Module 4 – Sample Questions

Financial Planning Association of Malaysia
Web Sample 2008
Module 4 – Sample Questions
Q1.
Three months ago, an investor converted RM100,000 into Singapore
Dollars. The investor has decided to repatriate the funds now. What is his
position now?
Ringgit Malaysia per Singapore Dollar
Exchange rate (three months ago)
Current exchange rate
A.
B.
C.
D.
:
:
2.2000
2.0700
Loss RM5,909.09
Gain RM5,909.09
Loss RM13,000.00
Gain RM13,000.00
Answer:
RM100,000 / 2.20 = S$45,454.55
S$45,454.55 x 2.07 = RM94,090.91
RM100,000 - RM94,090.91 = Loss RM5,909.09
Q2.
A bank quotes the following fixed deposit rates:
Tenor
3 months
6 months
12 months
more than 12 months
Interest rate per annum
3.25%
3.50%
4.25%
4.25%
The interest rate cycle has just bottomed out and interest rates are now
expected to rise. At which tenor would you advise your client to place a
fixed deposit to take full advantage of this?
A.
B.
C.
D.
3 months.
6 months.
12 months.
More than 12 months.
Financial Planning Association of Malaysia
Web Sample 2008
Q3.
Interest is prohibited in all financial transactions in Islam. The Islamic
terminology for interest is:
A.
B.
C.
D.
Syariah.
Riba.
Mudharabah.
Al-Dayn.
Q4.
Which of the following regarding Beta are false?
I.
II.
III.
IV.
The Beta of the market is 1.0.
A stock with Beta of 1.1 has below market risk.
Beta measures systematic risk.
Beta is a measure of return on risk-free investments.
A.
B.
C.
D.
I, III
II, III
I, IV
II, IV
Q5.
Calculate the simple return on an investment with the following data:
P1 = RM3.24
P2 = RM3.96
Dividend = RM0.20
A.
B.
C.
D.
22.2%
28.4%
23.2%
18.2%
Answer:
[(3.96 – 3.24) + 0.20]/3.24 = 28.4%
Financial Planning Association of Malaysia
Web Sample 2008
Q6.
The basic distinction between a primary and a secondary market is:
A.
Proceeds from sales in a primary market go to the current owner of a
security; proceeds in a secondary market go to the original owner.
Primary markets involve direct dealings within regional exchanges.
Only new securities are sold in a primary market; only outstanding
securities are bought and sold in a secondary market.
Primary markets deal exclusively in bonds, secondary markets deal
primarily in common stocks.
B.
C.
D.
Q7.
Calculate the ex-all price of the stock of Company A after a bonus and
rights issue with details as follows:
Price
:
Bonus Issue :
Rights issue :
RM4.00
2:1
1:1 at RM1.20 per share
Note: The rights are after the bonus issue, and bonus shares are eligible
for participation in the rights.
A.
B.
C.
D.
RM 0.80
RM 1.20
RM 0.50
RM 1.27
Answer:
Existing: RM4 x 1 = RM4
BI
x2=0
RI
RM1.2 x 3 = RM3.6
6 RM7.6
RM7.6/6 = RM1.27
Q8.
Which of the following is a comparative stock valuation ratio?
A.
B.
C.
D.
P/E ratio.
Price-to-book ratio.
Price-to-cash flow ratio.
All of the above.
Financial Planning Association of Malaysia
Web Sample 2008
Q9.
How much should you pay for a 10-year zero coupon bond with a face
value of RM1,000 and time to maturity of 7 years, if the required yield to
maturity is 12.0%?
A.
B.
C.
D.
RM321.00
RM452.00
RM1,000.00
RM160.00
Answer:
N=7
PMT = 0
FV = 1,000
I = 12%
Compute PV = RM452
Q10. The main difference(s) between forward contracts and futures contract
is/are that:
A.
B.
C.
D.
Futures contracts are bought and sold on organized exchanges whereas
forward contracts are normally negotiated with banks.
Futures contracts are standardized while forward contracts are individually
tailored.
A and B.
None of the above.
Q11. Which is the main regulatory body governing unit trust funds?
A.
B.
C.
D.
Bank Negara Malaysia.
Bursa Malaysia.
Securities Commission.
Registrar of Companies.
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Web Sample 2008
Q12. Calculate the rate of return of the following fund with the information
provided below:
A.
B.
C.
D.
Price (31/12/05)
Price (31/12/06)
:
:
RM1.22
RM1.15
Dividend paid in year 2006
:
12 sen
(5.7%)
4.3%
9.8%
4.1%
Answer:
[(1.15 – 1.22) + 0.12]/ 1.22 = 4.1%
Q13. The following methods are used by valuers in determining the market
value of a property, except:
A.
B.
C.
D.
Cost approach.
Comparative sales method.
Tangible asset value method.
Capitalization of rental method.
Q14. The efficient frontier of risky assets may be defined as the portion of the
investment opportunity set which ______________.
A.
B.
C.
D.
Lies above the minimum variance portfolio.
Represents the highest return to risk ratio.
