CMFAS Module 8A (1 Edition) Mock Paper: © Singapore College of Insurance
CMFAS Module 8A (1 Edition) Mock Paper: © Singapore College of Insurance
CMFAS Module 8A (1 Edition) Mock Paper: © Singapore College of Insurance
1. Structured products:
A. futures contract
B. forward contract
C. zero-coupon bond
D. reverse convertible bond
4. Under the Risk and Return Trade-off matrix, investment opportunities that
involve low risk and high return would be classified as:
A. Rare Gems
B. Safe Investments
C. Bold Investments
D. Unworthy Investments
A. Tracker certificate.
B. Discount certificate.
C. Capital guaranteed fund.
D. Reverse convertible bond.
6. John has just invested S$10,000 in a 5-year capital guaranteed fund. XYZ
Bank, the bond-issuer of this product, is also providing the downside
protection. One year later, XYZ Bank is put into liquidation by creditors. In
the WORST case scenario, how much can John expect to get back from XYZ
Bank?
A. S$0
B. S$1,000
C. S$5,000
D. S$10,000
7. What should the adviser know about the client in order to determine if
structured products are appropriate investments for the client?
8. What are the factor(s) that can affect the market price of a security?
A. Inflation.
B. Interest rates.
C. Exchange rate.
D. All of the above.
10. An investor with liquidity concerns should NOT invest in products with:
A. a ready market
B. exposure to foreign currencies
C. positive and stable credit ratings
D. a long lock-up period of ten years
11. In 2011, Jonathan invested SGD 50,000 in a Foreign Currency Fixed Deposit
Account denominated in Australian Dollars. The account offers 5% interest
rate per annum. One year later, SGD depreciated against AUD and Jonathan
liquidated his account. How much should Jonathan receive in 2012?
(In 2011, 1 SGD = 1 AUD; In 2012, 1 SGD = 0.8 AUD)
A. SGD 42,000
B. SGD 50,000
C. SGD 52,500
D. SGD 65,625
A. Leverage.
B. Speculation.
C. Diversification.
D. Market Making.
14. John observed that the movement in the prices of securities A & B are
completely random. He would expect the two securities to have a correlation
coefficient of:
A. +1
B. + 0.5
C. 0
D. –1
A. Gold.
B. Soy bean.
C. Oil and gas.
D. All of the above.
17. When the futures price of a commodity is lower than its spot price, this
situation is known as:
A. basis
B. margin
C. contango
D. backwardation
C. Erika enters into a contract on 1 Mar 2013 to sell her house to Felicia
at the bank valuation price at least two months before Erika migrates to
Australia.
D. Gisele enters into a contract with the local money changer to change
her SGD into USD at the prevailing market rate today.
20. Lynette opens an account to trade gold futures on an exchange. She puts up
an initial margin of S$3,000 and the exchange stipulates a maintenance
margin of S$2,000 to be kept at all times.
On the first day of trading, the value of her contract falls by S$1,300.
21. Assuming the current market price of Apple Inc. is USD465, which of the
following investors is holding an option with a positive intrinsic value?
A. Greg who owns a call option on Apple Inc. with a strike price of
USD 500.
B. Edwin who owns a put option on Apple Inc. with a strike price of
USD 470.
C. Matt who owns a call option on Apple Inc. with a strike price of
USD 465.
D. Tim who owns a put option on Apple Inc. with a strike price of
USD 465.
22. Kylie currently does not own any SIA shares and feels that its current trading
price of S$11 per share is too high. She is only willing to pay not more than
S$10 per share. Which of the following option strategies may enable her to
buy SIA shares for not more than S$10?
A. Buy a call option with an exercise price of S$8 for a premium of S$1.
B. Sell a naked put option with an exercise price of S$12 for a premium of
S$1.
C. Buy a protective put option with an exercise price of S$10 for a
premium of S$1.
D. All of the above.
23. Nicholas holds many shares in Fast Forward Corp and believes that, given
the global economic crisis, there is a good chance that the share price will
fall. However, he wishes to keep these shares as he believes in their long
term performance. Which one of the following option strategies will enable
him to generate additional income by taking on a low risk in the short term?
A. Bull straddles.
B. Bear straddles.
C. Writing covered calls.
D. Buying protective puts.
24. The 3-month forward price for 1kg of coffee is S$50 and the cost of carry is
S$5. The spot price for 1kg of coffee is:
A. S$45
B. S$50
C. S$55
D. S$60
25. The December futures price for 1 ounce of silver is S$60 and the spot price
is S$45. In market lingo, the basis is:
26. The share price of American Express Co. is currently trading at US$60.
Sharon believes that the share price will rise and decides to take a long CFD
position. The CFD provider quotes her US$58 bid and US$62 offer.
Subsequently, the share price of American Express Co. rises to US$80. The
CFD provider then quotes her US$78 bid and US$82 offer.
