Free CISI mock exam taster

Not quite. The answer is C.

Only a firm that considers the relevant market comprehensively and without bias may hold its personal recommendations out as independent. Restricted advice is the runner-up and is given in exactly the same way, with the same charging rules and the same duty of suitability, but it is drawn from a limited range of providers or products. Execution-only dealing carries no recommendation at all, and discretionary management means the firm decides and deals for the client.

Not quite. The answer is C.

The Monetary Policy Committee sets Bank Rate, and decides on the Bank's asset purchases, in order to meet the inflation target it is given. Capital adequacy is the runner-up because it is also settled inside the Bank of England, but by the Prudential Regulation Authority and the Financial Policy Committee rather than by the committee that sets interest rates. Deposit protection is likewise a prudential matter, and fiscal policy, meaning taxation and public spending, belongs to the Chancellor and not to the Bank.

Not quite. The answer is D.

Money market instruments mature within a year, trade readily in the wholesale market and are issued by high-quality borrowers, so short maturity, liquidity and low credit risk all describe them. Capital growth does not: they are held to preserve capital and provide access to cash, and the return arrives as interest or as a discount to face value rather than as a rise in value.

Not quite. The answer is A.

Dividing earnings per share by the market price gives the earnings yield. The dividend yield is the closest alternative and uses the same price but the dividend in the numerator, so it is normally the smaller figure. Dividend cover compares earnings with the dividend and the payout ratio is its inverse; neither uses the share price at all.

Not quite. The answer is B.

Conventional gilts carry a fixed coupon paid semi-annually and are free of capital gains tax in the hands of individuals, although the coupon remains taxable as income. The fourth proposition describes an index-linked gilt, where both coupon and principal are uplifted, so any combination including it is wrong. Restricting the answer to the first two propositions overlooks the capital gains tax exemption.

Not quite. The answer is B.

A premium is paid once, at the outset, by the buyer of an option; a futures trader instead lodges returnable margin with the clearing house. Both parties to a future are bound to complete at the agreed price, the exchange standardises the size, quality and delivery months, and gains and losses are settled each day through variation margin.

Not quite. The answer is B.

Accumulation units keep the income inside the fund, so the value of each unit rises instead of cash being distributed. Being paid out is the runner-up because it is exactly what happens on the same fund's income units, which is the choice the investor made when selecting the unit class. Nothing is set aside to be released on redemption, and income is never routed to the trustee, whose job is to safeguard the property rather than to receive distributions.

Not quite. The answer is C.

A senior management function requires prior approval from the FCA or the PRA, supported by a statement of responsibilities for the role. Annual certification by the firm is the runner-up and is genuinely required, but of certified staff whose work could cause significant harm rather than of senior managers. No particular qualification or professional membership is required by the regime.

Not quite. The answer is A.

Land and buildings cannot be held directly inside any ISA, so a flat bought and let to tenants is outside the wrapper, even though a property fund is not. A corporate bond is the runner-up, because a bond only qualifies if it had five years or more to run when it was issued, which makes it feel like a special case, but qualifying bonds are eligible. Exchange traded funds and investment trust shares listed on a recognised exchange qualify in the ordinary way.

Not quite. The answer is D.

Each instalment on a repayment mortgage covers the interest due plus a slice of capital, so the payment is larger and the balance shrinks month by month until it reaches nil. An offset mortgage is the runner-up because linked savings do reduce the balance that carries interest, but the loan itself is only repaid if the borrower keeps making capital payments. An interest-only mortgage leaves the whole advance outstanding, and a lifetime mortgage rolls the interest up instead of paying it.

Not quite. The answer is C.

A complete risk profile crosses all three: what the client is willing to accept, what they can afford to lose, and what the goal actually demands. Leaving out the return the plan needs is the commonest error, because a cautious portfolio that cannot reach the target is itself a failure of advice. Any mismatch between the three has to be resolved with the client before a recommendation is made.

Not quite. The answer is B.

In execution-only dealing the client makes the decision and the firm carries out the instruction, giving no personal recommendation. Independent advice is the runner-up because it also leaves the final decision with the client, but the firm first recommends a product after assessing the market and the client's circumstances. Restricted advice differs from independent advice only in the range considered, and discretionary management gives the firm authority to decide.

Not quite. The answer is D.

Deflation is a fall in the general price level, so money repaid later buys more than the money borrowed and the real value of the debt rises. Disinflation is the runner-up and the commonest confusion: there the inflation rate is falling but still positive, prices are still rising, so inflation continues to erode the real value of debt rather than increase it. Stagflation pairs weak growth with high inflation, and hyperinflation is inflation running out of control.

Not quite. The answer is C.

A certificate of deposit is issued by a bank or building society against a deposit placed for a set term, and because it is negotiable the holder can sell it in the secondary market instead of waiting for maturity. A Treasury bill is short-term government borrowing sold at a discount, so it never begins life as a deposit. A notice deposit account really is a deposit, but no instrument is issued for it, so the saver can only serve notice and wait rather than sell the holding to anyone else. A money market fund issues units in a pooled portfolio rather than a receipt for one deposit.

Not quite. The answer is D.

An order executed on the exchange's own systems is on-exchange business, done under that venue's rules and reported through it. Over-the-counter is the closest alternative and describes bargains agreed directly between two parties away from any venue. Quote-driven describes how prices are formed rather than where the bargain is struck, and programme trading means dealing in a whole basket of shares at once, which a single share order plainly is not.

Not quite. The answer is D.

Credit ratings run from AAA (highest quality, lowest risk) down through AA, A, BBB (investment grade) to BB, B, CCC, CC, C, D (non-investment grade/high yield). A BB-rated bond is below investment grade and therefore carries the highest credit risk of the options listed. UK gilts are considered virtually risk-free as they are backed by the UK government.

Not quite. The answer is A.

A writer with no holding in the underlying is naked, or uncovered, and must buy the asset in the market at whatever it costs if the call is exercised, so the loss is theoretically unlimited. Covered is the closest alternative and means the opposite: the writer already holds the asset ready to deliver. Long and short describe the direction of a position rather than whether it is backed by the underlying.

Not quite. The answer is B.

When the market values the shares at less than the assets behind them, the trust is said to stand at a discount, and the gap is quoted as a percentage of net asset value. A premium is the tempting mirror image and describes the opposite position, where the price sits above net asset value. Par means price and asset value are equal, and the issue price is simply what the shares were sold for at launch, which says nothing about where they stand against the assets today.

Not quite. The answer is B.

The FSCS protects deposits up to £120,000 per eligible person per authorised institution (raised from £85,000 on 1 December 2025). For joint accounts each holder has their own limit, so a two-person joint account is protected up to £240,000. The protection is capped rather than unlimited, and different claim types carry different limits: for investments the limit is £85,000.

Not quite. The answer is A.

Discretion over who benefits is the defining feature, trust income above the small standard rate band suffers the 45% trust rate, and a gift into such a trust is chargeable at 20% immediately rather than potentially exempt. The claim that each beneficiary holds a fixed absolute share describes a bare trust, where the beneficiary can demand the assets outright.