Includes portfolios with minimum risk.
Includes portfolios with the highest returns.
Q15. In ranking a portfolio performance, the Sharpe Index uses which measure
of risk?
A.
B.
C.
D.
Standard deviation.
Variance.
Beta.
Correlation coefficient.
Financial Planning Association of Malaysia
Web Sample 2008
Q16. The return on a portfolio is _________________________.
A.
B.
C.
D.
The sum of the returns of the individual securities.
The value weighted sum of the returns of the individual securities.
The value weighted sum of the variances of the returns.
The value weighted sum of the co-variances of the returns.
Q17. Which of the following are advantages of short-term investments?
I.
II.
III.
IV.
A.
B.
C.
D.
High liquidity and low risk.
Available from local financial institutions.
Can be readily converted into cash with minimal inconvenience.
Similar to market interest rates.
I, II, III
I, III, IV
II, III, IV
All of the above.
Q18. You have just won the first prize in a competition which pays RM3,500
annually for 5 years. Nevertheless, the first payment will only be received
3 years from now. The current interest rate is 8%. However, it is predicted
that the interest rate will decline to 6% by the beginning of year 3. What is
the actual value of this prize today?
A.
B.
C.
D.
RM11,703.68
RM12,405.90
RM12,671.90
RM15,627.87
Answer:
0
8%
1
3
2
3500
6%
4
5
3500
3500
6
7
3500
3500
8
Step 1: PVA due (at the beginning of year 3):
n = 5;
I = 6%
PMT = $3500
PV = -15,627.87
Step 2: CF in year 0:
n = 3;
I = 8%
PV = -12,405.9
FV = 15,627.87
Financial Planning Association of Malaysia
Web Sample 2008
Q19. The probability distribution of a less risky expected return is more peaked
than that of a riskier return. What shape would the probability distribution
have for a completely certain return?
A.
B. Probability
Probability
Return
Return
C.
D.
Probability
Probability
Return
Return
Q20. Which of the following is not an assumption in accounting?
A.
B.
C.
D.
Separate entity.
Going concern or Continuity.
Market value in determining the cost of asset.
None of the above.
Q21. An order placed which
_______________.
A.
B.
C.
D.
Limit order.
Short sale.
Market order.
Stop loss.
specifies
the
buy
or
sell
price
is
a
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Web Sample 2008
Q22. ____________ are issued by companies whose earnings are closely
linked to the general state of the economy or the general level of business
activity.
A.
B.
C.
D.
Speculative stocks.
Defensive stocks.
Cyclical stocks.
Growth stocks.
Q23. A company has a few ways to market its securities in a primary market.
They are:
I.
II.
III.
IV.
A.
B.
C.
D.
A Public Offering.
A Rights Offering.
A Private Placement.
A Public Placement.
I, II
I, III
I, II, III
All of the above.
Q24. The following are major reversal patterns in technical analysis except:
A.
B.
C.
D.
Double top.
Inverse head & shoulder.
Saucer.
Triangle.
Q25. Which of the following statements regarding fixed income securities is/are
false?
I.
II.
III.
IV.
A.
B.
C.
D.
I
II
III
III, IV
The price of a bond increases when its yield to maturity decreases.
As the duration of a bond increases, its sensitivity to a given
change in interest rates increases.
A normal yield curve is downward sloping.
The higher the liquidity risk, the greater the required yield to
maturity of a bond.
Financial Planning Association of Malaysia
Web Sample 2008
Q26. You have just bought a bond that matures in 10 years for the price of
RM925. The bond has a face value of RM1,000 and an 8 percent annual
coupon. What is the bond’s current yield?
A.
B.
C.
D.
8.65%
8.00%
8.33%
9.18%
Answer:
80/925 = 8.65%
Q27. Given the following unit trust quotes of Fund A, what is the effective
service or sales charge?
Fund A
A.
B.
C.
D.
Buying
RM0.96
Selling
RM1.02
RNAV
RM0.95
1.0%
7.4%
6.3%
8.2%
Answer:
1.02 – 0.95 = 0.07
0.07/0.95 = 7.4%
Q28. Studies on unit trust funds’ return and risk performance have found that
_____________.
A.
B.
C.
D.
Risk and return performance is not consistent over time.
Risk and return performance is consistent over time.
Risk performance is consistent over time but return performance is
not consistent over time.
Risk performance is not consistent over time but return performance is
consistent over time.
Financial Planning Association of Malaysia
Web Sample 2008
Q29. Which of the following are reasons for a purchaser to be cautious in using
the comparative method of valuing properties?
I.
II.
III.
IV.
A.
B.
C.
D.
The discount rate used may not be appropriate for the type of
property.
The property cycle may be at a peak.
It bears no relation to the cost of construction of the property.
It is difficult to determine the after tax cash flow.
I, II
II, III
III, IV
I, IV
Q30. In real estate, ownership rights can be transferred to a different person in
the form of a _______________.
A.
B.
C.
D.
Reversion or remainder.
Freehold or leasehold.
Title or deed.
None of the above.
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