CHARTERED INSTITUTE FOR
SECURITIES & INVESTMENT
LEVEL 3
CERTIFICATE IN INVESTMENT OPERATIONS
UNIT 1
INTRODUCTION TO SECURITIES AND
INVESTMENT
TIME ALLOWED: 1 HOUR
No copying of any part of this paper is permitted without the prior
written authority of the Chartered Institute for Securities & Investment
© Chartered Institute for Securities & Investment
How to use this sample paper
These 50 questions should be answered in an hour in the real exam, so make sure you time yourself
accurately.
Record your answer for each question by circling your selected answer.
When you have finished the test, you may check your answers against the Answer Sheet at the back
of this paper.
The exam is scored as follows:
46-50 Pass with Merit
35-45 Pass
0-34 Fail
For those questions you answered incorrectly, the answer sheet will show you the corresponding
syllabus element, sub element and learning objective against which the questions were written, so
you can identify any syllabus areas where you may need to revise further.
Introduction to Securities & Investment
1 What fundamental factor usually dictates the price of goods and services within a market
economy?
A Level of import tariffs
B Foreign exchange controls
C Supply and demand
D Government policy
2 Which of the following normally have voting rights attributed to them at the time of issue?
A Preference shares
B Warrants
C Ordinary shares
D Eurobonds
3 What is the meaning of "registered title" in relation to quoted equities?
A Company name registered at Companies House
B Company name registered with the exchange on which the shares trade
C Shareholder name shown on the company register in relation to a shareholding
D The name of the underlying investor using a nominee company to hold shares
Introduction to Securities & Investment
4 Which of the following arrangements BEST describes an ISA?
A Direct equity investment
B Long-term deposit
C Tax-efficient wrapper for investments
D Tax-free endowment policy
5 What is the PRIME responsibility of the Bank of England's Monetary Policy Committee (MPC)?
A Determining interest rates in accordance with inflation targets
B Intervening in the market to influence exchange rates
C Organising the amount of notes and coins in circulation
D Preparing economic statistics for the Government
6 A client is looking for an instrument with up to 5 years to maturity which will give him a return
at the end of its life, but which is also negotiable.
Which of the following instruments would fulfil these requirements?
A Commercial Paper
B Certificate of Deposit
C Bill of Exchange
D Treasury Bill
Introduction to Securities & Investment
7 What is the main reason for a company to issue bonus shares?
A To raise capital
B For internal tax reasons
C To increase liquidity of the shares
D To increase the market value
8 A portfolio manager expects to receive a large incoming payment next month and intends
purchasing a particular asset with it. What type of product can be used to offset the risk that
this asset's price will rise before the purchase can be made?
A Certificate of Deposit
B Commercial Paper
C Exchange-Traded Fund
D Future
9 What is the MINIMUM frequency for a public company to hold a meeting of shareholders?
A Quarterly
B Half yearly
C Annually
D Bi-annually
Introduction to Securities & Investment
10 Capital Gains Tax is payable on which of the following assets?
A The maturity value of an endowment policy
B The sale value of a UK company debenture
C The encashment of National Savings Certificates
D The sale of equities
11 What is a unit trust?
A A pool of investments managed collectively on behalf of its investors by a fund manager
B A pool of investments managed on behalf of its investors by an Authorised Corporate
Director
C A company set up with the sole intention of investing in the shares of other companies
D A company which exchanges commitments with another to gain from the profit of the
new commitment
12 Which of the following best describes an offset mortgage?
A Income is used to offset the capital of a mortgage
B The size of mortgage interest payments increases to offset a decrease in a property's value
C Interest calculations on a mortgage are offset by increases in a property's value
D The balance in a savings account is used to offset interest charges in a mortgage account
Introduction to Securities & Investment
13 Which of the following financial activities is MOST likely to be carried out in the retail sector?
A Trading of options
B Corporate finance
C Financial planning
D Reinsurance
14 All firms who wish to conduct financial services business in the UK have to undergo an
authorisation process. The main reason for this is to ensure that the firm in question:
A is deemed to treat customers fairly
B offers competitively priced products
C is considered fit and proper
D pays the correct level of taxes
15 A short term borrowing arrangement funded through a current account accurately describes
which retail banking service?
