Set 3 English Questions Answers 2019/20 PDF

Set 3 Questions & Answers 201912 Set 3 Total number of units in Year 3 = RM93, 375/RM0.90 1. Which of the f...

Set 3 Questions & Answers 201912 Set 3 Total number of units in Year 3 = RM93, 375/RM0.90 1. Which of the following benchmark below cannot be used as a fund performance = 103,750 units benchmark? Total number of units in Year 1 = 103,750 units – 20,000 units A. KL Inter-Bank Offer Rate C. Current account as a percentage of GDP = 83,750 units B. KLCI D. 5 year bond rate 4. In a hurry to close a sale, Unit Trust Consultants are prone to give information that is Answer C not supposed to be said. Under the Code of Ethics for UTC: Honesty, Dignity & The gross domestic product (GDP) is one of the measures of national income and Integrity, a UTC should not say the following except: output for a given country's economy. GDP is defined as the total market value of all final goods and services produced within the country in a given period of time A. This investment is guaranteed to make profit in middle to long term. (usually a calendar year). B. The fund managers will at their best ability provide the possible return for middle to long term investment. Question 2 & 3 C. Unit trust is as safe as fixed deposits. 2. The price of the fund in Year 1 is RM0.80 per unit. In Year 2, Mr. K bought another D. This fund will always yield at 10%. 20,000 units at the same price. He repurchased the investment in Year 3 at RM0.90 per unit with a total amount of RM93,375. What is the total investment amount for Answer B Mr. K in Year 1? Fund X Fund Y A. RM99,719 C. RM67,000 Equity 10% Equity 90% B. RM96,719 D. RM63,000 Money Market 90% Money Market 10% Answer C 5. Which statement(s) is/are true? Total number of units in Year 3 = RM93, 375/RM0.90 I. If interest rate rises, it will give an adverse effect on Fund Y. = 103,750 units II. If interest rate rises, it will give a positive effect on Fund X. Total number of units in Year 1 III. If stock market performed well, it will give a positive effect on Fund X. = 103,750 units – 20,000 units IV. If stock market performed well, it will give an adverse effect on Fund Y. = 83,750 units Investment Amount A. I, II C. II, III, IV = 83, 750 units X RM0.80 B. III, IV D. I, II, III, IV = RM67, 000 Answer A 3. What are the total units received for Year 1? When the interest rate rises, money market instruments will be in demand. Therefore the fund that has higher money market exposure will gain (Fund X). For the fund A. 73,750 units C. 83,750 units that has higher exposure in equity (Fund Y) will have negative impact. B. 80,750 units D. 90,750 units 6. Prices of listed closed-end funds are determined in the following manner: Answer C 1 Set 3 Questions & Answers 201912 A. The total value of the assets is divided by the number of units in circulations D. All the statements above. B. Prices are determined by the demand and supply in the market such as Bursa Malaysia where the trust is listed Answer D C. The UTMC computes the daily price upon close of business day D. The investment committee sets the daily prices 10. What do usually financiers do when assessing a loan application for an investor? Answer B A. The types of credit card that an investor has. B. The amount that needs to be top up when an investment falls under the security 7. Which of the following best defines collective investment scheme? level. C. The credit worthiness of an applicant. A. A pool of investment that can be raised by anyone, something like a charitable D. The investment that the investor has made before. donation. B. Large amount of money invested in an instrument to churn more proceeds. Answer C C. In other words something like a trust fund. D. Pool of cash that is later used to invest in a variety of investment instruments to 11. Generally, a unit trust that has 80% of its assets invested in growth stocks would be multiply the initial figure. most appropriate type of investment for the preparation of: Answer D A. A college fund for an 18 year old Collective investment scheme allows investors with similar objectives to pool their B. An individual retirement fund for a 52 year old savings, which are then invested in a portfolio of securities or other assets managed C. An income producing savings for an 86 year old by investment professionals. (Chapter 1, page 1-2) D. None of the optional answer is correct 8. What choices does an investor have when a distribution is handed out? Answer D I. Reinvest by purchasing more units in the same fund. 12. Which of the following is correct? II. Take the money and spend it on oneself. III. Reinvest by purchasing shares of the UTMC’s counter in Bursa Saham. A. When interest rate decreases, bond value will increase. B. When interest rate decreases, bond