Set 5 English Questions & Answers 180309 PDF

Set 5 ENGLISH Questions & Answers 180309 1. The Malaysian Unit Trust Funds Performance Table is a useful tool B. The portfolio of a real estate investment trust (REIT) can be because it: switched to equities easily as...

Set 5 ENGLISH Questions & Answers 180309 1. The Malaysian Unit Trust Funds Performance Table is a useful tool B. The portfolio of a real estate investment trust (REIT) can be because it: switched to equities easily as the assets are highly liquid C. Real estate investment trusts (REITs) are not allowed to be listed A. Allows performance to be tabled at meetings held by the Securities D. Unlisted unit trusts are not allowed to invest in real estate Commission investment trusts (REITs) B. Taps into the fund manager’s credibility C. Summarizes investment performance for the industry and allows Answer A for easy comparison Returns from property comprise net rental income plus or minus any D. Enables the public to understand the fees and charges charged by change in the value of the property over the period. The price at which unit trust management companies in Malaysia units in REIT trade on Bursa Malaysia will reflect these returns. (Chapter 1, page 1-15) Answer C Performance tables are extremely useful in that they summarize the 4. A collective investment scheme is: performance of the whole unit trust industry in a single table over standardized periods, and on a consistent and objective measurement A. A type of fund that allows anyone to collect money from others, basis. (Chapter 1, page 1-34) much like people collect money for charity B. An investment fund which invests only in a specific collection of 2. Which statement regarding the EPF Members Withdrawal Investment shares Scheme is correct? C. A collection of investments which cannot be sold without permission of the owners A. The maximum age for the qualified member is 60 D. Another term used to describe a unit trust scheme B. Members can withdraw funds from the EPF once in every two months Answer D C. Investment can be made with any unit trust scheme UTS is a form of collective investment that allows investors with D. Balance in Account 2 is not eligible for this scheme similar investment objectives to pool their savings, which are then invested in a portfolio of securities or other assets managed by Answer D investment professionals. (Chapter 1, page 1-2) Since 1996, a member has, subject to certain conditions, become entitled to make transfers from his or her Account 1 balance to an 5. What would you not normally expect to find in the annual report of a approved UTS. (Chapter 3, page 3-18) unit trust scheme? 3. Which of the following statement is correct? A. Statement of assets and liabilities of the unit trust scheme B. Auditor’s report A. The income of real estate investment trusts (REITs) is mainly C. Fund composition and statement of asset allocation derived from the rental income and capital appreciation of the D. Unit prices of competitors’ products property held by the trust Answer D 1 Set 5 ENGLISH Questions & Answers 180309 An annual report’s major contents are key performance data, manager’s C. Invest in any open-ended funds report, trustee’s report, financial statements and auditor’s report. D. Invest in real estate property trusts (Chapter 3, page 3-10) Answer D 6. When was the first unit trust management company set up in Malaysia? By acquiring units in a listed REIT, it is possible to invest small amounts to gain exposure to the property market. (Chapter 1, page 1- A. 1949 14) B. 1950 C. 1959 9. Puan Rose decided to withdraw some of her savings to invest in unit D. 1960 trusts. She would like to invest all of her money in a fund at one time and let it grow irrespective of the market condition. Whereas for Puan Answer C Sarina, she has very little savings but every month she is willing to cut Malayan Unit Trust Limited was the first UTMC to be formed in 1959. some of her expenses and invests in unit trusts. Name the respective (Chapter 1, page 1-18) ways that can be used by them to invest in unit trusts. 7. Investors who invested in unit trusts with borrowed money: A. Spot and Installment Plans B. Lump Sum Investment and Regular Savings Plan A. Will only make profit if returns from their investment are higher C. Lump Sum Investment and Contractual Plans than the cost of their borrowing D. Fixed Investment and Installment Plans B. Will not be affected by changes in the base lending rate set by their end-financiers Answer B C. Are guaranteed to make profit in longer term D. Need to keep on investing until the loan is fully settled 10. Generally, what are the possible forms of return on investment can an investor expect from investing in unit trusts? Answer A To maximize potential investment returns, some investors investing in I. Distribution UTS borrow the application money to invest, expecting that the rate of II. Capital appreciation return from investing in UTS will exceed the borrowing costs, thus III. Interest giving rise to additional profit. (Chapter 1, page 1-6) A. I & II 8. An investor wants to gain exposure to the commercial property market B. I & III in Kuala Lumpur but with only a small amount of money C. II & III (approximately RM5,000), she was not able to invest at all. Which is a D. All of the optional answers are correct good investment alternative for her? Answer A A. Invest in equity index fund The return on investment for unit holders in UTS is usually a B. Invest in fixed income fund combination of a regular income payment and capital appreciation. 2 Set 5 ENGLISH Questions & Answers 180309 Derived from a pool of investments held within that UTS. (Chapter 1, III. Can be bought and sold easily page 1-3) IV. More favorable transaction costs for unit trusts due to large investment amount 11. In marketing unit trust scheme, providing quality services includes: V. Flexibility to switch between different type of funds (applicable to certain unit trusts) A. Being responsive to customers’ requests, queries and complaints B. Providing clear and precise reporting A. I, II & III C. Providing convenient choices in handling investors’ cash and B. I, II, III & IV payments C. I, II, III, & V D. All of the optional answers are correct D. All of the optional answers are correct Answer D Answer D Chapter 1, page 1-3 to 1-4. Chapter 3, page 3-8. 12. Which of the following is the most appropriate thing to do if you meet a person who has never invested in unit trusts and does not feel 14. “Market risks” is a type of risks involved in investing in equity unit comfortable to invest in unit trusts? trusts and it means: A. Let the potential investor have a prospectus and go through with A. Stock values underlying the Net Asset Value (NAV) of the unit her trust scheme fluctuates in response to the activities of individual B. Comfort her by letting her know that unit trust is an investment companies and general market or economic conditions. Such with no risk movements will cause the NAV or prices of units to fall as well as C. Show her the marketing brochure and take them back as you need rise. to show the brochure to another investor B. Poor Management of the scheme will jeopardize the investment of D. Show her the excellent performance record of the unit trust fund unit holders through the lost of their capital invested in the scheme and tell her that the performance will repeat in the future C. Unit holders might be forced to provide additional funds to restore their loan margin when the value of the unit trusts scheme dropped Answer A drastically UTC must ensure that an investor is given a current prospectus and D. None of the optional answer is correct should provide him or her with an in-depth explanation of the prospectus before an application is made. (Chapter 1, page 1-24) Answer A Master Prospectus, page 32. Market risk: The purchase of equities 13. Unit trusts offer an effective way to pursue lifetime financial goals with represents a risk since the prices of stocks underlying the NAV of the advantages that would be difficult to achieve by lay persons who invest fund fluctuate in response to many factors. Therefore, stock values on their own. The advantages include: fluctuate in response to the activities of individual companies, and general market or economic conditions. Such movements in the I. On-going professional fund management underlying values of the shares of the investment portfolio will cause II. Diversification of assets with reduced risks 3 Set 5 ENGLISH Questions & Answers 180309 NAV or prices of units fall as well as rise, and income produced by the B. G needs to adopt a riskier investment strategy to achieve fund may also fluctuate. potentially higher returns C. P’s losses are potentially less because it takes less risk 15. One of the major benefits of investing in unit trusts is to gain access to D. Expect a lower return from P because the fund takes less risk the experience of a professional fund manager. Which term best describes a professional fund manager? Answer A A. Someone who has bought and sold many investment in his lifetime 18. Amongst others, the calculation of Net Asset Value (NAV) of a unit B. A friend who always recommends the best stocks to buy trust scheme involves: C. Someone who always manages in excess of RM500 million D. Someone who has been professionally trained in the field of fund I. The value of the equity investments management II. Costs and charges involved in various transactions of the scheme III. The value of money market instruments (if applicable) Answer D IV. Accrued gross distribution and interest income after deduction of relevant fees and expenses such as annual management fees and 16. Unit Trust Management Company (UTCM) must issue a prospectus for administrative expenses each of its unit trust schemes. The UTMC is required to: A. I & II C. I, III & IV A. Issue a prospectus at least once a year B. I, II & III D. All the optional answers are correct B. Provide complete information C. Send a copy to any potential investor who request a copy Answer D D. All of the optional answers are correct (Chapter 1, page 1-38 & 1-39) Answer D 19. In order to enhance professionalism in marketing of unit trusts: The prospectus must be updated at least once every 12 months. It is a legal document containing legal, accounting and investment terms. The A. It is irrelevant what promises are made to clients with respect to purpose is to provide investors with all the necessary information to investment returns make an informed decision to invest in that UTS. (Chapter 1, page 1- B. It is important to provide superior service to clients and attend to 24) their needs C. It is important to observe as many marketing leads as possible 17. Risk/return characteristics can vary significantly between two funds. D. It is important to recommend to potential clients the best Which of the following statement is not correct comparison of the performing unit trusts regardless of the suitability of her risk risk/return trade-off between investing in a Capital Growth Fund (G) profile to the fund and a Capital Protected Fund (P)? Answer B A. G’s return are potentially higher than P’s because G is less risky 4 Set 5 ENGLISH Questions & Answers 180309 20. What is the risk of an investor directly investing in a small number of Answer C shares? The DCA concept refers to the systematic and regular investment of a fixed amount of money, irrespective of the price level of the A. The investor is exposed to the risk of either making or losing large investments acquired to below the average price of those investments portion of her investments during the period. (Chapter 3, page 3-30) B. The investor benefits from diversification of portfolio C. The investor is able to consistently reap high returns of investment 23. How can an investor hedge against inflation? D. It is easy for investor to select good company I. Cut down all the unnecessary expenses and keep the money at home Answer A II. Lower the tax rate of the investment Holding a limited number of share investments does not provide the III. Invest the money in an instrument that can generate a higher benefit of diversification, therefore, exposed to the risk of losing all his return than the inflation rate or her capital. (Chapter 3, page 3-26) IV. Maximize the benefits of effective financial planning 21. A unit split in effect does not add value to the unit trust investors’ A. I & III C. I, III & IV investment holding, but________. B. III & IV D. I, II, III & IV A. Makes sure that the fund managers are able to earn their fees Answer B B. Is used by unit trust management company to lower the NAV per Investors need to preserve the purchasing power of their original unit, thus enabling new investors to invest in the fund investments, and be earning a rate of return from those investments that C. Is used to enlarge the fund size in Ringgit term beats the inflation rate. (Chapter 5, page 5-11) D. Is used to re-classify the fund to “Penny-Stocks” fund Most individuals need to plan. An effective personal financial plan will help protect a client’s assets from the effects of inflation. (Chapter 5, Answer B page 5-2) By splitting units, a high priced unit becomes lower-priced unit and new investors may be more inclined to purchase units – especially in 24. Please identify features of an open-ended unit trust. comparison with competitor UTS that may have high-priced units. (Chapter 1, page 1-44) I. It is a collective investment scheme that provides an opportunity for small investors to participate in stock market investment 22. Dollar-Cost Averaging is: II. Ownership of the fund is divided into units of entitlement III. If the market condition is not encouraging, the unit holders will A. A strategy that entails buying low and selling high not be able to liquidate their investment as other investors are B. A way to purchase unit trust funds and minimize the service charge not keen to purchase C. A systematic way of regular investment with fixed amount of money A. I & II D. A way to sell unit trust funds and to minimize the capital gains B. I & III C. II & III 5 Set 5 ENGLISH Questions & Answers 180309 D. All of the optional answers are correct Answer D One of the disadvantages of UTS is loss of control. Investors in UTS Answer A lose the right to direct how their savings are invested. (Chapter 1, page UTS is a form of collective investment that allows investors with 1-5) similar investment objectives to pool their savings, which are then invested in a portfolio of securities or other assets managed by 27. Which of the following statement is not valid? investment professionals. Ownership of the portfolio is divided into units of entitlement and each investor is known as a ‘unit holder’. A. Investors are entitled to receive unit trust certificate or statement (Chapter 1, page 1-2) UTS provide the benefits of liquidity whereby for his investment units can be bought and sold readily through UTMC, IUTA and UTC. B. Unit trusts are professionally managed by the unit trust (Chapter 1, page 1-4) management company C. Unit holders directly purchase the securities in the investment 25. Which of the following best describes “Aggressive Growth Fund”? portfolio of the unit trust D. Value of a unit will fluctuate in line with the changes in the net A. The fund will invest primarily in stocks which earn significant asset value of the unit trust dividend income B. The fund will normally generate returns which closely resemble Answer C the performance of a stock market index, both in terms of risk and Investors in UTS do not purchase the securities in the portfolio directly. return Ownership of the portfolio is divided into units of entitlement. (Chapter C. Generally the fund will be invested in stocks with higher growth 1, page 1-2) potential and with higher risk characteristic D. The fund mainly invests corporate bonds, government securities 28. The best way for investors to minimize the impact of the initial service and liquid assets charge on unit trust investments is to: Answer C A. Buy and sell units as much as they can Equity UTS labeled “aggressive growth” generally invest in companies B. Invest as regular as possible and avoid lump-sum investments with higher capital growth potential, but with associated higher risk. C. Adhere to a long-term buy and hold strategy; making sure that the (Chapter 1, page 1-13) units purchases match their long-term investment objectives D. Only purchase aggressive growth fund 26. Which of the following is not the right of unit holders? Answer C A. To obtain information about the unit trust scheme and its Investment in most UTS should not be for the short term, as the cost of performance investing is reasonably high. When spread over a longer time frame, B. To receive profile of board of directors these costs become less significant. Rapid purchase and sale of units in C. To redeem units UTS can, because of the cost of investing, become significant drain on D. To select shares for the unit trust scheme’s portfolio an investor’s capital. (Chapter 1, page 1-29) 6 Set 5 ENGLISH Questions & Answers 180309 29. What is one of the functions of FMUTM? Fund X is most appropriate