1.Establishing a market value for older buildings is more problematic using the:

cost approach.

direct comparison approach.

capitalisation approach.

both a and b.

2.The capitalisation approach results in:

a higher market value the greater the capitalisation rate used for a given net rental income stream.

a lower market value the greater the capitalisation rate used for a given net rental income stream.

a lower market value the lower the capitalisation rate used for an increasing net rental income stream.

both a and c.

3.As compared to an A-REIT, an unlisted property trust is likely to:

be smaller in size holding less properties.

have relatively more debt as a proportion of the total trust assets.

both a and b.

none of the above.

4.Which of the following statements regarding loan types is incorrect?

Capped loans provide some certainty to the borrower regarding interest rates for a specified period before they revert to standard variable loans.

Equity loans require the borrower to undergo an approval process each time they wish to borrow from this facility.

100% offset loans benefit from potentially decreasing interest expenses for the borrower if used wisely.

None of the above

5.Where a single homeowner dies in 2014 and bequests their family home which was originally purchased in 2001 to a beneficiary:

the home will be subject to a potential capital gains tax liability if sold by the beneficiary within 1 year following the death of the homeowner using the original purchase price as the cost base.

the home will be exempted from a potential capital gains tax liability if sold by the beneficiary within 2 years following the death of the homeowner.

the home will be valued at its market value at the date of death of the homeowner and subject to sale on any subsequent disposal by the beneficiary.

none of the above.

6.

The term(s) used to describe an employee taking a lower cash salary in lieu of other non- cash benefits include(s):

salary packaging.

salary sacrificing.

both a and b.

none of the above.

7.Beta risk is particularly relevant for fund managers adopting which investment approach?

Passive investing.

Active investing.

Contrarian investing.

None of the above

8.With managed funds it is NOT possible to diversify across:

asset classes.

management styles.

investment sectors.

none of the above.

9.Unlisted managed funds:

are closed ended structures.

are structured so that a prospective unitholder will purchase units from other unitholders.

operate as a trust structure and issues units to investors.

all of the above.

10.Cash management funds would be unlikely to invest in which of the following assets?

Overnight deposits.

Mix of short and medium-term government securities.

Mix of international short-term government securities.

Mortgage loans.

11.Nominate the incorrect statement in relation to standard deviation:

Standard deviation is the statistical measurement of dispersion of outcomes around a mean.

A higher measure of standard deviation infers higher risk.

In approximately 99% of the time, the returns will vary plus or minus two standard deviations from the average.

All of the above.

12.Investing in asset classes directly or indirectly via managed funds results in:

different risk outcomes but the same return relationships.

the same risk outcomes but different return relationships.

the same risk and return relationships.

all of the above.

13.The estimated percentage of options exercised on the ASX Options Market is:

less than 5%

less than 15%

less than 30%

less than 55%

14.The lender in a mortgage contract is referred to as the:

mortgagee

pledger

both a and b

mortgagor

15.Investment products or instruments that derive their value from underlying assets include:

contracts for difference (CFDs)

options

warrants

all of the above

16.The buyer of a contract for difference (CFD):

is going short and expects the price to fall

is going long and expects the price to rise

has the right but not the obligation to buy the underlying asset in the future at a fixed price.

none of the above

17.Where the value of secured assets falls below an agreed debt-to-asset ratio for a margin loan, what action will be required to be taken?

the lender must meet a margin call on the loan

the borrower must meet a margin call on the loan

the lender will require the loan to be discharged in full

none of the above

18.The presence of rising asset prices and concessional tax rates on capital gains in a stable interest rate environment is more preferable for a negatively geared share investment than which of the following economic conditions?

stable asset prices and rising interest rates

rising asset prices and rising interest rates

decreasing asset prices and relatively high tax rates on capital gains

all of the above

19.An example of an issue of a financial security in the primary market would be:

the acquisition of shares in a company from an existing investor purchased on the ASX.

shares arising as a result of a dividend reinvestment plan.

shares arising from participating in a rights issue.

both b and c

20.In terms of the asset classes of cash and fixed interest, nominate the incorrect statement:

Cash may be invested on the short term money market at the cash rate and is more liquid than fixed interest.

The essential feature of most fixed interest investments is that the interest rate is set at the start of the period and the principal is fixed.

