Free CISI IAD Securities mock exam

Not quite. The answer is D.

A Treasury bill is a short-term instrument guaranteed by the UK government which pays no coupon, since it is sold at a discount to nominal value and redeemed at par, making that discount the whole of the investor's return. Commercial paper is also issued at a discount and repaid at face value, but it is an obligation of the issuing company or conduit and so carries credit risk that a government-guaranteed bill does not. Treasury bills are issued at a weekly tender held by the Debt Management Office, not bought from the Bank of England, which runs its own money market operations in other instruments.

Not quite. The answer is A.

Issuing more stock on exactly the same terms, which the DMO describes as opening up a gilt, keeps the number of separate lines down and concentrates trading, which improves liquidity. Splitting supply and demand across more lines is the very outcome a tranche is meant to prevent and would thin trading rather than deepen it. A tranche cannot be used to change the coupon or the redemption date, because the terms match the existing stock; the only variation is that the first coupon paid on a tranche may be less than a full one.

Not quite. The answer is A.

The high-growth segment gives medium-sized and large high-growth companies a route to the main market where they cannot satisfy every eligibility criterion for the premium segment. It requires growth in revenues of 20% or more over the three years before admission, together with 10% of the number of securities admitted in public hands with a value of £30 million, the majority of which must be raised at admission. A free float of 25% is not a requirement of this segment.

Not quite. The answer is A.

Net asset value per share is the portfolio value less accrued liabilities divided by the shares in issue, so £348 million spread over 232 million shares gives £1.50. Leaving the accrued fees out altogether credits £1.55 for each share, which is the easiest slip because those liabilities are simple to overlook. Deducting twice what is owed leaves £1.45. A figure of £0.67 comes from dividing the shares by the net assets rather than the other way round. Because the vehicle is open-ended, shares are created and cancelled at this value instead of trading at a discount to it.

Not quite. The answer is C.

Continuous linked settlement operates on a payment versus payment basis, so where the strict criteria are not met on both sides of a deal no funds are exchanged at all. That is what closes off Herstatt risk, which arose because one bank paid its currency away in good faith and never received the other. Credit lines and collateral limit the loss once a failure has happened, whereas payment versus payment stops the exposure arising.

Not quite. The answer is D.

Cover well above the two times normally regarded as comfortable means only a small part of what the business earns is being paid out, and the retention usually signals an intention to reinvest for growth. A steady cover does not mean a steady dividend, because earnings and the dividend may have risen together in the same proportion. Cover sets earnings per share against dividend per share alone, so it says nothing about the market price and nothing about the yield the shares offer or the multiple they trade on.

Not quite. The answer is C.

Value at risk states a loss amount, a time frame and a probability, so a ten per cent one-day figure of fifty million points to a loss exceeding that sum on about one day in every ten. Reading it as a ceiling on the possible loss is the common error, since the measure says nothing about how bad the remaining one day in ten could be. It captures only one aspect of market risk and cannot stand alone as a test of capital adequacy.

Not quite. The answer is B.

Security tokens fall within the FCA's regulatory remit because they carry rights of the kind a regulated investment carries, such as an ownership position, repayment of a specific sum of money or entitlement to a share in future profits. A token granting access alone and conferring no ownership is a utility token, which carries none of those rights and stays outside the remit. Exchange tokens such as Bitcoin are regulated in the UK only for money laundering purposes, so buying through a registered platform leaves the buyer outside the wider protections, and where the exchange used happens to be based makes no difference either.