Set 4 English Questions Answers 271219 PDF

Set 4 Questions & Answers 201912 Set 4 Malaysia? 1. It is important for the UT industry to be regulated in order to A. Bank Negara Malaysia C. FIMM (Old term: FMUTM) protect clients’ investments....

Set 4 Questions & Answers 201912 Set 4 Malaysia? 1. It is important for the UT industry to be regulated in order to A. Bank Negara Malaysia C. FIMM (Old term: FMUTM) protect clients’ investments. Which of the following is not an B. Registrar of Companies D. Securities Commission authority involved in UTS regulation? Answer D A. Ministry of Finance C. Institute Bank-Bank Malaysia The regulation of the unit trust industry has been entrusted to the SC under B. Bank Negara Malaysia D. Securities Commission the Securities Commission Act, 1993 as amended. Answer C 5. What type of investment would you most expect to find in an aggressive growth fund? 2. ___________________ is a sales charge or entry fee levied by a UTMC on the initial purchase of UTS. The charge is A. Investment in capital guaranteed life insurance products sometimes called a ‘load’, ‘front end load’, or sales or entry B. Cash charge. The charge can be expressed either as a fixed C. Investment in properties with regular income amount or calculated as a percentage of the NAV of a unit. D. Shares of technology-company recently listed on the stock exchange A. Initial Load Charge C. Initial Service Charge B. Initial Repurchase Charge D. Initial Interest Charge Answer D Aggressive growth UTS invest in blue chips (large and well-capitalized Answer C companies whose shares are listed on a stock exchange) 3. Fixed-income funds are generally said to have lower risks 6. If NAV/U of a fund is RM1.00, the fund manager declared a than equity funds. Hence, what can be expected from the distribution of RM0.12, how much would an investor receive if he redeems returns of these funds? 10,000 units after distribution? A. Usually higher than equity funds A. RM10,500.00 C. RM9,800.00 B. Usually lower than equity funds B. RM 8,800.00 D. RM10,800.00 C. Consistently higher than equity funds D. None of the optional answers are correct Answer B NAV/unit ex-D = RM1.00 – RM0.12 = RM0.88 Answer B Redemption amount = number of units x NAV/unit ex-D Fixed income securities are usually more secure, especially if held to = 10,000 x RM0.88 maturity. It is therefore expected that the returns offered by fixed income = RM8,800.00 UTS will be lower than equity UTS over the long term. 7. Assume that the investment return is 10%, tax rate is 20% 4. Who is the main regulatory body for UTS in and the inflation rate is 5%, what is the effective rate of 1 Set 4 Questions & Answers 201912 return? 10. An index UTS: A. 5% B. 4% C. 3% D. 2% A. Invest primarily in all of the securities or a representative Answer C sample of the securities that are included in a selected Return after tax market index. = Investment return - (Investment return x Tax rate) B. Invest primarily in overseas share markets. = 10% - (10% x 20%) C. Invest in real property, usually prominent commercial = 10% - 2% properties. = 8% D. Invest in a range of companies that closely match Effective rate of return companies comprising a particular index. = return after tax - inflation rate = 8% - 5% = 3% Answer D 8. The best way to help investors go through the prospectus is 11. In general, which of the following category of unit trust is to begin with: likely to depreciate most when the overall stock market A. Members of the Investment Committee falls? B. Fees & Charges C. Key Data Section A. Property trust C. Equity trust D. Profile of the Board of Directors and Key Management B. Fixed-income trust D. Money market trust Staff Answer C Answer C The risk profile for an equity trust is aggressive in comparison with This section provides the executive summary of the prospectus. It allows property, fixed income and money market trust. Therefore if the overall investors and UTC to make a quick comparison of the different UTS issued stock market falls, the equity trust will depreciate the most. by the UTMC. 12. Generally prospectus of a unit must be renewed 9. The main objective of the Acts that regulate the unit trust industry is to safeguard the benefits of the: A. Every two years C. Every month B. Every six months D. Every year A. Unitholder C. Trustee B. UTMC D. Securities Commission Answer D The UTS prospectuses are very important documents. It must be updated at Answer A least once every 12 months. The main objective of all regulations of the unit trust industry must be to protect the interest of prospective investors and existing unitholders. 