Cash is always regarded as a riskier investment than fixed interest.

None of the above.

21.The electronic transfer and settlement system for representing share ownership in Australia is referred to as:

CHECKERS.

CARDS.

CHESS.

SFE.

22.Characteristics of preference shares include:

cumulative shareholders retaining priority over profits until all outstanding dividends have been paid.

participating shareholders having priority for dividends and have potential access to additional dividends after ordinary shareholders have been paid.

redeemable shareholders having their shares bought back or redeemed at their face value at the discretion of the company at a certain date.

all the above.

23.In terms of discount securities nominate the incorrect statement:

Instruments such as BABs are discount securities in that their selling prices are less than (at a discount to) their face values.

The face value of the security is sold at a discount so that the amount paid on maturity is equal to the face value of the security.

Pays a coupon or interest payment monthly until maturity.

All of the above

24.The relationship between nominal rates and real rates of return in times of rising inflationary levels results in:

real rates exceeding nominal rates of return.

nominal rates exceeding real rates of return.

both nominal and real rates of return being equal.

real rates being positively related to inflationary levels

25.The global financial crisis:

was brought about by US investment banks disguising the true risk characteristics of the collateralised debt obligations they were selling

was made worse by the uncertainty within global markets as to the level of credit risk posed by financial institutions leading to governments having to guarantee bank deposits

resulted in Governments offering stimulus packages to attempt to prevent economies from slipping into recession

all of the above

26.Monetary policy, administered by the RBA, is concerned with control over interest rates and the amount of money in circulation and is used to:

stimulate the economy by increasing interest rates

stimulate the economy by decreasing interest rates

slow the economy by increasing interest rates

both b and c

27.The value of the expected shortfall the working population will have in building an adequate retirement benefit is termed the:

Retirement Standard (RS)

Retirement Savings Gap (RSG)

Target Retirement Benefit (TRB)

none of the above

28.Items which are regarded as financial products include:

a security (e.g. a share in a body corporate or a debenture of a body corporate)

health insurance, funeral bonds and reinsurance

exempt public sector superannuation schemes within the meaning of the Superannuation Industry (Supervision) Act 1993

all of the above

29.In Australia, it is expected that by about 2050 there will be approximately:

2.7 people in working age groups for each retired person

3.5 people in working age groups for each retired person

5.0 people in working age groups for each retired person

4 males in working age groups and 2.5 females in working age groups for each retired person

30.In the calculation of the savings ratio, savings is defined as:

the amount left over after deducting all expenditures from income.

the balance of an individual's funds on deposit at a bank at the end of a period.

the amount left over after deducting expenditure from income after we add back items that may be regarded as an investment.

both a and b.

31.The greater the initial investment the:

greater the future value at a given interest rate and given number of periods.

lower the future value at a given interest rate and given number of periods.

future value will be the same at a given interest rate and given number of periods.

none of the above.

32.A rational response in relation to an investment involving time preference for money issues is to prefer to receive a given sum of money earlier rather than later because:

there is a greater chance that the entity promising you the money may not fulfil the promise the longer the waiting period.

the earlier the money is received the earlier the ability to reinvest and earn a rate of return on such funds.

the earlier the money is received the earlier the ability to use the funds for current consumption.

all of the above.

33.An ordinary annuity is characterised by:

a series of cash flows that are identical in amount and occur at the end of consecutive time periods.

a series of cash flows that are identical in amount and occur at the start of consecutive time periods .

a single cash flow that occurs at the end of a particular time period and is accumulated over multiple time periods.

34.A person's equity in their own home valued 10-years after initial purchase:

is the difference between the current market value of the home and their initial purchase price.

is the difference between the current market value of the home and the amount initially borrowed on a principal and interest home loan.

will rise with principal loan repayments on borrowings assuming housing prices at least remain constant.

will decrease with principal loan repayments on borrowings assuming housing prices at least remain constant.

35.A tax-free component and a tax-deferred component are two taxation benefits associated with the income derived by a property. The tax-deferred component:

derives from building depreciation allowances and provides for tax relief for a period of five years.

derives from depreciation of furniture and fittings and provides tax relief for a period of seven years.

derives from building depreciation allowances and the accumulated sum reduces the cost base of the property when it is sold.

derives from depreciation of furniture and fittings and the accumulated sum adds to the cost base of the property when it is sold.

