Professional Documents
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CY CMY
Published by:
Hong Kong Securities Institute
Hong Kong Securities Institute 2004
24/F, Wing On Centre, 111 Connaught Road Central, Hong Kong
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ISBN: 988-97716-3-2
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Disclaimer
This is an educational booklet only and does not provide legal advice or expert advice in whatsoever form.
Every effort has been made to ensure its accuracy, however, no responsibility for loss occasioned to any
person acting or refraining from action as a result of any materials in this publication will be accepted by the
publisher and/or individual contributors.
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Sample Questions
Question 3.
Which of the following is CORRECT about the process of intermediation?
I)
II)
Electronic intermediation improves efficiency, fairness and transparency of the flow of funds
in the financial system.
III)
IV)
Through intermediation, borrowers bear greater cost but lower risk in transactions.
Question 4.
Which of the following is NOT an example of government monetary policy to affect interest rates?
A
Buying and selling government securities in the interbank market via the central bank.
Adjusting its expenditure and taxation policy, thus affecting the supply of and demand for
funds.
II)
III)
IV)
Question 6.
To which of the following does credit risk MOST LIKELY refer?
A
Exposure to loss resulting from the inability to convert collateral to an equivalent cash value.
Exposure to loss due to the failure to comply with prescribed procedures and policies.
Sample Questions
Question 7.
Which of the following is NOT a PRIMARY objective of the Hong Kong Monetary Authority (HKMA)?
A
To act as a financial intermediary between buyers and sellers of retail managed funds.
To maintain a stable currency within the framework of the linked exchange rate system.
Question 8.
Which of the following requirements for the minimum paid-up capital and the original term to maturity
for deposits are applicable to deposit taking companies in Hong Kong?
A
A HKD150 million minimum paid-up capital and no restriction on original term to maturity.
A HKD25 million minimum paid-up capital and no restriction on original term to maturity.
A HKD150 million minimum paid-up capital and original term to maturity of no less than three
months.
A HKD25 million minimum paid-up capital and original term to maturity of no less than three
months.
Liquidity insurance.
Discount window.
Question 10.
Which of the following is MOST LIKELY to be classified as a direct control approach in monetary
policy?
A
Trading of government securities in the interbank market between the central bank and
licensed banks authorised to trade such securities by the government.
Sample Questions
Question 11.
Of which of the following organisations is the Hong Kong Futures Exchange (HKFE) a wholly owned
subsidiary?
A
Question 12.
Which of the following statements is CORRECT?
A
When the Hong Kong Monetary Authority (HKMA) sells USD to the currency board in return
for HKD, the supply of HKD in the financial system increases, thus decreasing the interest
rates of HKD.
When the HKMA sells USD to the currency board in return for HKD, the supply of HKD in the
financial system increases, thus increasing the interest rates of HKD.
When the HKMA sells USD to the currency board in return for HKD, the supply of HKD in the
financial system decreases, thus decreasing the interest rates of HKD.
When the HKMA purchases USD from the currency board with HKD, the supply of HKD in the
financial system increases, thus decreasing the interest rates of HKD.
Private placements.
Equity Charters.
Dividend reinvestment.
Question 14.
To which of the following does the Hong Kong Exchanges and Clearing Limiteds Pilot Programme of
May 2000 refer?
A
The commencement of the Dual Vetting System with the Securities and Futures Commission
(SFC) for listing applications.
Allowing certain NASDAQ and AMEX listed stocks to be listed on the Stock Exchange of
Hong Kong (SEHK) for trading purposes.
The establishment of the Growth Enterprise Market (GEM) as a wholly owned subsidiary of
the SEHK.
10
Sample Questions
Question 15.
Paul has 800 shares in Calfritz Ltd. before a 1 for 4 bonus issue is announced. If the shares were
traded at HKD2.00 immediately before the bonus issue, what is the price of Pauls shares immediately
after the bonus issue?
A
HKD1.20
HKD1.40
HKD1.60
HKD1.80
Question 16.
When is the par value of a share issued by a company determined?
A
It is determined 7 days after the share is first traded on the stock exchange.
It is determined when the market price of the share has reached the required minimum level.
It is determined when the statutory amount of transactions of the share on the stock
exchange has been reached.
11
The GEM serves as a contingency trading platform for the Main Board, and vice versa, in
the event of a severely crippling market disruption.
The Main Board is for professional investors whereas the GEM is for retail investors.
