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2CEXAM Mock Question

Licensing Examination Paper 12

14-Nov-17
14:54:08
1 In the future, the advantage of the market for funds in Hong Kong doesn't include: Topic 1

A Geographically close to the mainland China Chapter 1

B Strong and robust financial infrastructure Section

C Accurate and effective financial regulation, rules and financial professionals QID 822

D Lower tax rate than the average globe but higher than China Ans D Hot

Exp Local tax rate is not the main concern because fund is tended to invest in many other countries.
2 Effectively investors of managed funds delegate the investment management of their money to Topic 1
professionals, who exercicse their own discretion as to how it should be invested. So managed
funds are:
A trust investment. Chapter 1

B non-trust investment. Section

C discretionary investment. QID 813

D half-discretionary investment. Ans C Hot

Exp Effectively, individuals delegate the investment management of their money to professionals, who
exercise their own discretion as to how it should be invested.
3 __ is also called wholesale investor who has a larger investment amount and more complex Topic 1
investment goals.
A Institutional investor Chapter 1

B Retail investor Section

C Private customer QID 814

D Corporate customer Ans A Hot

Exp Institutional investors: in Hong Kong, the main such investors include banks, insurance
companies, fund managers and other financial institutions. They are called wholesale investor who
has a larger investment amount and more complex investment goals.
4 In the classification of managed fund market, large institutional investors like insurance companies Topic 1
and pension fund are classified:
A as retail market. Chapter 1

B as institutional customer market(wholesale market). Section

C between retail market and institutional customer market. QID 815

D as a kind of private customer investor. Ans B Hot

Exp In Hong Kong, the main institutional investors include banks, insurance companies, fund
managers and other financial institutions.

P.1
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provide are not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and
Investment Institute (HKSI) does not offer any HKSI Past Paper or HKSI Mock Paper for sale.
5 "Investment requirement is usually simpler than institutional investors, complexity of investment Topic 1
goal is lower, and there is no need of documentation of investment entrusted" Which kind of
investor/customer is it more likely to be?
A Institutional investor Chapter 1

B Retail investor Section

C Private customer QID 816

D Corporate customer Ans B Hot

Exp Retail/private investors: these are individuals invest on their own behalf.Their complexity of
investment goal is lower, and there is no need of documentation of investment entrusted since they
trade for themselve.
6 "They are natural person who has an investment amount lower than institutional investor but Topic 1
higher than retail investor" Which kind of investor/customer is it more likely to be?
A Start-up investors Chapter 1

B Wealthy investor Section

C Private customer QID 817

D Corporate customer Ans C Hot

Exp Private customer has an investment amount lower than institutional investor but higher than retail
investor.
7 Which of the following is not the major classification of managed fund? Topic 1

A Mutual trusted fund Chapter 1

B Mutual fund Section

C Umbrella funds QID 818

D Mandatory Provident Fund Ans A Hot

Exp In a competitive global market, many types of managed funds are offered, including unit trusts,
mutual funds, retirement or corporate funds and private equity funds. The management of all such
funds is called asset management.
8 Which of the following is the major classification of managed fund? Topic 1

A Private fund Chapter 1

B Hedge fund Section

C Private trust QID 819

D Unit fund Ans B Hot

Exp Hedge fund is the major classification of managed fund.

P.2
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provide are not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and
Investment Institute (HKSI) does not offer any HKSI Past Paper or HKSI Mock Paper for sale.
9 There is a huge increase in the market for managed fund in Hong Kong. Which of the following is Topic 1
not the main reason?
A Hong Kong continues to attract professionals in financial asset management. Chapter 1

B The introduction of QDII, CEPA, and RQFII Section

C Hong Kong is widely acknowledged as an international asset management center in Asia. QID 821

