Question 1

A firm acting as agent makes money by:

Options :

A : Profiting from the spread

B : Providing advice

C : Charging their client a commission

D : Trading against its own order book

Answer: C

Question 2

Which of the following underlies the pillars of risk tolerance?

Options :

A : Psychological traits

B : Sociological traits

C : Education

D : Experience

Answer: A

Question 3

According to Modern Portfolio Theory (MPT), portfolios below the efficient frontier are not efficient because:

Options :

A : They attract additional charges

B : Risk-free assets are not profitable

C : The investor assumes proportionately higher risk for lower incremental returns

D : A greater return could be achieved for the same risk

Answer: D

Question 4

Having prepared recommendations via a report, why would an adviser suggest a face-to-face meeting with their client?

Options :

A : In order to collect fees prior to implementation of the recommendations

B : To establish the client’s tax position

C : So that the client can review the adviser’s qualifications

D : To afford the opportunity to clear up any misunderstandings

Answer: D

Question 5

How does standard deviation provide investors with a measure of historical volatility?

Options :

A : By the analysis of historical share price movements

B : Through the measurement of the highs and lows of each asset

C : By measuring the degree of fluctuation around the mean

D : Through the measurement of share price movements compared to the benchmark

Answer: C

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