IFA 4 - Investment Nov 2018 - Final · 2018-12-04 · Microsoft Word - IFA 4 - Investment Nov 2018...
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© ICSA 2018 Page 1 of 19 Please complete this box: Candidate number: as indicated on your admission slip Desk number: Number of continuation sheets attached: If you are using a calculator, please enter the make and model number: Make (company name): Model number: Subject no. 51B Paper 3 Investment Tuesday afternoon, 27 November 2018 Time allowed: 1 hour 30 minutes Do not open this examination paper until the presiding officer or an invigilator tells you to. You must not take this paper out of the examination room. The examination paper contains 18 questions and is divided into three sections. You must attempt all questions in Section A and Section B and two questions in Section C. Section A contains 15 marks, Section B contains 30 marks, and Section C contains 30 marks. There are 75 marks available in total for the paper. You should allow yourself approximately 20 minutes in total to answer the questions in Section A, 30 minutes in total to answer the questions in Section B, and 20 minutes for each of the questions attempted in Section C. You may continue your answers on the continuation sheets at the back of the booklet if necessary. Separate answer sheets are available from the invigilator. Note: Unless otherwise specified, you should assume that an Act or an organisation referred to in the questions is a UK Act or organisation.
Transcript of IFA 4 - Investment Nov 2018 - Final · 2018-12-04 · Microsoft Word - IFA 4 - Investment Nov 2018...
© ICSA 2018 Page 1 of 19
Please complete this box:
Candidate number: as indicated on your admission slip
Desk number:
Number of continuation sheets attached:
If you are using a calculator, please enter the make and model number:
Make (company name): Model number:
Subject no. 51B
Paper 3 Investment Tuesday afternoon, 27 November 2018 Time allowed: 1 hour 30 minutes Do not open this examination paper until the presiding officer or an invigilator tells you to. You must not take this paper out of the examination room. The examination paper contains 18 questions and is divided into three sections. You must attempt all questions in Section A and Section B and two questions in Section C. Section A contains 15 marks, Section B contains 30 marks, and Section C contains 30 marks. There are 75 marks available in total for the paper. You should allow yourself approximately 20 minutes in total to answer the questions in Section A, 30 minutes in total to answer the questions in Section B, and 20 minutes for each of the questions attempted in Section C. You may continue your answers on the continuation sheets at the back of the booklet if necessary. Separate answer sheets are available from the invigilator. Note: Unless otherwise specified, you should assume that an Act or an organisation referred to in the questions is a UK Act or organisation.
© ICSA 2018 Page 2 of 19
© ICSA 2018 Page 3 of 19
Section A Answer all questions in this section. Continue your answers on the continuation sheets at the back of the booklet, if necessary. 1 Name the shareholder ratio which is used to measure the real rate of return received on an equity
investment.
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(1 mark)
2 How many cash flows would there be for a newly-issued strippable gilt, with exactly seven years to
final maturity? __________________________________________________________________________
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(1 mark)
3 Give two examples of items which may be included under the heading ‘intangibles’ in a company’s statement of financial position.
i _______________________________________________________________________
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ii _______________________________________________________________________
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(2 marks)
4 What right is afforded to the holder of a put option?
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(1 mark)
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5 Amy, a United States investor living in London, has received a £20,000 dividend payment. Her intention is to convert this amount into US Dollars and remit the proceeds to a bank account in New York. Today’s spot rate is quoted thus: $1.32-$1.34.
Ignoring all bank transaction and commission charges, what amount would be credited to Amy’s New York bank account?
(Tick one box only)
A US$ 14,925 B US$ 15,151
C US$ 26,400
D US$ 26,800
(1 mark)
6 What is the name of the process used by a central bank to inject money into an economy in order to prevent it moving into a deflationary state?
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(1 mark)
7 State three reasons which may cause the share price of an investment trust company to trade at a
premium to its net asset value (NAV).
i _______________________________________________________________________
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ii _______________________________________________________________________
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iii _______________________________________________________________________
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(3 marks) 8 Give two examples of the economic consequences of high unemployment.
i _______________________________________________________________________
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ii _______________________________________________________________________
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(2 marks)
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9 Venture capital trusts (VCTs) are open-ended collective investment schemes.
Is this true or false? (Tick one box only)
True
False
(1 mark) 10 State two differences between currency swaps and interest rate swaps.
i _______________________________________________________________________
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ii _______________________________________________________________________
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(2 marks)
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Total for Section A = 15 marks
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Section B Answer all questions in this section. Continue your answers on the continuation sheets at the back of the booklet, if necessary. 11 Explain, using an example from the London Stock Exchange, how an order-driven market works. _________________________________________________________________________
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(6 marks)
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12 List six potential risks of investing in fixed-interest securities.
i _______________________________________________________________________
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ii _______________________________________________________________________
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iii _______________________________________________________________________
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iv _______________________________________________________________________
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v _______________________________________________________________________
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vi _______________________________________________________________________
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(6 marks) 13 Explain how ‘carry trade’ is used to make a profit.
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(6 marks)
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14 Explain the advantages and disadvantages of purchasing covered warrants based on equities rather than direct investment in equities.
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(6 marks)
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15 In a particular week, an institutional investor successfully purchased £1 million of UK Treasury bills with a tenor of exactly 182 days. The total cost was £995,000.
(a) Identify the two methods used to evaluate Treasury bill returns.
i _______________________________________________________________________
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ii _______________________________________________________________________
_______________________________________________________________________ (2 marks) (b) Showing your workings in the box below, use each method identified in part (a) to calculate
the annual percentage returns assuming that the Treasury bills are held from their purchase date to final maturity.
Method (i) Method (ii)
(4 marks)
(Total: 6 marks)
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Total for Section B = 30 marks
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Section C Answer two questions only. Continue your answers on the continuation sheets at the back of the booklet, if necessary. 16 Evaluate the methods permitted in the United Kingdom for bringing new securities to the main
market of the London Stock Exchange.
(15 marks)
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17 Analyse the types of pension scheme that are available, commenting on any advantages and disadvantages to the providers and the beneficiaries of such schemes.
(15 marks)
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© ICSA 2018 Page 15 of 19
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18 David, a high net worth individual (HNWI), has always managed his own investments. He has recently retired and wishes to spend more time pursuing his hobbies. He no longer wants the ‘burden’ of self-investment which he is willing to entrust to a professional fund manager. He is prepared to invest a significant sum of money into a professionally-managed collective investment scheme. Discuss the key factors that David should consider before committing funds to a collective investment scheme.
(15 marks)
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© ICSA 2018 Page 17 of 19
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© ICSA 2018 Page 18 of 19
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© ICSA 2018 Page 19 of 19
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Total for Section C = 30 marks
Total for paper = 75 marks
END
The scenarios included here are entirely fictional. Any resemblance of the information in the scenarios to real persons or organisations, actual or perceived, is purely coincidental.
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Do not write on this page – examiner use only Section A Section B Section C
Question Question Question
1 11 16
2 12 17
3 13 18
4 14 Total
5 15
6 Total
7
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10
Total
Marker (full name):
Reviewer (full name):
Clerical check (full name):
Examiner review:
Total marks for paper:
