3. Chapter 1 - Theory (Quiz 3)

___________ is also the term used for the price at which units are sold to the public. It is similar to Net Asset Value (NAV) per unit of the unit trust fund.

• Offer price

• Redemption price

• Service charge

• Buying price

What is the most important benefit you will get from creating a diversified portfolio

      that includes stocks, bonds and money market funds?

• A guarantee that your portfolio won’t suffer if the stock market falls

• Higher returns than you will get from a portfolio that isn’t diversified

• The ability to balance both risks and returns in achieving your financial goals

• All of the optional answers are correct

Dollar-Cost Averaging is:

• A strategy that entails buying low and selling high

• A way to purchase unit trust funds and minimize the service charge

• A systematic way of regular investment with fixed amount of money

• A way to sell unit trust funds and to minimize the capital gains

Dollar Cost Averaging (DCA) can affect the average cost of investment. Which statement clearly explains the DCA effects?

• With fixed amount of money, investor can acquire more units in a rising market over a short- term period

• With fixed amount of money, investor can acquire lesser units in a fluctuating market over long term period

• With fixed amount of money, investor can acquire more units at lower price and fewer units at higher price which can reduce the average cost over loan-term period

• With fixed amount of money, investor can acquire regular amount of units at lower price which can reduce the average cost over long-term period

What must you not say to a  potential investor?

I. Unit trust is as safe as fixed deposits

II. The market value of your capital may be lower than initially invested

III. Return in Unit trust is not fixed

IV. You should diversity your portfolio and have some fixed deposits

• I only

• II, III & IV

• I, II and III

• All of the above answers are correct

Which Statement regarding the EPF Members Withdrawal Investment Scheme is correct?

• The maximum age for the qualified member is 60

• Members can withdraw funds from the EPF once in every two months

• Investment can be made with any unit trust scheme

• Balance in Account 2 is not eligible for this scheme

Which of the following best describes the disadvantage of financing investments of a unit trust fund through borrowing?

• In a rising market, the value of the investment in unit trust fund and the loan borrowed rises.

• The value of the investment in unit trust fund does not fluctuate with share market prices, but the loan financing does

• In a falling share market, the value of investment in unit trust fund may be decreasing whilst the loan liability remain constant, or increasing. The effect of this may result in the need to increase the collateral to the financial institution.

• None of the optional answer is correct.

The major factor that end financiers will assess in determining whether to extend

     credit to an investor who wished to finance a unit trust investment is:

• The name of the unit trust management company in which the investor wished to make an investment

• The current prevailing interest rate on credit cards owned by the investor

• The credit worthiness of the investor

• The credential of the investment committee members

What is your understanding of 'Margin Call’?

• It is the amount an investor might have to pay his/ her financier if the credit exposure of unit trust loan falls beneath a certain level.

• It is a type of processing fee imposed by financier to finance unit trust investment

• It is a financier's marked up margin imposed on top of base lending rate applicable

• It is charges imposed on futures contract