13. The maximum margin on unit trust financing is fixed at: 2 Set 4 Questions & Answers 201912 A. 85% B. 67% C. 50% D. 79% B. III only D. All of the above Answer B Answer D 14. Mr. X wants to invest RM 200,000.00 in a unit trust fund. 17. Assume an investor has invested a lump sum of RM 25, What is the maximum amount can he borrow from a 000.00. 2 years later the total returns were RM27,300.00. financial institution for the investment? Calculate the compounded return from this investment. A. RM134,000.00 C. RM120,000.00 A. 5.5% B. 4.5% C. 6.5% D. 7.5% B. RM66,000.00 D. RM80,000.00 Answer B Answer A Present value = RM 25,000.00, n = 2, Future Value = RM27,300.00 Maximum loan to valuation = 67% x RM200,000.00 Calculate the compounding rate p.a. = RM134,000.00 FV = PV ( 1+ i )2 RM27,300 = RM25,000.00 ( 1 + i )2 15. Which are the parties involved in the unit trust industry? 1.045 = ( 1 + i )2 1.045 = 1 + i I. UTMC 0.045 = i II. Trustee 4.5% = i III. Investment Manager IV. Unitholder 18. Arrange the sequence of the category of funds from the highest to the lowest risk. A. I and II C. I, II and IV B. I, II and III D. All of the above I. Money Market Fund II. Balanced Fund Answer D III. Bond Fund All of them are involved in the unit trust industry. However, the investment IV. Equity Fund managers are not parties to the deed. A. I, II, III and IV C. IV, II, III and I 16. Which are the key requirements of a trustee? B. IV, III, II and I D. IV, I, III and II I. Must be a trust company registered under The Trust Company Act, Answer C 1949 II. Must be independent of the UTMC and UTS 19. Which of the below are parts of the prospectus? III. Must be registered with the SC IV. Act as a custodian by holding all the assets belonging to a UTS I. Investment Objectives A. I and II C. IV only II. Authorized investments 3 Set 4 Questions & Answers 201912 III. Fees & charges 22. When did RHB Unit Trust Management Berhad introduced IV. Trust expenses (Annual Trustee Fee) the first Islamic bond fund? A. I, II, III C. I and III A. 2000 C. 2002 B. IV only D. All of the above B. 2001 D. 2004 Answer D Answer A 20. What will be received by the investors generally after they have 23. Which of the following is/are the risk(s) of borrowing to invested in UTS? invest in UTS? I. Confirmation that the investor’s application amount has been I. Interest rate fluctuations received. II. Default in repayment of loan II. Confirmation of the number of units acquired in the UTS, and the III. Premature repayment of loan NAV of a unit on the date of allotment of units. IV. Margin call III. Confirmation on the rate of initial service charge imposed both in percentage form and actual value as well as the net amount A. I and II C. II and III invested net of service charge B. I and III D. All of the above IV. Confirmation of the rate of exit fee imposed both in percentage form and actual value as well as the total amount repurchased Answer D V. A certificate for the number of units issued 24. Which of the below is/are NOT part of the Code of Ethics? A. I, II, and III C. I, II, III, and V B. I only D. I, II, III, and IV I. Fair dealing II. Competence Answer C III. Use of authorization card IV. Acting with due care, skill and diligence 21. What is the platform for UTMC to discuss issues relating to V. Compliance with law the unit trust industry? A. III and V C. III only A. Ministry of Finance B. I, II, IV D. None of the above B. Institut Bank-Bank Malaysia C. Securities Commission Answer A D. FIMM (Old Term: FMUTM) III and V are part of the Standards of Professional Conduct. Answer D 25. Dollar cost averaging is: A. A strategy whereby investors buy more units when prices are high 4 Set 4 Questions & Answers 201912 B. A strategy whereby investors buy less units when prices are low year ended 30 Dec 200X. C. A systematic and regular investment of a fixed amount of money D. A strategy for customers to invest all their capital at one time A. 1.07% B. 1.03% C. 1.08% D. 1.04% rather than on a regular basis Answer D Answer C MER = [ fees + recovered expenses ] x 100 DCA is a systematic and regular investment of a fixed amount of money, Average fund size irrespective of the price level of the investment at the time the investment is = RM 2,605, 407 x 100 made. This can reduce the average cost of the investments acquired to 250,492,853 below the average price of those investments during the period. = 1.04% 26. What is unit trust scheme? 