value will decrease. A. All of the above C. I and III C. There is no relationship between interest rate and stock market. B. I and II D. None of the above D. There is not relationship between interest rate and bonds. Answer B Answer A The investor has a choice to reinvest or spend the money. The investor is however Generally, bond prices move in the opposite direction of interest rates. not allowed to reinvest and buy shares, unless he/she chooses to redeem the investment and use the proceeds to buy shares. Question 13 and 14 Initial investment: RM80, 000 9. Which of the following statement a UTC should not say to an investor? Term of investment: 3 years Expected Investment Return before Fees & Expenses: 10% p.a. A. Unit Trust investment has no risk. On-going management fee: 1.5% p.a. B. Don’t worry because the returns are guaranteed. Initial service charge: 5% C. It’s ok not to have money to invest because you can always apply for a loan. 2 Set 3 Questions & Answers 201912 13. What is the expected value of the investment after 3 years? = RM76, 190.48 (1+9.0%) 3 = RM76, 190.48 (1.09) 3 A. RM97,317 C. RM102,183 = RM98, 668.88 B. RM101,156 D. RM106,480 Maximum Initial Service Charge is disclosed in:- Answer A Working money = RM80, 000/(1+5%) Deed C. Marketing Materials = RM80, 000/(1.05) Prospectus D. All of the above = RM76, 190.48 Effective return = 10% - 1.5% Answer D = 8.5% SC requires all UTMCs to publish service charges in the prospectus Investment value after 3 years and marketing materials for public awareness. As for the deed, is it the FV = PV ( 1 + i )n legal agreement between 3 main parties – UTMC, Trustee and unit = RM76, 190.48 (1+8.5%) 3 holders. The agreement must state the service charges as well. = RM76, 190.48 (1.085) 3 = RM97, 317.27 Question 17 & 18 An investor had invested a lump sum of money in a unit trust fund at RM0.80 per 14. How long does it take approximately take for the expected value of the initial unit in the first year and subsequent purchase another 20,000 units in second year. At investment to reach RM160, 000? the end of third year he decided to redeem all his investment at Buying Price of RM0.90 per unit and total proceed was RM79, 200. A. 7.2 years C. 14.4 years B. 8.5 years D. 20.6 years 17. How many units was he entitled for the investment he made in the first year? Answer B A. 68,000 units C. 88,000 units Use Rule of 72 B. 79,200 units D. None of the above 72/8.5 = 8.5 years Answer A 15. Assuming that the on-going management fee is 1.0% instead 1.5%, what is the Total number of units in Year 3 expected value of the investment at the end of third year? = RM79, 200/RM0.90 = 88,000 units A. RM98,669 C. RM103,602 Total number of units in Year 1 B. RM101,156 D. RM106,480 = 88, 000 units – 20, 000 units = 68, 000 units Answer A Working money = RM80, 000/(1+5%) 18. How much did he invest in the first year? (Assume no initial sales charge applied) = RM80, 000/(1.05) = RM76, 190.48 A. RM16,000 C. RM70,400 Effective return = 10% - 1.0% B. RM54,400 D. None of the above = 9.0% Investment value after 3 years Answer B FV = PV ( 1 + i )n Amount invested in Year 1 3 Set 3 Questions & Answers 201912 = 68, 000 units X RM0.80 =RM54,400 A. 20,408.16 units C. 5,120.33 units B. 19, 436.35 units D. 5,102.04 units 19. What is your understanding of “Margin Call”? Answer B It is the amount an investor might have to pay his/her financier if the Amount invested credit exposure of unit trust loan falls beneath a certain level. = RM10,000/(1+5%) It is a type of processing fee imposed by financier to finance unit = RM10,000/(1.05) trust investment. = RM9523.810 It is a financier’s marked up margin imposed on top of base lending Number of units ex-distribution rate applicable. = Amount invested/NAV per unit ex-Distribution It is charges imposed on future contracts. = RM9523.810/0.49 = 19,436.35 units Answer A 22. If the initial service charge is reduced from 5% to 3% and based on the selling price Lenders may find that the value of the units in UTS that are held as security for the ex-distribution, how much savings can the client get, given the same investment loan provides them with insufficient margin over the amount of the outstanding loan. amount in previous question? The lender will then ask that the borrower ‘top up’ the level of security - a margin call will be made on the borrower. (Chapter 1, page 1-8) A. RM326.53 C. RM327.95 B. RM184.93 D. RM200.00 Question 20, 21 & 22 NAV cum-distribution for a unit trust fund is RM200million. Unit in circulation is Answer B 380million units and the fund manager is charging a 5% initial service charge. Difference between: (Please use 3 decimals for calculation purpose) Working money (with 5% service charge) and Working money (with 3% service charge) 20. If the