to be classified as: A. Reviews all materials prior to release to the public A. Equity Fund C. Property Fund B. Generates all the guidelines that unit trust companies comply to B. Fixed Income Fund D. Money Market Fund and to report to the Compliance Authority if non-compliance is found Answer A C. Provides a common platform for unit trust companies to discuss The major portion of equity UTS portfolios are shares of listed issues in the industry companies. (Chapter 1, page 1-13) D. A governing body which regulates the investment made by the unit trust management company 32. Which statement is correct Answer C I. Interest rate decreased, value fund Y will be more adversely The FMUTM provides a common platform for UTMC to discuss issues affected relating to the unit trust industry. II. Interest rate decreased, value fund Y will be more positively affected 30. The fund manager of unit trust scheme is allowed to charge a III. Value fund X will be more positively affected when the stock management fee, the fee is market is increasing A. Mainly used to cover the management expenses incurred by the A. I only C. II & III manager in managing the scheme B. I & III D. All correct B. Also known as a fee charged by the trustee C. Levied by the fund manager on the investment made by investors Answer B to cover the commission paid to agents When the interest rate increases, the value of money market D. Used for the purpose of registering the unit holders with the trustee instruments will increase accordingly, vice versa (fund Y). When the stock market is increasing, the equity portion will move Answer A positively. (fund X). Annual management fees that average around 1.5% per annum are levied by UTMC to cover the costs of managing UTS. (Chapter 1, page 33. Which of the following is (are) true about a bond fund? 1-30) I. It is best to buy when interest rates are peaking and bond Question 31 & 32 yields are high II. Manager’s fees and charges are generally lower compared 31. Assume that the asset allocation of fund X and fund Y are as to the equity fund follows: III. Fund prices will fall when interest rate rise Fund X Fund Y IV. No matter when you redeem your investment, you will get Equity Market 70% 0% back at least your principal amount or capital you have Money Market 10% 85% invested 7 Set 5 ENGLISH Questions & Answers 180309 A. II only comparison with competitor UTS that may have high-priced units. B. I & III (Chapter 1, page 1-44) C. I,II & III D. All of the optional answers are correct 36. NAV calculation includes: Answer A I. Equity market III. Transaction cost of UTS II. Money market (if applicable) IV. MER 34. Which of the following is NOT TRUE? A. I and II A. Generally, the portfolio of unit trust investment is determined B. I, II and III by fund manager C. I, II and IV B. A unit trust is an investment mechanism which allows investor D. All of the optional answers are correct who shared similar investment objectives to pool their money C. The portfolio of investments is allowed to include only one Answer D asset class D. Unit holders do not directly purchase the securities and the 37. Trustee ownership of the fund is divided into units I. Regulatory body to control investment decision by UTMC Answer C II. Common platform for UTMC to discuss issues The investment of some UTS may also be diversified across asset III. Guideline & report to regulatory body for non-compliance on classes. In addition to shares, a UTS may invest in fixed income investment securities, property and cash, These investments will provide an IV. Safeguard the assets of the fund element of stability in a declining stock market, and may provide some liquidity when meeting the repurchases of unitholders in A. I, II and III UTS. (Chapter 3, page 3-28) B. I, III and IV C. II, III and IV 35. Net Asset Value of the fund does not change with UNIT SPLIT. D. All of the optional answers are correct Why does the UTMC take the options to split? Answer B A. Gain Management Fees The trustee’s role is in Chapter 2, page 2-14 B. Increase fund size in term of ringgit C. Lower unit NAV so that new investors can purchase 38. Capital Growth Fund (G) Capital Protected Fund (P) D. Increase unit NAV to benefit existing unitholder. Which of the following statement is NOT TRUE? Answer C By splitting units, a high priced unit becomes lower-priced unit and A. G has better returns than P because of less risk new investors may be more inclined to purchase units especially in B. P has less loss because of less risk 8 Set 5 ENGLISH Questions & Answers 180309 C. P has less return because of less risk 40. FMUTM D. G has an ggressive risk strategy to get better potential returns I. Common platform for UTMC to discuss issues Answer A II. To agree on standards of practice for the protection of the interests G would have a higher potential return because it is at a higher risk of unitholders. exposure compared to P. III. To improve regulations, tax and other rules affecting sales of unit trust. 39. A. I and II B. II and III A B C. I and III RM1,000 RM1,000 D. All of the optional answers are correct NAV RM0.27 RM0.80 MER 1.5% 0 Answer D Exit Fees 0 2% Page viii Mr. Yee has investments in Fund A and Fund B with RM1000 each for 5 years. Assume that Fund A has a MER charge of 1.5% per annum, fund B has an exit fee of 2% and both funds have the same returns. Mr. Yee will gain more from Fund B. Is this statement true? A. True B. False because Fund A and Fund B have the same returns C. False because of the different fees imposed on both funds D. None of the answers are correct Answer A Yes, Mr. Yee will gain more from Fund B because MER charges are yearly charges however an exit fee is only charged when an investor makes redemption. 9