28. What does a gradually decreasing MER over a period of several years indicate? A. Form of collective investments that allow investors with similar objectives to pool their savings A. UTMC is not managing its operating cost well B. An investment portfolio which only contains one type of B. UTMC is managing its operating cost efficiently for its fund asset size C. Form of collective investments whereby the unitholders are C. That all newly launched UTS will have MER the shareholders of the company they have invested in D. UTMC is managing its operating cost efficiently D. An investment portfolio whereby the investors of the particular UTS will purchase the securities in the portfolio Answer B directly The fund size is an important factor for MER. UTS with a larger fund size should generally have a lower MER than smaller UTS. Answer A The pools of savings are then invested in a portfolio of securities or other 29. How do investors overcome the impact of inflation? assets managed by investment professionals. A. By reducing the tax rate B. Investors need to preserve the purchasing power of the 27. For the Financial Year Ended 30 Dec 200X, the financial original investment statement of ABC Fund shows that the following expenses C. Hope to earn a return that is less than the inflation rate were incurred: D. None of the optional answers are correct Management Fees - RM1, 340,999 Trustee Fees - RM 730, 173 Answer B Auditors Fee - RM 172, 641 To overcome the impact of inflation the investors need to preserve the Bank charges & other expenses - RM 361, 594 purchasing power of the original investment and be earning a rate of return The average Fund Size for ABC fund during the year was that beats the inflation rate. In periods of high inflation, the purchasing RM 250, 492, 853. Calculate the MER of the fund for they power of financial assets decreases. 5 Set 4 Questions & Answers 201912 30. What is the term used if Mrs. Z wants to reinvest her = RM76,190.48 x ( 1 + 0.085 )3 distribution in UTS? = RM76,190.48 x ( 1.085 )3 = RM76,190.48 x 1.2773 A. Distribution Reinvestment C. Suspension = RM97,318.10 B. Buying Distribution D. Distribution Equalization 33. Assume that the ongoing management fee is 1% instead of Answer A 1.5%, what is the value of investment after 3 years? (Use 4 decimal points for your calculation) 31. How many reports must be issued during the period in which units in UTS are held? A. RM98,666.67 C. RM90,516.00 B. RM98,420.00 D. RM95,280.00 A. At least 1 report C. At least 3 reports B. At least 2 reports D. At least 4 reports Answer A Value end of year 3 = working money x ( 1 + i )n Answer B = RM76,190.48 x ( 1 + [ 10% - 1% ] )3 There are at least 2 reports which are the Annual Report and the Interim = RM76,190.48 x (1.09)3 Report. = RM76,190.48 x 1.2950 = RM98,666.67 For Questions 32 & 33 34. Which of the following is NOT true about the agency 32. Initial investment = RM80,000.00 structure? Rate of return = 10% On going management fee = 1.5% A. The standard structure comprises a Group Agency Manager, Service charge = 5% an Agency Manager, and Agency Supervisor and an Agent. B. There must be more than 4 tiers. What is the return of the investment after 3 years? (Use 4 decimal points for C. The unit must not exceed 50 persons in total at all times. your calculation) D. An agent is not allowed to recruit other agents. A. RM97074.80 C. RM97,074.80 Answer B B. RM97,318.10 D. RM101,156.00 The structure should not exceed 4 tiers. The SC encourages UTMC to have agencies with fewer tiers to ensure that proper supervision is applied to each Answer B agent. Initial investment = RM80,000.00 Working money = RM80,000/(1+5%) 35. What is the most important element an investor should = RM76,190.48 have before deciding to invest in UTS? Value end of year 3 = working money x ( 1 + i )n = RM76,190.48 x ( 1 + [ 10% - 1.5% ] )3 A. Confidence C. Intelligence 6 Set 4 Questions & Answers 201912 B. Risk D. Professionalism 38. Mr A says, “Oh! XYZ fund is really good. I shall invest in this fund to get a high return in 3 years’ time!” Upon Answer B hearing this, A UTC should advise Mr A which of the All investors should understand that investing in the UTS has its own risk. following? 