distribution declared is 3.5 cents per unit, how much is the selling price per ex- = [RM10,000/(1+5%)] – [RM10,000/(1+3%)] distribution? = RM9523.810 – RM9708.738 = RM184.93 RM0.49 RM1.86 RM0.52 RM1.96 23. Daily NAV of UTS are available through Answer A A. UT pricing tables published in the major newspapers NAV per unit cum-Distribution B. Call UTMC = RM200million/380million units C. Visit UTMC and branches = RM0.526 D. All of the above NAV per unit ex-Distribution Answer D = RM0.526 – RM0.035 = RM0.491 24. In year 1995, En. Jamal put RM50,000 in an investment that earned him 9% per annum. Supposing the investment is able to deliver the above yearly return for the 21. Based on the above answer and assume that a client invested RM10, 000 ex- past as well as the coming year, when will his money double? distribution, how many units will she get for her investment? 4 Set 3 Questions & Answers 201912 A. Year 2000 C. Year 2005 previous month is not in her best interest, what other aspect would you advise her to B. Year 2003 D. Year 2007 look into before investing in the fund? Answer B I. Consistency of the fund’s performance in medium and long term. Use Rule of 72 II. Her own financial goal and decide how much risks she can afford to take. 72/9 = 8 years III. Suitability of fund investment objectives and risks with her own 1995 + 8 years = 2003 investment goal and risk profile. IV. Total fees and charges imposed by the fund and service level Question 25 & 26 provided. Number of units held before unit split: 18,000 units Total value of investment before unit split : RM6,000 A. I and II C. I, II and III Unit split ratio : 1 : 3 B. II and III D. All of the above 25. How many units will the investor hold after the unit split exercise? Answer D A. 24,000 units C. 16,000 units 28. In order to increase the return of a fund investment, the fund is to borrow and B. 18,000 units D. 6,000 units invest in another stock. Answer A A. This sentence is true as this is the nature of investment. Number of units after unit split B. This sentence is wrong as borrowing is not allowed in UTS. 18, 000 x (4/3) = 24, 000 units C. This sentence is true because borrowing and invest, in order to generate. D. None of the above is correct. 26. What is her total investment value after the unit split exercise? Answer B A. RM2,000 C. RM8,000 Investor is allowed to borrow money to invest but the fund itself is not allowed. B. RM6,000 D. None of the above 29. After discussing to a potential investor, the UTC finds out that the investor can Answer B accept high risk, is looking for long-term capital gain and short term income. Which NAV per unit before unit splt of the fund stated below is suitable for this investor? = RM6, 000/18, 000units = RM0.33 A. Growth Fund C. Income Fund NAV per unit after unit split B. Balanced Fund D. Bond Fund = RM0.33 x (3/4) = RM0.25 Answer A Total Investment Value The expectation of both UTMC and investors is that these UTS could produce high = RM0.25 x 24,000 units returns based on increase in the price of shares held in the portfolio, rather than from = RM6, 000 dividend income received by UTS. (Chapter 1, page 1-13) 27. Based on the latest performance table, Mei Ling enthusiastically tells you “Look! 30. Sheila wants to be a millionaire. If she has RM500,000,.00 and can earn 8% per The OMG Small Cap Fund was up to 36% last month, I think this fund may be best annum, how long would it take to achieve her goal? for me to invest.” Knowing that choosing a fund merely based on best record in the A. 8 years 5 Set 3 Questions & Answers 201912 B. 9 years i. Improve the regulatory, fiscal and legal environment of unit trust. C. 10 years ii. Improve sound and ethical business practices. D. 11 years iii. Provide information, assistance and other services to its members. iv. Promote public awareness of the benefits and risk of investing in Answer B unit trust. Rule of 72 = 72/8 = 9 years A. i, ii and iii C. i, iii and iv 31. What forms of return do investors get through unit trust investments? B. ii, iii and iv D. All of the above Distribution and Capital Growth Answer D Distributions Capital Growth 35. Raw return is: Interest A. The best measure of unit trust returns Answer A B. A form of measure which is superior to the annualized return The return on investment for unit holders in UTS is usually a combination of a C. A measure that shows the total return achieved by holding the regular income payment and capital appreciation. (Chapter 1, page 1-3) investment over the entire period between buying and selling D. The only return measure that accounts for the value of time 32. Which of the following type of fund is most risky? Answer C A. Capital Growth Fund B. Capital Protected Fund 36. When a distribution is declared, the: C. Money Market