36.When providing advice to a client on whether it is best for them to rent or buy a family home based only on financial grounds, the advice:

will favour the buying option in times of relatively low interest rates and current flat housing prices.

will favour the buying option in times of relatively tight rental markets.

both a and b.

none of the above.

37.In terms of behavioural theory, overconfidence can result in:

individual investors being mistakenly convinced that they can regularly beat the market.

sharemarket investors less likely to speculate by regularly trading in stocks.

people deviating from rational thinking in making judgements where there is an element of uncertainty.

both a and c.

38.Markowitzs modern portfolio theory assumes that there are two asset types being:

low risk and high risk assets.

low risk and moderate risk assets.

risky and risk-free assets.

none of the above.

39.The enterprising or aggressive investor is characterised by:

speculation.

their willingness to devote time and care to the selection of sound and attractive investments even though they may not be fully trained experts in the field.

the conservation of capital.

both a and b.

40.If you were to deposit $850 today into an investment account earning 6% p.a. compounded annually, approximately how much will you have in your account at the end of 5 years?

$1,165

$1,137

$1,206

$620

41.The NPV of an investment requiring an initial outlay of $10,000 at a discount rate of 6% which provides end-of-year cash flows of; year 1 - $3,000 (inflow), year 2 - $11,000 (inflow), year 3 - $1,500 (outflow) and year 4 - $7,000 (inflow) will be approximately:

$6,163.

$6,905.

$9,424.

$19,500.

42.An investor is seeking to make an investment decision over a 4-year term between alternative fixed interest securities of equivalent risk with each providing accumulated interest amounts on maturity. The ABC security offers a fixed interest rate of 8% for a 3-year maturity whereas the XYX security offers a fixed interest rate of 9% for a 4-year maturity. What initial calculation should be the basis for the decision-making between the securities?

to calculate a forward rate for year 4 of the XYX security

to calculate a forward rate for year 4 of the ABC security

to calculate a forward rate for year 3 of the ABC security

none of the above

43.Mr & Mrs Kelso are seeking a loan to buy a caravan to use to travel around Australia. The on-road cost of the caravan is $35,000. The loan details they have been provided from Ezy Credit are that the interest rate charged will be 9% p.a. and require end-of-month repayments over a 4-year term. The initial fees that form part of the loan arrangement are an establishment fee of $750 as well as a brokerage fee to Ezy Credit calculated as 2% of the loan value. Given that Mr & Mrs Kelso wish to borrow all the funds required to obtain the caravan what will be the approximate end-of-month loan repayment?

$612.80

$894.60

$907.80

$938.35

44.The role of ASIC is to:

draft legislation governing the financial planning industry

monitor competition policy within the financial services sector

ensure compliance by practitioners with legal requirements governing the financial planning industry

@establish and monitor compliance of the prudential regulations that govern the operations of financial institutions within Australia

45.The highest credit rating from those indicated below would be:

CCC

AAA

A

BBB

46.A close reading of chapter 1 provides which of the following lessons for investors:

be aware of market cycles

do not diversify unless there are no other options available

both a and b

none of the above

47.The capital asset pricing model (CAPM):

recognises a positive relationship between risk and return.

uses beta as the relevant measure of market risk.

requires a value for the risk-free rate.

all of the above.

48.Market forces are the primary determinant of share prices in the secondary market with prices increasing arising from:

excess levels of buying pressure over selling pressure.

excess levels of selling pressure over buying pressure.

equilibrium levels of buying and selling pressure.

either b or c.

49 An investment providing a nominal interest rate of 6% p.a. compounded monthly is equivalent to an effective interest rate of:

less than 6%.

equal to 6%.

more or less than 6% depending on the investment term .

none of the above.

50.A period of negative savings where income does not meet the required level of expenditures could also be regarded as a(n):

asset.

increase in equity.

savings surplus.

savings deficit.

51.Approximately how much would you currently pay for an investment at a discount rate of 11% p.a. which produces an end of year cash inflow of $160 each year for 3 years?

$369

$391

$480

$1480

52.CAPM says: (nominate the incorrect statement):

the expected return on a share is equal to the risk-free rate plus the amount of beta multiplied by the risk premium.

if investors wish to buy a particular share, the expected return must, at least, be equal to the return they would earn if they invested in a risk-free asset.

investors need to be compensated for taking risk, they will not be compensated for total risk, just the unsystematic risk.

beta and the risk premium multiplied together, plus the risk-free rate, provide the expected return of the share.

