Question 1

Maria is considering investing in either a bond fund or a balanced fund. She seeks your advice on risk assessment. Which scenario presents the most accurate risk comparison between the two?

Options :

A : In a period of rising interest rates, the bond fund may experience higher volatility compared to the balanced fund due to its focus on fixed-income securities.

B : When market sentiments are bullish, the bond fund may offer higher returns than the balanced fund due to its conservative investment approach.

C : In a stable interest rate environment, both the bond fund and the balanced fund are expected to exhibit similar levels of risk.

D : In a period of rising interest rates, the bond fund may experience lower volatility compared to the balanced fund due to its focus on fixed-income securities.

Answer: A

Question 2

A managed futures strategy involves investing in a variety of futures contracts. Which of the following best describes the main characteristic of the trend-following strategy used in managed futures?

Options :

A : It focuses on pairs of securities with relative momentum signals and invests long in one while shorting the other.

B : It relies on historical price trends to predict future movements and takes long positions in assets with positive trends and short positions in assets with negative trends.

C : It seeks to capitalize on short-term price fluctuations through high-frequency trading techniques.

D : It involves hedging risks using derivatives to minimize exposure to market movements.

Answer: B

Question 3

Emma invested in a split-share corporation where the preferred shares have a priority claim on $40 of the common shares’ value. If the current value of the common shares is $55 and the corporation is winding up, what amount will Emma receive for her capital shares if they hold the remaining value after the preferred shares' claim?

Options :

A : $15.

B : $40.

C : $95.

D : $55.

Answer: A

Question 4

Tom, a liability trader, has been suddenly asked to sell a large amount of XYZ stock for a client. The market for XYZ stock is currently showing a bid of $10 and an ask of $10.10. Tom decides to buy the stock at $10.10 and aims to sell it at a higher price later. What type of trade is Tom engaging in?

Options :

A : Proactive trade.

B : Speculative trade.

C : Reactive trade.

D : Arbitrage trade.

Answer: C

Question 5

Monica has surplus cash and wants to invest it in a fund with short-term maturity securities to minimize interest rate risk. She prefers lower volatility and liquidity for her investments. Which mutual fund type would be the most suitable option for Monica?

Options :

A : Preferred dividend fund.

B : Mortgage fund.

C : Money market fund.

D : Fixed income fund.

Answer: C