Fund D. Fixed Income Fund A. Investment value of the unitholder is not affected B. Investment value of the unitholder falls relative to the Answer A distribution paid C. Distribution must be reinvested 33. What is an index tracking fund? D. Investment value of the unitholder increases relative to the distribution paid A fund invested in companies with higher capital growth potential. A fund invested in range of companies that closely match Answer B companies comprising a particular index. A unit holder in UTS, after receiving a distribution, would find that the NAV of his A fund that invest in companies that are expected to pay significant or her investment falls by the amount of that distribution. (Chapter 1, page 1-45) dividends. A fund invested in overseas share markets. 37. Which one of the following stated below is the most likely benefit you will get with a diversified portfolio that includes stocks, bonds and money market funds? Answer B (Chapter 1, page 1-13) A. Higher returns that you get with a portfolio that is not diversified 34. What are the primary objectives of FIMM (Old term: FMUTM)? B. The ability to balance both risk and return in achieving your financial goals. 6 Set 3 Questions & Answers 201912 C. A guarantee that your portfolio will not suffer if the stock It’s the total NAV of the fund divided with the number of units in circulation. market falls. (Chapter 1, page 1-10) D. All of the above. 41. An investor buys or disposes the units in UTS based on the unit price quoted by Answer B UTMC which is determined at the close of business day. The above statement is Balanced UTS exhibit lower volatility than most single asset class UTS but offer referring to the practice of some prospect of returns higher than those available from money market UTS, savings accounts and fixed deposits. (Chapter 1, page 1-15) A. Forward Pricing B. Historic Pricing 38. Which of the following affects the effective rate of return? C. Today’s Pricing D. Future Pricing A. Gearing B. Taxation Answer A C. Inflation The above statement reflects the practice of forward pricing. (Chapter 1, D. All of the above page 1-43) Answer D 42. Which will increase the overall risk? Tax and inflation are two factors that can impact investment returns. Gearing is an added risk for the investor who borrows to take part in the investment. (Chapter 1, A. Shifting from bonds to stocks page 1-6, Chapter 5, page 5-11) B. Shifting from stocks to bonds C. Shifting from stocks to money market 39. Fixed interest investments have a high negative correlation with equities meaning: D. Shifting from stocks to FD A. When the equity market is down, the fixed interest investment market Answer A will be up. B. When the equity market is up, the return from fixed interest Question 43, 44 and 45 investment will supersede the return from equity market. NAV pre unit split: RM100,000,000 C. The risk element of fixed-income fund is higher than equities. Units in circulation pre unit split: 250,000,000 units D. The returns from equities are always greater than fixed interest Unit split: 1:10 investments regardless of the market situation. Answer A 43. Calculate the NAV per unit for pre unit split. 40. What is NAV per unit? A. RM0.33 C. RM0.35 B. RM0.40 D. RM0.39 A. Total value of the investment after deducting service charge. B. Ratio of the investment in fixed-income securities. Answer B C. NAV of the investment divided by the number of units in issue. NAV per unit pre unit split D. Total units held by the scheme multiplied with the repurchase = NAV/units in circulation price. = RM100,000,000/250,000,000 = RM0.40 Answer C 7 Set 3 Questions & Answers 201912 44. Calculate the NAV per unit for post unit split. A. One C. Three A. RM0.31 C. RM0.32 B. Two D. Four B. RM0.36 D. RM0.05 Answer B Answer B An IUTA and CUTA must ensure that a minimum of two UTCs are stationed at each NAV per unit pre unit split = RM0.40 Distribution Point at all times. (Chapter 2, page 2-18). RM0.40 x 10 = RM0.36 11 48. Customer A invests in a one off investment of RM10,000. Customer B invests RM300 every month. The above ways of investment are called: 45. Assume Mr. D has 8,500 units before unit split declaration. Calculate his total units after the declaration. A. Lump sum investment B. One stop investment A. 7,727.27units C. 9,350 units C. Regular Savings B. 8,500 units D. 85,000 units D. Lump sum and regular savings investment Answer C Answer D After unit split (Chapter 1, page 1-5 & 1-6) 8500 X 11 = 9,350 units 10 49. What are the characteristics of high returns funds? 