36. What do you understand about unit split? A. The fees & services for the particular fund B. The possible risk involved A. It affects the NAV of the UTS C. To go through the prospectus B. It affects the value of a unitholder’s investment D. All of the above is correct C. It does not affect the NAV of the UTS or the value of a unitholder’s investment. Answer D D. None of the optional answers are correct UTC must ensure that (1) investors understand that the services provided by UTMC are not without cost; (2) investors are given explanation of risk Answer C when investing in UTS and (3) investors read through and understand the The effect of unit split does not affect NAV of UTS nor the value of a prospectus of the particular fund unitholders investment. The objective of unit split is to attract new investors by lowering the unit price. 39. A buyer is not sure if should invest in UTS. An agent should: 37. Investor A & Investor B started investing with RM64,000.00 with the rate of return of 8.5% p.a for investor A. A few years later, both of A. Advise the buyer to contact the agent once has made them received RM128, 000.00 each. However Investor B received the decision returns faster by 1.27 years. When did Investor B receive his/her B. To go through the prospectus together and leave the return? prospectus with the buyer to decide C. Should ignore the buyer as this is a waste of time for the A. 8.47 years B. 7.20 years C. 6.41 years D. 5.94 years agent Answer B D. Show the buyer some brochures and to take it back after that to be used for the next appointment with a different prospect Investor A = 72 8.5 = 8.47 years Answer B UTC should provide all their prospects with an in depth-explanation of the prospectus before an application is made. Investor B = 8.47 – 1.27 = 7.20 years 40. A UTC should not say: A. Investing in UTS has no risk B. If do not have enough money to invest, investors should apply for a loan 7 Set 4 Questions & Answers 201912 C. Returns are guaranteed when investing in UTS 44. D. All of the above NAV Amount Invested 0.50 RM1500.00 Answer D 0.60 RM1500.00 0.70 RM1500.00 41. A complaint can be referred to: Calculate the average unit cost for the above investment. A. UTC C. FIMM (Old Term: FMUTM) & SC B. UTMC D. All of the above A. RM0.59 B. RM0.95 C. RM0.78 D. RM0.64 Answer A Answer D Total amount invested = RM4500.00 Total units invested 42. For a Syariah based UTS, where can the excess cash or = (1500/0.50) + (1500/0.60) + (1500.00/0.70) liquid assets be kept/invested? = 3000 + 2500 + 2142.86 = 7642.86 A. Investment accounts Average unit cost = RM4500.00/7642.86 B. Current accounts = RM0.5887 C. Syariah-based instruments = RM0.59 D. None of the above 45. Which is not true about management fee? Answer C Any excess cash and/or liquid assets are to be kept/invested in Syariah- A. The annual management fee is calculated on the Gross NAV based instruments e.g. Islamic current account or investment account. of UTS B. The average annual management fee is 1.5% 43. Below are the list of a unitholder’s rights and liabilities. C. The management fee is to cover the cost of managing UTS Which of the following is not part of the list? D. The fee is an optional requirement to be included in the prospectus A. To call for meetings of unitholders B. To receive UTS annual and interim reports Answer D C. To receive a distribution from UTS The annual management fee must be included in the prospectus. D. To choose which type of shares to be included in their investment portfolio 46. There are many potential risks that are related to investing in UTS. Listed below are a few types of risk. Which of the Answer D following has an incorrect description? One of the disadvantage of investing in UTS is investors lose their rights to direct how their savings are invested. A. Market risk – stock value does not fluctuate in response to the activities of individual companies and general market or 8 Set 4 Questions & Answers 201912 economic conditions 49. One of the advantage of investing in UTS is that the funds B. Liquidity risk – defined as the ease with which a security are managed by professional management. Why is this so? can be sold at or near its fair value depending on the market C. Inflation risk –the risk of high inflation will affect the real A. They have experience investing more than RM500million return from investment B. They have years of knowledge and experience in the unit D. Risk of non-compliance – risk that specifically occurs when trust industry a Syariah compliant security is reclassified as a Syariah non-compliant C. They ensure the funds are structured according to their own Security. principles D. None of the above is correct Answer A The stock value does fluctuate in response to the activities of individual Answer B companies, general market or economic conditions. 