A Credit card
B Debit card
C Bridging loan
D Overdraft facility
Introduction to Securities & Investment
16 What does the seller of an option normally acquire?
A The right to buy an asset in the future
B The right to sell an asset in the future
C An immediate premium
D A premium at a specific future date
17 Under the General Data Protection Regulation, how long should client data be kept?
A Indefinitely
B At least 2 years
C At least 7 years
D No longer than necessary
18 Treasury Bills are considered low risk investments because:
A they are government-backed
B they cannot fall in value
C they have a short life-span
D the risk lies with the issuer
Introduction to Securities & Investment
19 Which of the following is a mandatory event?
A Dividend
B Rights issue
C Takeover
D Scrip Dividend
20 A client holds an 8% bond which matures in 2020. It is currently trading at £124. What is the
flat yield?
A 1.80%
B 5.16%
C 6.45%
D 25.81%
21 A spot transaction in foreign exchange is one that settles:
A in two business days
B in five business days
C at a date to be agreed
D within two hours of confirmation
Introduction to Securities & Investment
22 The profits made from full encashment of which of the following products will be treated for
tax purposes as income rather than capital gains?
A Investment bonds
B OEICs
C Unit trusts
D Investment trusts
23 A mortgage is BEST defined as a:
A loan funded by the income from a property
B debt which matches the equity in the property
C debt repayable on the sale of a property
D loan secured on a property
24 The bonus normally added to a with-profits policy at maturity or death is known as:
A a reversionary bonus
B a compound bonus
C a terminal bonus
D an interim bonus
Introduction to Securities & Investment
25 As a result of two recent derivative agreements, Paul agrees to pay £5,000 to James for Asset A
in 3 months' time and Eric buys the right, but not the obligation, to purchase Asset B from
Stuart in 6 months' time. Which of these traders is referred to as a 'holder'?
A Paul
B James
C Eric
D Stuart
26 Compared to direct property investment, Real Estate Investment Trusts normally offer a
reduced level of:
A liquidity risk
B institutional risk
C legal risk
D systemic risk
27 What do Forex dealers trade in?
A Financial futures
B Eurobonds
C Currencies
D Commodities
Introduction to Securities & Investment
28 Which of the following is a characteristic of direct investment in property compared to other
investments?
A It offers low volatility
B It is easier to value
C It offers liquidity
D It is divisible allowing partial sales
29 Which of the following is a measure of inflation in the UK?
A Exchange rate
B FTSE 100 Index
C Balance of Payments
D Retail Price Index
30 As well as making the selection of investments in accordance with a client's investment
objectives, a robo-adviser can provide ongoing services for what purpose?
A Portfolio rebalancing
B Asset servicing
C Margin calculations
D Wealth assessment
Introduction to Securities & Investment
31 If money laundering is suspected, to whom must employees report their suspicion?
A Compliance Officer
B Money Laundering Reporting Officer
C Internal Auditor
D National Crime Agency
32 The XETRA DAX index relates to stock market performance in which of the following countries?
A Italy
B Germany
C France
D Spain
33 What is the MAXIMUM compensation award that the Financial Ombudsman can make a firm
pay?
A £5,0000
B £150,000
C £250,000
D £350,000
Introduction to Securities & Investment
34 Which of the following instruments is principally designed to protect the holder against a fall in
the market?
A A hedge fund
B A unit trust
C An ISA
D An index tracker fund
35 When a firm issues a complainant with its final response, what must the firm's letter include?
A The name, address and telephone number of the firm's chief complaints' officer
B The name, firm address and contact telephone number of the firm's managing director
C Details of the Financial Ombudsman Service
D Details of the Financial Services Compensation Scheme
36 The use of which type of investment wrapper means that the payments made by the investor
will attract tax relief at outset?