46. Azmi, Bakar and Charles invested one full financial year in Fund XYZ which financial period ended 31 July, and they will be entitled for full distribution amount A. Potentially high risk e.g. 5 sen/unit. David, Eva, Farid and George came in the middle of the financial B. The higher the return, the lower the risk year in Fund XYZ, and they are still entitled for the same full distribution amount. C. Generally suitable for empty nesters When there are many new investors, the distribution amount will be reduced and this D. Do not invest in equities is unfair to earlier investor. What is the practice to ensure a more equitable income distribution to all investors? Answer A High return funds are always associated with high risk. (Chapter 1, page 1-12) A. “Buying” a distribution B. Distribution Equalisation 50. Ms. Rafidah had invested a lump sum of money into a UTS and she wishes to C. Split minimize her initial service charge exposure. As a UTC (Old term: PDUT), what is D. Distribution the best recommendation to her? Answer B A. Recommend Ms. Rafidah to invest in growth fund that seeks for higher Distribution Equalisation is a portion of money set aside from investments to potential return which would cover her initial service charge. equalise unitholders’ distribution income. (Chapter 3, page 3-14) B. Advise Ms. Rafidah to invest her money as regular as possible to lower down her cost. 47. Institutional Unit Trust Advisors (IUTA) and Corporate Unit Trust Advisors C. Advise Ms. Rafidah to apply “buy & hold” strategy as seeking for a (CUTA) must ensure that a minimum of Unit Trust Consultant(s) (UTC) are long term investment goal. stationed at each Distribution Point at all times. D. Invest in Islamic fund which comply with Syariah principles. 8 Set 3 Questions & Answers 201912 = 15,000 units x RM0.60 = RM9,000 Answer C Raw return = (RM9,000-RM7,500)/RM7,500 = 20% Questions 51, 52 & 53 An investor had invested a single amount of money in a unit trust fund at RM0.50 Question 54, 55, 56 & 57 per unit in the first year and subsequently purchased another 10,000 units at RM0.52 The NAV cum-distribution of Fund B is RM292,500,000 and units in circulation is per unit in second year. At the end of third year, he decided to redeem his investment 195,000,000. The fund declared distribution of 15 cents per unit, and the manager is at buying price RM0.60 per unit and the total proceeds was RM15,000. charging 5% service charge. 51. How many units was he entitled for the investment he made in the first year? 54. What is the NAV per unit cum-distribution? A. 15,000 units A. RM1.50 C. RM1.45 B. 25,000 units B. RM1.35 D. RM1.60 C. 35,000 units D. None of the above is correct Answer A NAV per unit cum-Distribution Answer A = NAV/Number of units Number of units 3rd year = RM15,000/RM0.60 = 25,000 units = RM292,500,000/195,000,000 Number of units 1st year = 25,000 units – 10,000 units = 15,000 units = RM1.50 52. What is the total amount of money he had invested in the first and second year? 55. What is the NAV per unit ex-distribution? A. RM7,500 C. RM12,700 A. RM1.50 C. RM1.45 B. RM5,200 D. None of the above is correct B. RM1.35 D. RM1.60 Answer C Answer B 1st year investment = 15,000 units x RM0.50 = RM7,500 NAV per unit ex-distribution 2nd year investment = 10,000 units x RM0.52 = RM5,200 = NAV per unit cum-distribution – distribution Total = RM7500 + RM5,200 = RM12,700 = RM1.50 – RM0.15 = RM1.35 53. Upon redemption in the 3rd year, calculate the raw return of the investment that he made in the 1st year. (Assume no distribution was paid during the period). 56. What is the investment value of Mr. Samuel before the declaration of distribution, if he is holding 60,000 units? A. 15% B. 18% A. RM93,000 C. RM90,000 C. 20% B. RM92,000 D. RM91,500 D. 100% Answer C Answer C Investment value cum-distribution 1st year investment = RM7,500 = NAV per unit cum-distribution X number of units Redemption of 1st year investment 9 Set 3 Questions & Answers 201912 = RM1.50 X 60,000 60. Computation of NAV: = RM90,000 A. Value of equity invested in the unit trust scheme 57. Assuming no tax, what is the investment value of Mr. Samuel after the declaration of B. Trustee Fee distribution, if he is holding 60,000 units and the distribution is to reinvest the NAV C. Auditor Fee per unit? D. All of the above A. RM93,000 C. RM90,000 Answer D B. RM92,000 D. RM91,500 Answer C Investment value ex-distribution = NAV per unit ex-distribution X number of units = RM1.35 X 60,000 units = RM81,000 Amount reinvested = Distribution X Number of units = RM0.15 X 60,000 = RM9,000 Total amount = RM81,000 + RM9,000 = RM90,000 58. NAV of equity trust fund A. Will fluctuate in respect to changes in the prices of equity index component stocks B. Will fluctuate in respect to changes in interest rate only C. Will not change at all to the ups and downs of the stock market D. None is correct Answer A 59. A listed company is known as: A. Open-end fund B. Universal Trust C. Closed-end fund D. Regional Trust Answer C 10