50. Net Asset Value = RM250,000.00 47. Investor X has decided to change from high risk to a low Units in circulation = 300,000.00 risk category of investment. Which of the following is an Distribution of income = 3.5¢ option for investor X? Unit split = 1:5 A. Bond Fund to Equity Fund Calculate the NAV per unit ex distribution. (2 decimal points for B. Equity Fund to Bond Fund calculation) C. Money Market Fund to Balanced Fund D. Bond Fund to Balanced Fund A. RM0.73 B. RM0.80 C. RM0.70 D. RM0.76 Answer B Answer B The Equity Fund has a higher risk than Bond Fund. NAV/unit cum-D = RM250,000.00/300,000.00 = RM0.833 NAV/unit Ex-D = RM0.833 – RM0.035 48. What does liquidity means in the context of UTS? = RM0.798 = RM0.80 A. Units can be bought easily 51. Calculate the NAV per unit ex distribution assuming post unit split. (use B. Average cost of investment acquired to below the average 2 decimal points for calculation) price C. Investors can sell their investments at any time A. RM0.63 B. RM0.60 C. RM0.67 D. RM0.69 D. Payment of income to unitholders Answer C Answer C NAV/unit post unit split = RM0.80 x 5/6 Investment can easily be bought and sold readily through UTMC, IUTA = RM0.67 and UTC. 52. Given that the NAV per unit at the beginning of the day is 9 Set 4 Questions & Answers 201912 RM0.65, and the NAV per unit at the end of the day is 55. RM0.66. Investor Z decides to redeem 10,000 units. Based X Y on Forward Pricing, how much will it cost? 70% Equity 20% Equity 30% Money Market 80% Money Market A.RM6,500.00 C. RM6,600.00 B. RM6,000.00 D. RM10,000.00 Which of the following is true? Answer C A. If the market falls, Y will be more negatively affected than X Number of units x NAV/unit end of day B. If the market falls, X will be more negatively affected than Y = 10,000.00 x RM0.66 C. If the market rises, both X and Y will be negatively affected = RM6,600.00 D. None of the above is correct 53. Which is not true regarding the role of FIMM (Old term: Answer B FMUTM)? Portfolio X is at a higher risk than Y. A. To provide self-regulation for the UT industry 56. How do we calculate redemption price? B. Appointed by the SC to conduct unit trust examinations for Persons wishing to become UTC A. NAV plus Transaction Cost Factor C. To advise the Minister of Finance B. NAV less Transaction Cost Factor D. To work closely with the SC in the development and growth C. NAV plus an exit fee of the unit trust industry D. NAV less an exit fee Answer C Answer D To advise the Minister of Finance is one of the SC’s role 57. What does a registrar contain? 54. Which is not true about a UTC? A. The category of funds each investor has invested in B. The total of investments each investor has in each fund A. UTC should introduce himself as a unit trust agent category B. UTC does a need analysis for his client C. Personal data relating to each investor C. UTC needs an IA and UTC license D. None of the above D. UTC recommends a unit trust product Answer C Answer C The Register contains a large amount of personal data of each investor. A UTC does not need an IA license Clients can update their data from time to time such as change of address, new IC number and change of name. 10 Set 4 Questions & Answers 201912 58. Which of the parties below has been established to Answer C investigate any complaints from customers? Bank Islam Malaysia Berhad was established in 1983. A. Appealing Committee B. Investigating Committee C. Disciplinary Committee D. Investment Committee Answer B This committee has been established to investigate complaints and also look into disciplinary action that will be taken against any UTC who breaches the FIMM (Old term: FMUTM) Code of Ethics. 59. Given an inflation rate of 5%, how much will education fees of RM80,000.00 cost in 10 years’ time? (Use 2 decimal points for your calculation) A. RM146,601.00 B. RM130,000.00 C. RM130,312.00 D. RM114,023.00 Answer C Compounding factor = (1 + i )n = (1 + 5%)10 = (1 + 0.05)10 = 1.6289 Cost for education after 10 years = 1.6289 x RM80,000.00 = RM130,312.00. 60. Islamic finance in Malaysia began to develop with the establishment of: A. Shell MDS Sdn Bhd B. The Islamic Capital Market Unit C. Bank Islam Malaysia Berhad D. Malaysia Capital Market Masterplan 11