Investment Funds and Risk Management
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Questions and Answers

Which of the following funds is likely to have the highest risk?

  • Hedge Fund (correct)
  • Equity Fund
  • Money Market Fund
  • Balance Fund

    • Which of the following investor requirements can unit trust funds meet?

  • Short term savings
  • Children's Education
  • Retirement Fund
  • All of the above (correct)

    • What is the total value of Mr. Dave's investment at the end of May?

  • RM2,500
  • RM2,000
  • RM4,500 (correct)
  • RM3,000

    • What is the Net Asset Value (NAV) per unit of Mr. Dave's investment in June?

    <p>RM0.70</p> Signup and view all the answers

    Which of the following funds would be suitable for a 20-year-old employee with a high risk tolerance?

    <p>Growth Fund</p> Signup and view all the answers

    What is the primary goal of the Capital Market Masterplan?

    <p>To increase awareness of the Malaysian Islamic Capital Market</p> Signup and view all the answers

    What is the main advantage of investing in a unit trust?

    <p>Diversification of investments</p> Signup and view all the answers

    What is the main difference between a Hedge Fund and a Balance Fund?

    <p>Risk level</p> Signup and view all the answers

    What is the formula to calculate NAV per unit ex distribution?

    <p>NAV cum distribution / units in circulation</p> Signup and view all the answers

    Why is UTS an ideal way of investing for an investor who is unable or unwilling to do research and analyze the investment market?

    <p>Because it provides professional management</p> Signup and view all the answers

    What is one of the benefits of investing in UTS that reduces risk?

    <p>Diversification</p> Signup and view all the answers

    What is the primary function of the Securities Commission?

    <p>To regulate the unit trust industry</p> Signup and view all the answers

    What is the benefit of UTS that allows investors to easily redeem their investments?

    <p>Ready access to funds</p> Signup and view all the answers

    What is the role of the Securities Commission in relation to licensed persons?

    <p>To supervise and license them</p> Signup and view all the answers

    What is the correct calculation to determine the amount received from the repurchase of units in Fund XYZ?

    <p>Number of units x NAV per unit ex distribution</p> Signup and view all the answers

    What is NOT a function of the Securities Commission?

    <p>Providing investment advice to investors</p> Signup and view all the answers

    What is the initial investment amount of the money market fund?

    <p>RM100,000</p> Signup and view all the answers

    What is the on-going management fee of the money market fund?

    <p>1.4%</p> Signup and view all the answers

    What is the rate of return of the money market fund?

    <p>11%</p> Signup and view all the answers

    What is the value of the investment after 10 years if the initial entry cost decreased to 6%?

    <p>RM235,938.96</p> Signup and view all the answers

    How long does it take to increase the investment amount to RM200,000 with the effective rate of return from question 28?

    <p>7.5 years</p> Signup and view all the answers

    What is the total expense incurred by the ABC Millennium Fund during the financial year?

    <p>RM3,725,717</p> Signup and view all the answers

    What is the MER of the ABC Millennium Fund?

    <p>1.58%</p> Signup and view all the answers

    If Mr. Eddie invested RM10,000 today, how many units is he getting if forward pricing is applied?

    <p>15,384.62 units</p> Signup and view all the answers

    What is the characteristic of an investor who focuses on long-term returns?

    <p>Higher risk tolerance in the short-term</p> Signup and view all the answers

    How is the price of a listed security determined?

    <p>By buyers and sellers in the market</p> Signup and view all the answers

    What type of equity UTS generally invests in companies with higher capital growth potential but with associated higher risk?

    <p>Aggressive growth</p> Signup and view all the answers

    What is the main advantage of using the Rule of 72?

    <p>To estimate the number of years required to double an investment</p> Signup and view all the answers

    What is the impact of a rising share market on the value of units in equity UTS?

    <p>It normally results in an increase in the value of units</p> Signup and view all the answers

    What is a disadvantage of investing in a UTMC?

    <p>Loss of control over investment portfolio</p> Signup and view all the answers

    What does a gradually decreasing MER over a period of several years indicate?