All IPOs are listed on the GEM for a probation period before they qualify for a Main Board
listing.
Sizable companies with proven profitability records are listed on the Main Board while the
GEM caters for smaller companies that do not qualify for a Main Board listing.
Question 18.
In 1998, the Hong Kong Government entered the market to stave off currency speculation during the
Asian financial crisis. As a result, which of the following happened?
A
The establishment of the Tracker Fund of Hong Kong (TraHK) to dispose of the shares
acquired by the Hong Kong Government.
The establishment of the Tracker Fund of Hong Kong (TraHK) to finance the operation of
tracking and pre-empting possible future attacks from international speculators.
The establishment of the Hang Seng Index Fund (HKIF) to dispose of the shares acquired by
the Hong Kong Government.
The establishment of the Hang Seng Index Fund (HKIF) to finance the operation of tracking
and pre-empting possible future attacks from international speculators.
12
Sample Questions
Question 19.
Calculate the total amount of a deposit of HKD8,000 after 2 years if invested at a compound interest
rate of 7% per annum, compounding quarterly.
A
HKD8,282.45
HKD9,159.20
HKD9,191.05
HKD13,745.49
Question 20.
In order to encourage retail investment and to develop a liquid and active debt market, which of the
following were listed on the Stock Exchange of Hong Kong (SEHK) by the Hong Kong Monetary
Authority (HKMA) in 1997?
A
13
Commercial Bills.
Question 22.
ABC Ltd. is hiring John, a licensed corporate finance professional, to assist the expansion of ABC.
Which of the following services are MOST LIKELY provided by John?
I)
II)
III)
IV)
14
Sample Questions
Question 23.
Debbie has just set up a new investment fund which is authorised by the Securities and Futures
Commission (SFC). The fund focuses on investing in high growth stocks. After implementing her
investment strategies, Debbie finds the following:
All cash raised has been allocated equally among 6 PRC concept companies
The stock prices of these 6 companies have increased by 150% in the past 2 years
The fund owns about 25% of the ordinary shares in 3 of the 6 companies
Debbies compliance officer finds that her fund is not in full compliance. Which of the following are
instances of mis-compliance of the fund?
I)
The number of investors investing in the fund has not yet reached the minimum required by
law.
II)
The allocation limit of the funds net asset value in a single companys securities has been
exceeded.
III)
The high growth rate of these companies indicates that Debbies investment strategy is too
risky for a managed fund.
IV)
The fund should not hold more than 10% of the ordinary shares of any one of these
companies.
15
Corporate financier.
Fund manager.
Stockbroker.
Question 25.
Which of the following are essential procedures involved in the process of creating a financial plan by
a retail financial planner?
I)
II)
III)
Provide margin financing for the client to implement stock investments according to the
financial plan.
IV)
Monitor and review the performance of the clients stock investments and revise investment
strategies as needed.
16
Sample Questions
Question 26.
Mr. Hung has inherited a large amount of wealth from his parents. He has decided to invest a portion
of his wealth in managed funds. Which of the following is NOT a valid reason for Mr. Hung to invest
in managed funds?
A
To have a tailor-made investment portfolio designed exclusively for him by a fund manager.
To gain access to markets which are not directly accessible to retail investors in the stock
market.
Question 27.
Which of the following statements is INCORRECT?
A
All companies engaging in dealing in securities and futures in Hong Kong must be licensed by
or registered with the Securities and Futures Commission (SFC).
Investors in a managed fund must be consulted before the investment manager executes his
investment strategies and decisions.
17
II)
III)
IV)
Exchanging your fixed interest payable for a counter-partys floating interest payable.
Question 29.
Jason is a fund manager and forecasts that the recent high inflation rate will induce the central bank
to post an interest rate hike. The portfolio he is currently managing has a weighting of 20% in
floating-rate debt securities, 40% in fixed-rate debt securities and 40% in equity securities. Based on
his forecast, which of the following actions would be MOST APPROPRIATE for Jason to take?
A
Inform the investors of his fund and seek their advice on the most suitable strategy.
Unwind his portfolio and wait for the appropriate time to invest the cash on hand in these
markets again with the same weighting.
Reduce his investment in both fixed-rate debt securities and equity securities while
increasing his investment in floating-rate debt securities.
18
Sample Questions
Question 30.
Which of the following statements is INCORRECT?
