Certificate in Offshore Finance and Administration. Do not open this examination paper until the presiding officer or an invigilator tells you to.

Transcription

1 Subject no. 51A Certificate in Offshore Finance and Administration Investment July 2012 Tuesday afternoon 10 July 2012 Time allowed: 2 hours Do not open this examination paper until the presiding officer or an invigilator tells you to. You must not take this paper out of the examination room. This examination paper is divided into three sections. You must attempt all parts of Question 1 in Section A, all questions in Section B, and two questions only in Section C. Section A carries 20 marks (2 marks for each part of Question 1). Section B carries 30 marks (6 marks for each question). Questions in Section C each carry 25 marks. You should allow yourself approximately 20 minutes in total to answer the questions in Section A, 40 minutes in total to answer the questions in Section B and 30 minutes for each of the questions attempted in Section C. ICSA, 2012 Page 1 of 5

2 Section A Answer all parts of Question 1. Select only one of the options A, B, C or D for each part. 1. (i) The acid-test ratio is: A. Current assets minus inventory divided by current liabilities. B. Current assets minus inventory divided by current assets. C. Current market price of one ordinary share divided by annual earnings per share (EPS). D. Current market price of one ordinary share multiplied by annual EPS. (ii) The corporate action which is intended to make shares more marketable while maintaining reserves is a: A. Rights issue. B. Scrip issue (or bonus issue). C. Stock consolidation. D. Stock split. (iii) The effect on an index-linked gilt in an economy where there is a sustained period of deflation would be: A. The repayment of the nominal amount would be unaffected, but the coupon payment would be reduced. B. The repayment of the nominal amount would be affected, but the coupon payment would be unaffected. C. The repayment of the nominal amount and the coupon payment would be reduced. D. Neither nominal amount nor coupon payment would be affected. (iv) Commercial paper, as issued by large companies, is a method of obtaining: A. Long-term secured finance which is used to purchase fixed assets and finance capital projects. B. Long-term unsecured finance which is used to purchase fixed assets and finance capital projects. C. Short-term secured finance which is used to fund daily operations. D. Short-term unsecured finance which is used to fund daily operations. ICSA, 2012 Page 2 of 5

3 (v) In the United Kingdom, HM Treasury may hold ad hoc tenders of Treasury Bills with maturities of up to: A. 28 days and minimum tender amount of 1M. B. 28 days and minimum tender amount of 5M. C. 91 days and minimum tender amount of 1M. D. 91 days and minimum tender amount of 5M. (vi) An option which may be exercised on a number of pre-specified dates prior to its expiry is referred to as: A. Bahamian B. Bahraini C. Barbadian D. Bermudan (vii) When a small price change results in a large change in the quantity of goods or services demanded: A. Demand is elastic. B. Demand is inelastic. C. Supply is elastic. D. Supply is inelastic. (viii) A multilateral trading facility owned by leading Nordic banks and securities firms used for trading Nordic securities is: A. Bordeaux B. Burgundy C. Buzet D. Champagne ICSA, 2012 Page 3 of 5

4 (ix) REITs are: A. Companies which enable shareholders to have direct exposure to property investment. B. Companies which enable shareholders to have indirect exposure to property investment. C. Trusts which enable beneficiaries to have direct exposure to property investment. D. Trusts which enable beneficiaries to have indirect exposure to property investment. (x) A rump gilt has an outstanding nominal amount which is considered to be: A. Relatively large. An example would include 3½% War Loan. B. Relatively large. 3½% War Loan is not an example of a rump gilt. C. Relatively small. An example would include 3½% War Loan. D. Relatively small. 3½% War Loan is not an example of a rump gilt. (Total: 20 marks) Section B Answer all five questions. 2. Define quantitative easing (QE) and give three disadvantages resulting from its implementation. 3. Give six reasons why directors might seek to have their company listed on a recognised stock exchange. 4. Explain what a dark pool is and describe two of its fundamental problems. 5. What are the main reasons for the issuance of Eurobonds? 6. Explain the purpose of the dividend cover ratio. Include the relevant formula in your answer. (Total: 30 marks) ICSA, 2012 Page 4 of 5

5 Section C Answer two questions only. 7. Explain: (a) Carry trade and give the ways investors may make profits or incur losses by using it. (13 marks) (b) Currency swaps, including in your answer their uses and main risks. (12 marks) (Total: 25 marks) 8. Explain: (a) Defined benefit and defined contribution pension schemes. (15 marks) (b) The key issues which an employee should consider before becoming a member of a company pension scheme. (10 marks) (Total: 25 marks) 9. Describe: (a) Collective investment schemes and give the two main types of such schemes. (13 marks) (b) Split capital trusts and outline their main advantages. (12 marks) (Total: 25 marks) The scenarios included here, except where expressly identified, are entirely fictional. Any resemblance of the information in the scenarios to real persons or organisations, actual or perceived, is purely coincidental. ICSA, 2012 Page 5 of 5

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