53.Contributing ordinary shares:

may be cumulative, participating or redeemable.

are shares issued on the understanding that dividends will not be payable until a future specified date when a particular project becomes profitable.

are completely paid up when initially issued.

are not completely paid up when initially issued

54.Technical analysts:

use forecasts of future data based on company fundamentals to make financial decisions.

examine the past price history of a company in order to identify patterns of price movements.

prepare graphs of past price movements in order to isolate buy and sell points which are used to make financial decisions.

both b and c

55.The underlying value of units in an unlisted managed fund is based on the:

net prevailing market value of the fund's investment portfolio divided by the number of units issued.

supply and demand for those units.

inflation- adjusted value of the fund's net assets.

none of the above

56.Nominate the incorrect statement in relation to standard deviation:

Standard deviation is the statistical measurement of dispersion of outcomes around a mean.

A higher measure of standard deviation infers higher risk.

In approximately 99% of the time, the returns will vary plus or minus two standard deviations from the average.

All of the above

57.For negative gearing purposes:

the benefit of the tax loss created depends on the marginal tax rate of the lender.

the tax loss created by the investor can be offset against salary and other net investment income in the same financial year.

total allowable deductions excluding interest expense from the investment will always exceed net investment income.

all of the above.

58.An example of direct property investment is:

John is a registered investor in a listed real estate investment trust.

Jill holds units in an unlisted property trust.

James is the registered owner of a commercial property.

Jenny is a member of a private property syndicate.

59.Stimulating or contracting the economy via changes in interest rates is an example of the government's use of:

fiscal policy

industrial relations policy

monetary policy

welfare policy

60. The lowest level of business activity occurs during which of the following phases in the business cycle?

boom or expansion phase

recession phase

recovery phase

contraction phase

61.Some variations of standard interest and principal mortgages available to investors include:

equity release loans, where surplus equity above agreed levels may be withdrawn

interest-only loans with the entire principal payable at the end of the loan

reverse mortgages

all of the above

62.The greater the initial investment the:

greater the future value at a given interest rate and given number of periods.

lower the future value at a given interest rate and given number of periods.

future value will be the same at a given interest rate and given number of periods.

none of the above

63The NTA of an unlisted property trust assuming all other items are held constant:

will increase in situations where the fund manager decides to repay principal on outstanding debt from surplus cash holdings.

will increase in situations where the fund manager decides to revalue upwards the amount included in the balance sheet for goodwill attached to a prominent property held by the fund.

is used by fund managers to determine the current value of units in the trust before adjusting for any management fees.

both a and c

64.What is the valuation approach which is described as follows: "An estimated market value made by comparing recent sales figures to provide a return required by investors based on the income stream paid to investors less normal operating expenses"?

The cost approach.

The direct comparison approach.

The securitisation approach.

The capitalisation approach

65. Alice sells a property in 2014 for $300,000 that she has held for five years. She bought the property for $200,000 and during the period of ownership she claimed a building depreciation allowance of $8,000 each year. Given a marginal tax rate of 46.5% (including the Medicare levy) the relevant tax to be paid relating to the sale will be:

$32,550

$65,100

$27,900

$46,500

66.Investing in asset classes directly or indirectly via managed funds results in:

different risk outcomes but the same return relationships.

the same risk outcomes but different return relationships.

the same risk and return relationships.

all of the above.

67.The lowest level of business activity occurs during which of the following phases in the business cycle?

boom or expansion phase

recession phase

recovery phase

contraction phase

68.The 'know your client rule':

provides that a licensee must monitor and supervise the activities of representatives to ensure they are complying with the law

provides that before a financial planner is able to give specific advice on an investment, the Corporations Act requires the planner to make every effort to understand the client's investment objectives, financial situation and particular needs

applies to both wholesale and retail clients

is contained within the Financial Services Guide

69.A managed fund investing in subprime mortgages will be holding assets of:

low quality with a low possibility of default by borrowers

low quality with a high possibility of default by borrowers

high quality with a low possibility of default by borrowers

high quality with a high possibility of default by borrowers

70.An example of an issue of a financial security in the primary market would be:

the acquisition of shares in a company from an existing investor purchased on the ASX.

shares arising as a result of a dividend reinvestment plan.

shares arising from participating in a rights issue.

both b and c.

