Free CISI IAD Securities practice questions

Not quite. The answer is C.

The term of a deposit is the period for which the saver commits the money, and as a general rule the longer that commitment, the higher the rate of interest offered. Fixed-term accounts usually impose a penalty where money is taken out early, and some arrangements also require notice of an intention to withdraw, so the extra yield is paid for with reduced liquidity. Expecting a higher rate while keeping access on demand is the tempting error, since immediate access is precisely what the saver gives up.

Not quite. The answer is A.

In the UK market a bond is treated as short-dated when under seven years remain, medium-dated between seven and 15 years, and long-dated beyond 15 years, so eleven years to redemption places the issue in the medium band. The long-dated label is tempting because eleven years feels distant, but it is reserved for issues with more than 15 years still to run. Ranges differ elsewhere, and in the US a bond of this maturity would be treated as long term.

Not quite. The answer is A.

A partly paid share is one on which the company has yet to demand the whole of the nominal value, and it keeps the right to call for the balance from whoever is on the register when the call is made. Nothing about partial payment enlarges the dividend entitlement, so the idea of extra income while a call remains outstanding has no basis. The nominal value simply sets the minimum the company must receive for the share in total, so no call can ever ask for more than that.

Not quite. The answer is C.

An OEIC is single priced, so the same figure applies to purchases and sales, and any initial charge covering dealing costs and management expenses is disclosed separately at the point of entry rather than being deferred to exit. Dual pricing, with a spread between the buying and the selling price, is the practice of most unit trusts rather than of OEICs, and dealing on an exchange at whatever supply and demand dictate describes a closed-ended company instead. Removing that spread was one of the reasons the OEIC was expected to cut the cost of entering and leaving a fund.

Not quite. The answer is B.

Delivery versus payment synchronises the two legs of a bargain, so the securities move only as the cash moves and neither side is left exposed to the other. The suggestion that a seller could take the money a day ahead of delivery describes exactly the exposure that this convention exists to remove. Electronic settlement inside a central depository is what makes the simultaneity practicable.

Not quite. The answer is C.

The statement of financial position is a snapshot at a single moment, built on the accounting equation that assets equal liabilities plus equity, so it reports what is owned, what is owed and the equity that shareholders have put in. Income earned and expenditure incurred belong to the statement of comprehensive income, which covers a period rather than a moment, and that is the confusion most often made. Cash receipts and payments are the subject of the statement of cash flows.

Not quite. The answer is B.

Bloomberg earns its revenue principally through its terminal, a paid desktop service delivering analytics, equity trading platforms, market data and news to financial institutions worldwide. The radio output grew up alongside the terminal rather than replacing it as the earner, and anything handed over on a free website cannot be the source of that revenue. A satellite channel is the most tempting alternative, but that description belongs to CNBC, a business news broadcaster owned and operated by NBC Universal.

Not quite. The answer is C.

A general attitude to risk does not have to be applied uniformly to every goal a client holds. The objectives treated as most important are the ones where a shortfall can least easily be tolerated, so they attract the least risk, while lower-ranked goals can more readily be given up if investments fall. Treating an important goal as a reason to chase a larger return reverses that logic and puts the very outcome the client cares about at risk.

Not quite. The answer is C.

The annual equivalent rate, also called the effective rate, shows what a deposit really earns once interest is compounded more often than once a year, which allows accounts with different compounding frequencies to be compared on the same footing. The nominal rate is the figure quoted before compounding is taken into account, so describing the annual equivalent rate in that way states the opposite of what it is for. Interest on UK deposits is paid gross of tax, and any charges the bank makes are separate from the rate itself.

Not quite. The answer is B.

A dual-dated issue names two redemption dates and the borrower may settle at any point inside the window they mark out, which leaves the holder unsure how long the paper will actually run. Two currencies in which the coupon can be paid describe a dual-currency issue, where the question is the money the holder receives rather than when repayment falls due. Two different interest rates over successive periods describe a stepped structure, which belongs to the interest terms and settles nothing about redemption. Two credit-rating agencies retained by the borrower form no part of the terms at all, since a rating is an outside opinion rather than a promise the issuer makes.