A
The Hong Kong Mortgage Corporation Limited (HKMC) is responsible for providing mortgage
services to homeowners in Hong Kong.
The Securities and Futures Commission (SFC) regulates all retail managed funds marketed in
Hong Kong.
The Hong Kong Monetary Authority (HKMA) supervises all authorised financial institutions in
Hong Kong.
Question 31.
Mason purchases 50,000 shares of XYZ Company and offers these shares to his broker as collateral
in order to borrow more funds with which to purchase additional shares. What is this securities
trading process called?
A
Mark-to-market.
Risk management.
Exposure netting.
19
Values of collateralised securities are recalculated to reflect the latest market value.
The transactions can only be settled when sufficient funds are received.
A contract between a buyer and a seller is novated by an exchange so that the exchange
becomes the counter-party for both the buyer and the seller.
Question 33.
Which of the following are the MAIN implications to be drawn from the case of Metallgesellschafts
failure in 1993?
I)
Senior management need to understand the nature of the companys investment tools and
strategies.
II)
Hedging tools should be carefully selected in order to match the companys underlying
exposure.
III)
Sufficient cash reserves should be in place if leveraged instruments are to be utilised in the
management of the companys portfolio.
IV)
20
Sample Questions
Question 34.
After John has purchased a portfolio of short-term debt securities, the prices of the debt securities
have dropped significantly due to a major increase in interest rates implemented by the government.
To which type of risk is Johns portfolio exposed?
A
Market risk.
Credit risk.
Strategic risk.
Operational risk.
Question 35.
When a note-issuing bank in Hong Kong issues Hong Kong Dollar notes, (i) with whom should it
deposit the equivalent amount of USD and (ii) what will the bank receive in return?
A
(i) the Federal Reserve of the United States; (ii) a negotiable certificate of deposit.
(i) the Hong Kong Monetary Authority (HKMA); (ii) a certificate of indebtedness.
(i) the Hong Kong Monetary Authority (HKMA); (ii) a promissory note.
21
A fund manager buys call options to minimise the impact of the expected short-term market
fluctuation on his portfolio.
II)
A trader purchases spot gold contracts and immediately transacts an opposite trade of an
equal amount in the futures market.
III)
A corporation redeems cash from a managed fund in order to increase the liquidity of its
pension portfolio.
IV)
Question 37.
Which of the following descriptions about derivatives is INCORRECT?
A
The HKFE Clearing Corporation Limited (HKCC) performs the settlement of contracts traded
through the Hong Kong Futures Automated Trading System (HKATS).
A Forward Rate Agreement (FRA) locks in the future borrowing and lending rate for the
contracted parties.
A futures contract has customised features and is contracted directly between the buyer and
the seller.
The exercise rights of an option always belong to the holder of the option.
22
Sample Questions
Question 38.
It is now December. Yuletide Limited expects to receive HKD100 million at the end of February for
sales of Christmas trees. The company plans to invest all receivables in fixed-interest securities.
However, it is expected that interest rates will fall in January. Which of the following is the MOST
APPROPRIATE strategy for Yuletide to adopt in order to guarantee the return of its future
investment at the current interest rate level?
A
Question 39.
Assuming that:
Spot GBP/USD:
GBP1.0000=USD1.5123
1.4890
1.5063
1.5183
1.5359
23
In order to operate an effective fixed exchange rate regime, XYZ may have difficulty
controlling its domestic interest rates.
II)
The central bank of XYZ may intervene in the currency market to stabilize and influence the
direction of its currency. XYZs exchange rate regime can be called a dirty floating-rate
regime.
III)
When there is a surplus of foreign currency in a local bank at the end of a business day, the
central bank of XYZ will buy foreign currency from that bank.
IV)
Net daily foreign currency positions are accumulated and settled on a monthly basis.
Question 41.
What is the nominal interest rate if interest is paid quarterly and the effective annual interest rate is
3.546%?
A
3.40%
3.45%
3.50%
3.51%
24
Sample Questions
Question 42.
PVC Corp is issuing a 2.5-year bond with a face value of HKD100 million and a coupon rate of 2.5%
payable semi-annually. Assuming that the yield-to-maturity of similar bonds is 2.5%, what is the fair
price of the bond issued by PVC?
A
HKD88 million
HKD100 million
HKD102 million
HKD106 million
Question 43.
What is a bond generally called when its coupon rate is set to vary against a predetermined
benchmark rate?