71.The effect of a change in the general level of interest rates on the capital values of traded fixed-interest securities is such that:

a fall in the general level of interest rates will normally promote decreases in the capital values of traded fixed-interest securities.

holders of these securities will enjoy an appreciation in capital values when the general level of interest rates falls.

there is a positive relationship between the general level of interest rates and the capital values of traded fixed-interest securities.

both a and c.

72.An ordinary annuity is characterised by:

a series of cash flows that are identical in amount and occur at the end of consecutive time periods.

a series of cash flows that are identical in amount and occur at the start of consecutive time periods .

a single cash flow that occurs at the end of a particular time period and is accumulated over multiple time periods.

none of the above.

73.Credit card facilities in Australia are currently characterised by:

providing borrowers with an open-ended credit facility.

borrowers being required to make a monthly payment based on the outstanding credit card balance.

providing lenders in recent years with a higher source of fee revenue from this source than from home loans.

all of the above.

74.Focusing an investment portfolio with ethical investments:

allow investors to integrate personal values and social concerns with their investment objectives.

potentially creates adverse diversification issues for the investor increasing their investment risk exposure

both a and b.

is not likely to be constrained by a lack of information available from many companies regarding this issue.

75.Money market securities generally have a term:

less than that of the capital market.

greater than that of the capital market.

equal to that of the capital market.

of at least 5 years.

76. The electronic transfer and settlement system for representing share ownership in Australia is referred to as:

CHECKERS.

CARDS.

CHESS.

SFE.

77.The Gordon dividend discount model has a number of problems which include:

the required rate of return must be greater than the expected growth rate. If this is not the case, then the model will estimate a negative value for the share price (which is impossible).

if the expected growth rate is really greater than the required rate of return, then the Gordon growth model is not appropriate for valuation.

this model assumes that the fundamentals of the firm will remain constant over time.

all of the above.

78.The effect of a change in the general level of interest rates on the capital values of traded fixed-interest securities is such that:

a fall in the general level of interest rates will normally promote decreases in the capital values of traded fixed-interest securities.

holders of these securities will enjoy an appreciation in capital values when the general level of interest rates falls.

there is a positive relationship between the general level of interest rates and the capital values of traded fixed-interest securities.

both a and c.

79.The management expense ratio (MER) is a ratio of fees charged to the:

book value of assets under management.

market value of assets under management.

unit price of the fund.

none of the above.

80.With managed funds it is NOT possible to diversify across:

asset classes.

management styles.

investment sectors.

none of the above.

81The relationship that exists between unsystematic risk and the number of securities held in an investment portfolio is:

non applicable as no relationship exists.

inverse until unsystematic risk is removed.

positive until unsystematic risk is removed.

inverse up to a maximum of 10 securities and then positive.

82.The underlying value of units in an unlisted managed fund is based on the:

net prevailing market value of the fund's investment portfolio divided by the number of units issued.

supply and demand for those units.

inflation- adjusted value of the fund's net assets.

none of the above.

83.The calculation of an absolute return arising from the recent sale of a managed fund requires which of the following information?

Purchase price, inflation rate and risk-adjusted sale price.

Purchase price and inflation rate.

Purchase price and risk-adjusted sale price.

Purchase price and actual sale price.

84.The currency risk effects from holding an investment valued in an overseas currency will result in:

a rise in the Australian dollar value of the investment if the Australian dollar falls relative to the overseas currency

a rise in the Australian dollar value of the investment if the Australian dollar rises relative to the overseas currency

a fall in the Australian dollar value of the investment if the Australian dollar rises relative to the overseas currency

both a and c

85.The buyer of a contract for difference (CFD):

is going short and expects the price to fall

is going long and expects the price to rise

has the right but not the obligation to buy the underlying asset in the future at a fixed price.

none of the above

86.Alice sells a property in 2014 for $300,000 that she has held for five years. She bought the property for $200,000 and during the period of ownership she claimed a building depreciation allowance of $8,000 each year. Given a marginal tax rate of 46.5% (including the Medicare levy) the relevant tax to be paid relating to the sale will be:

$32,550

$65,100

$27,900

$46,500