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 2011 Tuesday afternoon 12 July 2011 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, 2011 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 right of pre-emption, which is the right of existing shareholders to subscribe for new shares in a company, is contained within: A. The Financial Services and Markets Act (2000) B. The Companies Act (2006) C. Income and Corporation Taxes Act (2010) D. The Trustee Act (2000) (ii) The bond-specific portfolio measure is: A. The excess return to relative duration measure. B. The information ratio. C. The Sharpe measure. D. The Treynor measure. (iii) As set out in the Financial Services and Markets Act (2000) s.23, the maximum penalties the Magistrates Court can impose for conducting unauthorised regulated activities are: A. Six months imprisonment and / or a 1,000 fine. B. Six months imprisonment and / or a 5,000 fine. C. Two years imprisonment and / or an unlimited fine. D. Five years imprisonment and / or an unlimited fine. (iv) The expression history repeats itself is the justification for: A. Fundamental Analysis B. Quantitative Analysis C. Technical Analysis D. The Combination Approach ICSA, 2011 Page 2 of 5

3 (v) Puttable bonds: A. Allow the issuer to redeem bonds before their maturity date. B. Allow the issuer to reduce coupon payments under certain circumstances. C. Provide the holder with increased coupon payments under certain circumstances. D. Provide the holder with the ability to sell the bond back to the issuer before maturity. (vi) Interest rate swaps affect: A. The balance sheet. B. The profit and loss account. C. The balance sheet and the profit and loss account. D. Neither the balance sheet nor the profit and loss account. (vii) The forward exchange market is one where currencies are delivered at an agreed date in the future. The exchange rate at which delivery takes place is agreed: A. Immediately. B. T+1. C. T+2. D. On the actual delivery date. (viii) A speculator selling a futures contract has: A. Limited risk and limited reward. B. Limited risk and unlimited reward. C. Unlimited risk and limited reward. D. Unlimited risk and unlimited reward. (ix) An investor buys an equity warrant for 86 pence which gives the holder the right to buy one ordinary share at If the current market price of the share were 1.12, then the warrant would have a time value of: A. Twelve pence. B. Fourteen pence. C. Twenty six pence. D. Seventy four pence. ICSA, 2011 Page 3 of 5

4 (x) The end result of a UK gilt repo is: A. A secured loan with interest rates below LIBOR. B. A secured loan with interest rates above LIBOR. C. An unsecured loan with interest rates below LIBOR. D. An unsecured loan with interest rates above LIBOR. (Total: 20 marks) Section B Answer all five questions. 2. Explain four ways by which companies can raise capital on the London Stock Exchange. 3. Identify the two principal measures used to evaluate treasury bills. For each measure identified, calculate the result based on a 91-day treasury bill, nominal 100, issued at Outline two methods used by corporate bond issuers to compensate holders for low coupon rates. 5. What is indexation and what are the results of such indexation on a fund? 6. Name the types of service available to customers of investment firms. (Total: 30 marks) ICSA, 2011 Page 4 of 5

5 Section C Answer two questions only. 7. Explain: (a) (b) The problems which may arise for an investor as a result of overseas investment. (13 marks) The shorter-term factors which affect exchange rates. (12 marks) (Total: 25 marks) 8. Define: (a) Covered warrants, including in your answer their general characteristics. (10 marks) (b) Options, stating the rights and obligations of the parties involved. (15 marks) (Total: 25 marks) 9. (a) Section 59 of the Financial Services and Markets Act (2000) and the Supervision Manual (SUP) state that a person cannot carry out a controlled function in a firm unless that individual has been approved by the FSA. Explain this statement. (7 marks) (b) Explain how an individual qualifies for approval to carry out a controlled function. (18 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, 2011 Page 5 of 5

6

7

8