A
25
The market anticipates that interest rates will rise slightly in the near future.
Question 45.
While plotting the yield curves of selected debt securities of the same type, Paul finds that the yields
of short-term securities are generally higher than the yields of longer term securities. Which type of
yield curve does this situation illustrate?
A
26
Sample Questions
Question 46.
A credit card company pools its credit card receivables together and issues an asset-backed security
using those receivables as collateral. Which of the following BEST describes this situation?
I)
Issuance of this kind of asset-backed security indicates that the credit card company is in
serious financial difficulty.
II)
New funds are raised for the company through the issuance of this asset-backed security but
the principal and interest on the security must be repaid from the cash flows generated by
the credit card receivables.
III)
This kind of security is commonly known as commercial paper and is a typical way for a
corporation to finance its expansion or working capital needs.
IV)
The credit card company transforms its assets into marketable securities through
securitisation.
27
II)
III)
Trading of this bond is settled through the Real Time Gross Settlement System (RTGS) which
links the banks with Euroclear.
IV)
Investment in this bond is likely to enjoy an exemption from profits tax applicable in Hong
Kong.
I) only.
Question 48.
Which of the following are NOT COMMON characteristics of both rights issues and bonus issues?
I)
II)
III)
IV)
28
Sample Questions
Question 49.
Which of the following are INCORRECT?
I)
The Central Clearing and Settlement System (CCASS) is responsible for maintaining stock
accounts for stock exchange participants in Hong Kong.
II)
The Hong Kong Securities Clearing Company Limited (HKSCC) provides custodial and share
registrar services for stock exchange participants in Hong Kong.
III)
Employees stock options issued by the underlying company provide a guaranteed source of
equity finance for the issuer.
IV)
All securities traded on the Stock Exchange of Hong Kong (SEHK) are settled through the
CCASS on a T+2 basis.
Question 50.
After several years of economic recession, Country X is now facing a severe budget deficit. The
government of Country X decides to reduce government spending and to increase the income tax rate
in order to balance its budget. What is the LIKELY impact on the economy upon implementation of
this policy?
A
The economy will be worse off as the result of a contractionary fiscal policy.
The economy will be worse off as the result of a contractionary monetary policy.
29
Debentures.
Mortgage-backed securities.
Convertible notes.
Currency swaps.
Question 52.
Which of the following statement(s) is/are CORRECT?
I)
Under the Maastricht Treaty, the USD was pegged to gold at a fixed price of USD35 per
ounce.
II)
One of the main objectives of the Bretton Woods system was to establish a mechanism for
the reconstruction of Europe.
III)
The breakdown of the Bretton Woods system was due to severe budget deficits resulting
from the United Statesinvolvement in the Vietnam War in the 1970s.
IV)
Under the currency board system, for each Hong Kong dollar printed in Hong Kong, the note
issuing banks must deposit an equivalent amount of USD with the Central Currency Backup
Fund (CCBF) managed by the Hong Kong Monetary Authority (HKMA).
I) only.
30
Sample Questions
Question 53.
Why is a transaction in the derivatives market COMMONLY called a zero sum game?
A
Question 54.
Which of the following transactions DOES NOT involve a derivatives instrument?
A
A fund manager plans to reduce the risk of profit when disposing of his equity portfolio in 3
months. He enters into an equity forward agreement with an investment bank.
While buying back its debt securities from the market, a company issues a series of stock
options with different maturity dates to bondholders.
A trader buys 1,000 ounces of gold in the spot market and simultaneously sells futures
contracts of the equivalent amount to arbitrage the price differences.
A shareholder receives 3 new shares for every old share he holds as the result of a stock
split made by the relevant company.
31
Expected return
Standard deviation
5%
0.25
II
5%
0.30
III
8%
0.25
IV
8%
0.30
Which ONE of the stocks provides the BEST investment opportunities for a rational investor?
A
Stock I.
Stock II.
Stock III.
Stock IV.
Question 56.
Investment bank Faulty is reviewing a swap contract with Company A. After a senior management
review, it is found that the contract contains certain terms with no legal effect. Under the contract,
Faulty will be subject to significant exposure when interest rates move slightly. In addition, the shares
of Company B which have been offered to Faulty as collateral by Company A have been suspended
from trading by the stock exchange as the result of an accounting investigation. If Faulty executes
this contract with Company A, what risks is Faulty exposed to?
