Lesson 8 & 9

Which of the following shows the three main asset classes:

• Cash, Company Shares, Bonds

• Equities, Property, Commodities

• Equity, Fixed Interest, Derivatives

• Derivatives, Cash, Bonds

The acronym OEIC stands for:

• Ordinary Equity Investment Company

• Open Ended Investment Company

• Open Equity Investment Collective

• Ordinary Equity Investment Capital

An Investment trust’s price is:

• Not subject to the laws of supply and demand

• Is always equal to the underlying investments in which it invests

• Subject to supply and demand

• None of the above

When you employ pound cost averaging to invest into an OEIC:

• The number of shares you buy each month is the same regardless of the share price

• You always buy shares at the lowest price

• You always buy shares at an effective average price less than the actual average price during the period of purchase.

• You always buy at the highest price

Equity investments:

Select one:

• Will redeem at their par value at the end of the investment term

• Will pay a fixed coupon until encashment

• Provide potential for higher return than bonds but with a higher risk profile

• Pay dividends but are different from company shares

Income from shares is known as dividend income and is:

• Free of tax for all investors

• Distributed monthly to all qualifying shareholders

• Paid to all bondholders

• Taxable at a rate dependent upon the investor's marginal tax rate

Gilts and Corporate Bonds are broadly the same but:

• Gilts are offered by the UK Government and Corporate Bonds are offered by private businesses so therefore Gilts are considered safer

• Gilts can only have a 10 year term whereas Corporate Bonds often have a much longer term

• Corporate bonds pay tax on capital gains whereas Gilts do not.

• Gilts are offered by private companies and the Government offers Corporate Bonds

The Gross Redemption Yield is:

• Always the same as the Gross Income Yield

• Is less than the Gross Income Yield when the bond is trading above par.

• Is less than the Gross Income Yield when the bond is trading below par.

• None of the above.

When thinking about diversification when buying equities;

• Most of the diversification benefits are achieved by the time you have invested in 10 different stocks.

• You should invest in as many stocks as possible.

• There is no diversification benefit if investing into another equity

• Costs should not be a consideration

   

Working out the dividend yield on an equity is:

• Not possible unless you have the maturity date of the share.

• Adds no value because dividends are reflected in the share price already

• Possible if you have the amount of dividend and the share price

• None of the above