A. US$16
B. US$18
C. US$20
D. US$22
27. Samuel shorts a futures contract on the Kuala Lumpur Composite Index
(KLCI) with the following features:
28. Chris owns 100 shares of Apple purchased at US$500 per share. He
subsequently sells a call option on these shares for US$30 per share with an
exercise price of US$500.
Calculate Chris’s gain/loss when Apple’s share price drops to US$450 and
the call option expires worthless.
A. Loss of US$5,000
B. Loss of US$2,000
C. Gain of US$2,000
D. Gain of US$5,000
29. Claire purchased a call and put option on 100 shares of Cisco for US$1 per
share at a strike price of US$20. Before Cisco announced its full-year
earnings results, Cisco was trading at a price of US$20 per share.
A. Gain of US$500
B. Gain of US$300
C. Loss of US$200
D. Loss of US$100
31. Which of the following factors will NOT cause an index fund to have tracking
error?
A. index fund
B. formula fund
C. fund of funds
D. special situations fund
34. In a unit trust, the person who performs the duties of day-to-day operation of
the trust is also known as the _________________________.
A. unit-holder
B. fund manager
C. fund distributor
D. Chief Financial Officer
35. What can an investor do to mitigate the risks of investing in unit trusts?
36. How can the financial adviser ensure that marketing collaterals of investment
products present a fair and balanced view to prospective clients?
37. In which document should the fund issuer disclose to investors where they
can obtain pricing information and the frequency of price updates?
A. Prospectus.
B. Annual report.
C. Fund Factsheet.
D. Product Highlights Sheet.
A. ETF is an investment fund that is not listed and traded over the
counter.
B. Buyers and sellers keep the market price of ETF units close to the
fund’s NAV.
C. The liquidity of the ETF units and the underlying index components are
independent.
D. ETFs can be replicated either through direct investments or synthetic
financial instruments.
40. What is the main difference between Exchange-Traded Funds (ETFs) and
shares?
A. ETFs are not listed while shares are listed on the stock exchange.
D. The price of ETFs are determined by their Net Asset Value (NAV) while
share prices are determined by market quotes.
41. What is the formula used to determine the Net Asset Value (NAV) per
Exchange-Traded Fund (ETF) unit?
42. The S&P 500 Double Long (2x) Fund seeks to deliver twice the daily
percentage change in the level of the S&P 500 Index. If the S&P 500 Index
gains 10% of its value in one day, what should be the expected change in
the value for this fund?
A. 5%
B. 10%
C. 15%
D. 20%
44. As part of his asset allocation strategy for his investment portfolio, David
wants to be invested into fixed income instruments. Which of the following
ETFs should he invest in?
45. Ivan has invested US$100,000 in Apple Stock. He is worried that the falling
US dollar will affect his returns when he liquidates and converts his
investment back into SGD. Since gold generally has a negative correlation
with the US dollar, he also invested S$25,000 in a Gold Exchange-Traded
Fund (ETF). What is Ivan’s main purpose of investing in this ETF?
A. Hedging.
B. Tactical Trading.
C. Cash Management.
D. Core-satellite investments.
46. Jimmy has made the following statements on hedge funds. Which of the
following statement(s) should be considered as FALSE?
Issuer = Bank X
Underlying Asset = Straits Times Index (STI)
Tenure = 5 years
Maturity value = Initial capital amount + 80% of STI performance
Based on the above information, what type of fund is it MOST likely be?
A. Hedge Fund.
B. Formula Fund.
C. Fund of Funds.
D. Exchange-Traded Fund.
Issuer = Bank Y
Underlying Asset = SPDR S&P 500 ETF
Tenure = 5 years
Bonus payout = 9% of initial capital if the S&P 500 index is above 1,500
points upon maturity of the structured product
Assume that S&P 500 is above 1,500 points at the end of 5 years and the
investor has held the investment to maturity.
How much would the investor receive if he has invested S$100,000 in the
structured product?
A. S$95,000
B. S$101,000
C. S$104,000
D. S$110,000
49. A hedge fund’s investment strategy consists of purchasing call and put
options at the same strike price on a company before it announces its
quarterly earnings results. This strategy works MOST effectively when the
stock price is ____________________ after its quarterly earnings
announcement.
A. bullish
B. bearish
C. stagnant
D. volatile resulting in huge upside or downside
50. A currency hedge fund speculates in global events that will affect the relative
value of currencies. Which of the following is an example of a strategy that
such a fund will employ?
A. Long USD/JPY.
B. Long S&P 500 Index.
C. Short crude oil futures.
D. Buying a put option on Apple Stock.
1 B 26 A
2 C 27 A
3 A 28 B
4 A 29 B
5 A 30 C
6 A 31 A
7 D 32 C
8 D 33 B
9 C 34 B
10 D 35 D
11 D 36 C
12 A 37 A
13 C 38 D
14 C 39 A
15 D 40 C
16 D 41 A
17 D 42 D
18 A 43 B
19 B 44 C
20 C 45 A
21 B 46 A
22 A 47 B
23 C 48 D
24 A 49 D
25 D 50 A