units can be purchased?

A
3,924.5
B
3,968.25
C
4,166.66
D
4,385.96
Rebating

What does the unprofessional practice of Rebating refer to?

A
The offering of a rebate by an insurance agent of his/her commission to entice a prospect to purchase an insurance policy
B
The offering of a commission rebate by an insurance company to an insurance broker
C
Deliberate false statements and claims made by an insurance intermediary
D
Claiming that an investment return is guaranteed when it is not