A
32
Sample Questions
Question 57.
Which of the following business practices is/are considered to be the result of PRUDENT corporate
governance?
I)
II)
III)
Stringent supervision and control by directors and senior management of the company.
IV)
Involvement of traders in settlement procedures to ensure that all transaction details are
accurate.
IV) only.
Question 58.
A fund manager analyses the performance of a portfolio under his management by using extreme
scenarios. Which type of test is the fund manager performing?
A
Value-at-Risk.
Stress testing.
33
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Answers
Question
Answer
Question
Answer
Question
Answer
21
41
22
42
23
43
24
44
25
45
26
46
27
47
28
48
29
49
10
30
50
11
31
51
12
32
52
13
33
53
14
34
54
15
35
55
16
36
56
17
37
57
18
38
58
19
39
59
20
40
60
36
Explanations
As shown in the demand/supply diagram, the supply and demand curves meet at the
equilibrium point.
Question 2
As shown in the flow of funds diagram, the household sector is mainly a lender of
funds in the economy.
Question 3
Question 4
Question 5
Question 6
Question 7
As a regulator, the Hong Kong Monetary Authority (HKMA) does not involve itself in
retail intermediation activities.
Question 8
Question 9
The particular arrangement operated by the HKMA involves entering into repurchase
agreements with local banks and is called the discount window. Intra-day short
coverage, Liquidity insurance and Foreign exchange relief are made-up terms.
Question 10
Imposing controls on interest rates for loans is one of the direct methods that a
government could use to affect the level of money supply.
Question 11
The Hong Kong Exchanges and Clearing Limited (HKEx) is the result of a merger in
March 2000 between the Stock Exchange of Hong Kong (SEHK), the Hong Kong
Futures Exchange (HKFE) and the Hong Kong Securities Clearing Company Limited
(HKSCC). HKEx became the holding company for these entities.
Question 12
According to the supply and demand theory, an increase in the supply of HKD to the
market will drive the interest rates of HKD downwards.
Question 13
B is a made-up term.
38
Explanations
Question 14
In May 2000, the HKEx entered into a Pilot Programme whereby a number of
securities listed on the National Association of Securities Dealers and Automatic
Quotations (NASDAQ) and the American Stock Exchange (AMEX) were also listed on
the SEHK. These securities do not constitute public offerings in Hong Kong. They
are listed on the SEHK for trading purposes only and are regulated by the SEHK
listing rules and Hong Kong laws. Securities included in the Pilot Programme
comprise exchange-traded funds (mutual funds) as well as shares.
Question 15
Question 16
The par value is an arbitrary amount per share determined at the time that a
company is incorporated.
Question 17
The GEM was established in 1999 by the SEHK to encourage the development of
companies in emerging and growth industries. The GEM enables listed companies,
which do not have established profitability records a prerequisite for listing on the
Main Board to raise funds publicly.
Question 18
In order to dispose of the shares acquired during the Asian financial crisis in 1998 in
an orderly manner, the Hong Kong government decided to set up the Tracker Fund to
sell off its shares gradually in 1999.
Question 19
Question 20
In 1997, the HKMA listed 57 EFN issues on the SEHK in order to encourage retail
investment and to develop a liquid and active debt market in Hong Kong.
Question 21
Unlike government debt (i.e. EFBs and EFNs), quasi-government debt (i.e. HKMC
Notes) and corporate paper (i.e. commercial bills and corporate bonds), Forward
Rate Agreements (FRA) are OTC products and are not settled and cleared through
the Central Money Markets Unit (CMU).
Question 22
39
800 shares
$1,600 = 800 $2.00
200 shares = 800 shares 4
1,000 shares = 800 + 200
$1.60 = $1,600 1,000
Question 24
Question 25
Question 26
Managed funds are so called because they are funds managed by professional
investment managers who manage the assets on a discretionary basis. Individuals
delegate the investment management of their money to professionals, who exercise
discretion as to how it should be invested.
Question 27
D: Managed funds are managed on a discretionary basis. The fund managers have
the discretion to change the asset allocation of funds according to
predetermined investment objectives set out in the investment prospectus.
Question 28
III) Managing receivables and inventory does not involve risk management while the
other 3 options focus on risk transfer, risk avoidance and risk retention.
Question 29
Question 30
Question 31
Question 32
40
Explanations
Question 33
Questionable derivatives practices and hedging strategies were the core reasons
behind Metallgesellschafts failure.
