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 February 2013 Tuesday afternoon 5 February 2013 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, 2013 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 term wasting assets may be applicable to: A. Commercial paper. B. Covered warrants. C. Junk bonds. D. Rump gilts. (ii) The value of output of all the members in a particular economy, including income from overseas investments less the income earned by foreigners resident in that economy is the: A. Balance of payments. B. Balance of trade. C. Gross domestic product (GDP). D. Gross national product (GNP). (iii) Arbitrage is: A. An inappropriate investment decision based on a whim. B. The selling by a hedge fund of shares it does not own with the expectation of purchasing the shares in the immediate future at a lower price. C. The settlement of financial disputes using the Financial Ombudsman Service. D. The simultaneous buying and selling of investments in different markets in order to take advantage of differing prices for the same assets. (iv) Futures are: A. Non-standardised derivative instruments with a range of delivery dates. B. Non-standardised derivative instruments with a single delivery date. C. Standardised derivative instruments with a range of delivery dates. D. Standardised derivative instruments with a single delivery date. ICSA, 2013 Page 2 of 5

3 (v) Quantitative easing (QE) results in: A. A decrease in money supply and may lead to inflation. B. A decrease in money supply and may lead to deflation. C. An increase in money supply and may lead to inflation. D. An increase in money supply and may lead to deflation. (vi) Ordinary shareholders have the right to: A. Approve the annual reports and accounts of the company. B. Receive all of the profits of the company prior to charges including bank interest. C. Receive interim and final dividends. D. Subscribe for new ordinary share capital in direct proportion to their existing holding. (vii) Investment trust companies (ITCs) are: A. Closed-ended funds constituted under a trust deed. B. Closed-ended funds which have not been constituted under a trust deed. C. Open-ended funds constituted under a trust deed. D. Open-ended funds which have not been constituted under a trust deed. (viii) Eurosterling bonds are regulated by: A. The European Central Bank (ECB). B. The Financial Services Authority (FSA). C. The Financial Stability Board (FSB). D. The International Capital Markets Association (ICMA). ICSA, 2013 Page 3 of 5

4 (ix) Plain vanilla interest-rate swaps are: A. Exchange-traded derivative instruments where one party swaps a stream of fixed interest payments based on a particular index for a stream of floatingrate interest payments based on a different index. B. Exchange-traded derivative instruments where one party swaps a stream of fixed interest payments based on a particular index for another stream of fixed interest payments based on a different index. C. Over-the-counter derivative instruments where one party swaps a stream of fixed interest payments based on a particular index for a stream of floatingrate interest payments based on a different index. D. Over-the-counter derivative instruments where one party swaps a stream of fixed interest payments based on a particular index for another stream of fixed interest rate interest payments based on a different index. (x) Treasury bills (T-bills) are: A. Registered money market instruments issued at face value with regular coupon payments. B. Registered money market instruments issued at a discount to face value without regular coupon payments. C. Unregistered money market instruments issued at face value with regular coupon payments. D. Unregistered money market instruments issued at a discount to face value without regular coupon payments. Section B Answer all five questions. (Total: 20 marks) 2. Give three factors, each with a short explanation, that show the relationship between price and demand. 3. What are the advantages, from the perspective of a company, in issuing preference shares? 4. What is SETS? 5. Other than clearing, outline the functions that a futures clearing house must fulfil. 6. Define and explain the purpose of the gross redemption yield (GRY). (Total: 30 marks) ICSA, 2013 Page 4 of 5

5 Section C Answer two questions only. 7. (a) Name the types of options contracts available. Describe the obligations and risks of the parties to these contracts. (15 marks) (b) Identify the various types of life assurance policy and comment on those areas where there is a lack of transparency. (10 marks) (Total: 25 marks) 8. (a) Explain hedge funds, describing some of their positive and negative aspects. (16 marks) (b) What are Exchange Traded Funds (ETFs)? Give three factors which make them attractive to investors. (9 marks) (Total: 25 marks) 9. Describe the generic risks for bond purchasers. Include in your answer some of the methods used to mitigate such risks. (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, 2013 Page 5 of 5

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