    <p>Efficient management of operating costs for its fund size</p> Signup and view all the answers

    What is the formula to calculate the effective rate of return?

    <p>Rate of return - (Rate of return X tax rate)</p> Signup and view all the answers

    What is one of the benefits of investing in a Unit Trust Scheme (UTS)?

    <p>Easy access to funds</p> Signup and view all the answers

    What is the concept of systematic and regular investment of a fixed amount of money?

    <p>Regular investment plan</p> Signup and view all the answers

    How can an investor determine the number of units held during redemption?

    <p>By dividing the investment amount by the NAV per unit</p> Signup and view all the answers

    What is a useful tool for monitoring investment performance in UTS?

    <p>Performance tables published by research houses</p> Signup and view all the answers

    What is the primary asset class in an equity UTS portfolio?

    <p>Shares of listed companies</p> Signup and view all the answers

    How is the NAV per unit calculated?

    <p>By dividing the total NAV by the total number of units in circulation</p> Signup and view all the answers

    What is the role of UTC in UTS transactions?

    <p>To assist in buying and selling units</p> Signup and view all the answers

    What is the effect of a distribution on the NAV per unit?

    <p>It decreases the NAV per unit</p> Signup and view all the answers

    Study Notes

    Investment Funds

    • Equity Fund: highest risk fund
    • Hedge Fund: higher risk fund
    • Balance Fund: medium risk fund
    • Money Market Fund: lowest risk fund

    Unit Trust Fund

    • Designed to meet investor's requirements such as:
      • Long-term savings
      • Retirement fund
      • Children's education

    Investment Returns

    • Mr. Dave's investment:
      • Total investment: RM4,500
      • Average price of investment: RM0.43 (calculated)

    Unit Trust Investment

    • Mr. Dave's unit trust investment:
      • Number of units held by the end of May: 4,500 units (calculated)

    Client Type

    • 20-year-old employee:
      • Stage 1 client type
      • Little savings, low commitments, and skeptical about unit trust investment
      • Right tolerance for risk
      • Recommended to invest in Growth Fund

    Capital Market Masterplan

    • Recommendation to enhance awareness of Islamic Capital Market to domestic and international levels

    Lump Sum Investment

    • Initial investment: RM100,000
    • Initial entry cost: 6.5%
    • Ongoing management fee: 1.4%
    • Rate of return: 11%
    • Return of investment after 10 years: RM234,831.27 (calculated)
    • Value of investment after 10 years with decreased entry cost: RM235,938.96 (calculated)

    Forward Pricing

    • Published NAV: RM0.65
    • Price at the end of the day: RM0.66
    • Number of units received by Mr. Eddie with forward pricing: 15,384.62 units (calculated)

    MER (Management Expense Ratio)

    • ABC Millennium Fund:
      • Annual Management Fee: RM3,528,673
      • Trustee: RM150,326
      • Auditor's Remuneration: RM16,300
      • Administration expenses: RM28,418
      • Average Fund Size: RM235,300,528
      • MER: 1.58% (calculated)

    Unit Trust Management

    • Mr. Abraham invested RM5,000 in ABC Growth Fund
    • Owned by ABC Unit Trust Management Bhd

    Distribution of Units

    • Distribution of RM0.04 per unit for Fund XYZ
    • NAV cum distribution: RM1,500,000
    • Units in circulation: 1,000,000 units
    • NAV per unit ex-distribution: RM1.46 (calculated)
    • Mr. Z's repurchase of 20,000 units: RM30,000 (calculated)

    Benefits of Investing in UTS

    • Professional management
    • Ready access to funds
    • Opportunity cost
    • Investment exposure
    • Diversification

    Securities Commission

    • Functions:
      • Regulate unit trust industry
      • Ensure compliance with securities laws
      • License and supervise licensed persons
      • Act as custodian of assets of UTS

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    Description

    This quiz evaluates your understanding of investment funds, including equity, money market, balance, and hedge funds, as well as their associated risks and investor requirements.

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