IV) concerns spreading risk by diversification of business, which is not of importance
to this particular case.
Question 34
Market risk refers to the potential for losses or gains as a result of market price
movements in financial securities. A loss has been incurred in Johns portfolio due to
a market change.
Question 35
As part of the operation of the Hong Kong Currency Board mechanism, note-issuing
banks deposit equivalent amounts of USD with the HKMA and obtain a certificate
of indebtedness in return.
Question 36
I)
II)
III)
IV)
Question 37
Question 38
Forward contracts that fix interest rates of future investments are called Forward
Rate Agreements (FRAs). The FRA will lock in the return of Yuletides planned
investment at the current interest rate level.
Question 39
1.5123 [1+(2.35%
1 + (3.95%
90
)]
360 = 1.5063
90
)
360
Question 40
In order for a fixed exchange rate system to operate effectively, the central banks
levels of foreign currency reserves and local currency will fluctuate on a daily basis.
Normally this creates difficulty in controlling domestic money supply and interest
rates. The central bank must always cover the daily shortfall or surplus of
currencies held by domestic banks.
Question 41
41
2.5%
= 1,250,000
2
Distractors C and D are made-up. The coupon payment on a floating rate coupon
bond will vary against a predetermined benchmark rate.
Question 44
The statement in the question reflects the fact that the bond is very close to a
risk-free security since the yield is just barely above that of the risk-free rate. The
closer the bond is to being risk-free, the higher the credit rating of the issuer.
Question 45
In a normal situation, yields increase in line with the term to maturity. The longer
the term to maturity, the greater the uncertainty and therefore the greater the risk.
Yields on long term securities therefore increase to reflect the greater risk for
investors. When short-term yields are higher than long-term yields on a yield curve,
and yields decrease with an increase in the term to maturity, this is referred to as
an inverse yield curve.
Normal positive yield curve
yield
yield
maturity
mat urit y
maturity
Question 46
Only II) and IV) are correct in relation to the scenario of securitisation.
Question 47
Question 48
The main difference between a rights issue and a bonus issue is that a bonus issue
is a free offer of new shares to shareholders based on the number of existing shares
held by each shareholder while a rights issue is normally subscribed by shareholders
at a price lower than the prevailing market price. Shareholders who do not exercise
their rights in a rights issue will have their holdings diluted.
42
Explanations
Question 49
III) Option holders do not necessarily exercise their rights; such options are
therefore not a reliable source of equity finance.
IV) US securities traded on the Hong Kong Stock Exchange in the Pilot Programme
are settled on a T+3 basis.
Question 50
Question 51
Convertible notes are hybrid securities. An investor can convert the notes into
shares or simply redeem them at maturity in the same way as other debt securities.
Question 52
Only II) and III) about the Bretton Woods Systems main objective and breakdown
are correct.
I) The Maastricht Treaty was concerned with the development of a timetable for
the transition towards European Monetary Union and the single currency for its
member states, the Euro.
IV) The Central Currency Backup Fund does not exist
Question 53
The buyer and the seller take two opposing views and only one side can be right,
the other side must lose.
Question 54
Forward agreements, stock options and gold futures are all derivatives instruments
but not stock splits.
Question 55
C is the choice of highest return and lowest standard deviation amongst the four
choices.
Question 56
Since the contract carries clauses with no legal effect, the enforceability of the
contract is in question, which constitutes a legal risk. Faulty also bears market risk
if there is any movement in interest rates. The suspension from trading of Company
Bs shares on the stock exchange will make it difficult for Faulty to convert
Company As collateral into liquid assets (e.g. cash) in the event of Company As
default, and this constitutes a liquidity risk for Faulty.
Question 57
Prudent corporate governance includes segregation of duties and functions and IV)
violates such good practice in as much as traders are involved in activities which
should be beyond their remit as in the case of Barings.
Question 58
43
Eurobonds are debt securities issued by companies in the foreign capital markets as
opposed to domestic debt securities issued in local markets. The term euro in this
context derives from the Latin term meaning external. Promissory notes, bankers
acceptances and negotiable certificates of deposit are short-term instruments
traded in the money markets, usually carrying maturities of up to one year.
Question 60
A bull market refers to the expectation of investors that the stock market is going
to rise and a bear market refers to the expectation of investors that the stock
market is going to fall.
44
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