A Junior ISA
B Pension
C Investment bond
D Cash ISA
Introduction to Securities & Investment
37 Within an OEIC who is responsible for the safekeeping of the scheme property?
A The trustee
B The authorised corporate director
C The depository
D The FCA
38 Safekeeping of securities is a function BEST described as that of a:
A Custodian
B Market maker
C Broker
D Investor
39 Which of the following factors is most likely to influence whether an investment trust share
price is above or below the net asset value of the share?
A Period since launch
B Tax status of the trust
C Supply and demand
D Gilt yields
Introduction to Securities & Investment
40 In what way does the General Data Protection Regulation give individuals extra rights to obtain
information about themselves?
A Firms have to respond to subject access requests
B Individuals have the right to both view and request destruction of records
C It allows e-mail requested by encrypted messaging
D Individuals are able to request personal information in digital format, subject to cost
41 A capitalisation issue would have which of the following effects on an investor's shareholding?
A The number of shares will change
B The share price will remain the same
C There will be partial payment of capital
D The investor will be required to sell part of his holding
42 The settlor of a trust is the person who:
A creates the trust
B witnesses the trust
C is entitled to the trust income
D is entitled to the trust capital
Introduction to Securities & Investment
43 Which of the following indices contains only the largest companies, by capitalisation, listed on
the London Stock Exchange?
A FTSE 100
B FTSE 250
C FTSE All Share
D FTSE Techmark
44 A coupon payment and redemption payment on a gilt are traded separately. What are these
normally called?
A Index-linked gilts
B Gilt strips
C Gilt repos
D Gilt reverse repos
45 What type of legal structure is an investment trust?
A Trust corporation
B Limited company
C Registered co-operation
D Mutual society
Introduction to Securities & Investment
46 What are UK Government issued interest bearing securities known as?
A Equities
B Bonds
C Gilts
D Swaps
47 Which of the following statements regarding Exchange-Traded Funds in the UK is TRUE? They are:
A priced at or near net asset value
B private limited companies
C traded through a market maker
D subject to UK stamp duty
48 The published spread of a unit trust price is the difference between which of the following?
A The cancellation and selling prices of the units
B The selling and buying prices of the units
C The offer and creation prices of the units
D The cancellation and creation prices of the units
Introduction to Securities & Investment
49 A bond that pays no interest but is issued at a significant discount to redemption value is
known as a:
A clean bond
B dirty bond
C short coupon bond
D zero coupon bond
50 Who is the legal owner of the unit trust assets?
A The depository
B The unitholders
C The manager
D The trustee
Introduction to Securities & Investment
Question Number Answer Syllabus Reference
1 C 2.1.1
2 C 4.1.2
3 C 4.1.12
4 C 9.2.1
5 A 2.1.3
6 B 3.2.2
7 C 4.1.6
8 D 6.1.1
9 C 4.1.8
10 D 9.1.1
11 A 7.2.1
12 D 10.2.2
13 C 1.1.2
14 C 8.1.3
15 D 10.1.1
16 C 6.3.1
17 D 8.4.1
18 A 3.2.2
19 A 4.1.5
20 C 5.4.2
21 A 3.4.1
22 A 10.3.1
23 D 10.2.2
24 C 10.3.2
25 C 6.3.2
26 A 7.5.1
27 C 3.4.1
28 A 3.3.1
29 D 2.1.6
30 A 1.1.3
31 B 8.2.3
32 B 4.1.11
33 D 8.5.2
34 A 7.7.1
35 C 8.5.1
36 B 9.3.1
37 C 7.3.2
38 A 1.1.2
39 C 7.5.2
40 A 8.4.1
41 A 4.1.6
42 A 9.4.2
43 A 4.1.10
44 B 5.2.1
45 B 7.5.1
46 C 5.2.1
47 A 7.6.1
48 B 7.4.1
49 D 5.3.1
50 D 7.2.2
