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NEW QUESTION # 151
A non-profit, whole-of-life assurance policy will pay:
Answer: D
Explanation:
A non-profit whole-of-life assurance policy is a type of life insurance that guarantees a fixed payout upon death, without any investment element.
* Why is Option D Correct?
* The sum assured is determined at the start of the policy and does not fluctuate.
* Unlike unit-linked or with-profits policies, the payout is fixed and guaranteed.
* Why Not Other Options?
* A (Linked to insurance company's units) # Only applies to unit-linked policies, which have investment risk.
* B (Pre-determined time limit) # Describes term life insurance, not whole-of-life.
* C (Inflation-linked payout) # Applies to index-linked policies, not non-profit whole-of-life.
# Reference: FCA Handbook (Insurance Conduct of Business), CISI Wealth & Investment Management.
NEW QUESTION # 152
Which document is used to illustrate the costs and charges related to investment in a mutual fund?
Answer: A
Explanation:
The Key Investor Information Document (KIID) provides essential details about a mutual fund, including fees, risks, and past performance.
* Why is Option B Correct?
* KIIDs are legally required under EU UCITS (Undertakings for Collective Investment in Transferable Securities) regulations.
* They outline:
* Ongoing charges (e.g., management fees).
* Entry/exit fees.
* Performance fees (if applicable).
* Why Not Other Options?
* A (Key Features Document) # Used for insurance products, not mutual funds.
* C (Prospectus) # A detailed document, but not focused on fees.
* D (Terms of Business) # Covers a firm's general services, not fund costs.
# Reference: FCA Handbook (KIID Requirements), CISI Wealth & Investment Management.
NEW QUESTION # 153
Which type of individual is most likely to be subject to enhanced due diligence (EDD) checks?
Answer: C
Explanation:
Enhanced Due Diligence (EDD) is required for high-risk clients, particularly Politically Exposed Persons (PEPs), such as government officials.
* Why is Option C Correct?
* Government officials (PEPs) are considered higher risk due to their potential exposure to bribery or corruption.
* Financial institutions must conduct extra scrutiny on their financial transactions.
* EDD Requirements Include:
* Detailed background checks.
* Source of wealth verification.
* Ongoing transaction monitoring.
* Why Not Other Options?
* A (Company Director) # May require due diligence but not EDD unless a PEP.
* B (Corporate Client) # EDD applies if a company is in a high-risk jurisdiction.
* D (High-net-worth individual) # Wealth alone does not trigger EDD unless other risk factors exist.
# Reference: Financial Action Task Force (FATF) Guidelines, CISI Wealth & Investment Management (AML).
NEW QUESTION # 154
The Return on Capital Employed (ROCE) ratio can be used to:
Answer: D
Explanation:
Return on Capital Employed (ROCE) measures how efficiently a company uses its capital to generate profits.
* Formula: ROCE=Operating ProfitCapital Employed×100ROCE = frac{text{Operating Profit}}{text
{Capital Employed}} times 100ROCE=Capital EmployedOperating Profit×100
* Why Use ROCE?
* It helps in comparing performance over time (trend analysis).
* Investors use it to assess capital efficiency.
* Why Not Option D?
* ROCE evaluates total capital (equity + debt), while Return on Equity (ROE) focuses only on shareholders' equity.
# Reference: CFA Institute (Financial Ratios), CISI Wealth & Investment Management.
NEW QUESTION # 155
When a hedge fund puts together an equity arbitrage position, it will seek to balance respective:
Answer: A
Explanation:
Equity arbitrage strategies involve balancing betas to hedge risk while profiting from pricing inefficiencies.
* Key Concept:
* Beta measures systematic risk (market-related risk).
* Equity arbitrage strategies aim to neutralize beta while profiting from pricing anomalies.
* Example:
* A hedge fund buys an undervalued stock and shorts an overvalued stock with matching betas
, ensuring market-neutral exposure.
# Reference: CFA Institute (Hedge Fund Strategies), CISI Wealth & Investment Management.
NEW QUESTION # 156
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