D Hong Kong's advantage of innovation in bond market Ans D Hot

Exp Hong Kong attracts fund managers for several reasons, including: its central location in Asia; clear
regulations on how to establish and become authorized in the local market, a just and equitable
legal system, the English language (mandatory for conducting international business) and
administration skills (needed to develop and maintain a viable operation); a simple and low-tax
regime; a window to mainland China (and its mass market); a world class and technologically
advanced communications system and telecommunication network; high liquidity in the local stock
market; a plentiful supply of professionals, such as accountants, lawyers and stockbrokers, to
support the fund management industry.
10 Which of the following is not the reason why offshore fund is popular? Topic 1

A Tax haven Chapter 1

B Lower regulation Section

C Close to large market QID 820

D Higher regulation Ans D Hot

Exp There are three reasons for their success: low taxes, less burdensome regulation and supervision,
and (in most cases) strict secrecy laws protecting bank clients.
11 Investors can be classified into which 2 of the following types? Topic 1
I. Individuals
II. Corporate
III. Institutions
IV. Private Clients
A I, III Chapter 1

B II, III Section 1

C II, IV QID 1982

D III, IV Ans A Hot

Exp
12 Generally demand curve is: Topic 1

A upward-sloping. Chapter 1

B downward-sloping. Section 1

C flat. QID 8

D wavy. Ans B Hot

Exp Generally, the higher the price for the item, the lower the quantity demanded for it will be, and
vice versa. Quantity demanded is therefore inversely related to price.Thus, demand curve is
generally shown as negatively sloped curve.

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provide are not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and
Investment Institute (HKSI) does not offer any HKSI Past Paper or HKSI Mock Paper for sale.
13 Which factor most likely determines the supply of goods and services? Topic 1

A Price of goods and services Chapter 1

B Production cost Section 1

C Distribution cost QID 9

D Supply and price of substitutes Ans A Hot

Exp The objective of the producer is to make a profit from the item. Hence, the most important factor,
from the producer’s perspective, is the price that can be obtained from selling the item.
14 Managed funds are: Topic 1

A indirect investments. Chapter 1

B semi-direct investment. Section 2

C direct investments. QID 810

D semi-indirect investments. Ans A Hot

Exp Managed funds are indirect investments known as collective, pooled or investment funds.
15 What are managed funds also known as? Topic 1
I. Collective Investments
II. Pooled Investments
III. Investment Funds
IV. Funds
A I, III Chapter 1

B II, IV Section 2

C II, III, IV QID 1983

D I, II, III, IV Ans D Hot

Exp
16 Kaohsiung company starts a collective investment scheme called "Garbage Dealing Fund" which is Topic 1
managed by a fund manager called Mr. Ye and mainly invests in foreign stocks. Many retail
investors buy "Garbage Dealing Fund" through banks. What kind of product is the "Garbage
Dealing Fund"?
A Sovereign fund Chapter 1

B Unit trust. Section 3

C Depository receipts QID 1165

D Fixed income securities Ans B Hot

Exp A unit trust refers to a collective investment scheme pooling money from individual investors,
with a large portfolio of securities managed according to pre-set investment objectives by
professional fund managers.

P.4
Website: www.2cexam.com Phone: 21109644
Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we
provide are not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and
Investment Institute (HKSI) does not offer any HKSI Past Paper or HKSI Mock Paper for sale.
17 Which of the following factor is not the reason why there is sharp increase in services of financial Topic 1
advisor?
A Aging population Chapter 1

B Large increase in saving Section 5.3

C Markets for finance and investments become more mature day by day. QID 698

D Global plunge in interest rate Ans D Hot

Exp In many countries, the aging of the post-World War II baby-boomers has driven the growth of the
financial advisory industry. This aging has been brought about by increased longevity in the
majority of developed world populations. This large segment of the population is more highly
educated and wealthier than preceding generations. The high average savings of such people
represent a larger percentage of the population than earlier or subsequent generations, and their
accumulated savings have stimulated demand for financial advisory services. The profession has
gained importance in recent years as the financial and investment markets have become
increasingly sophisticated.
18 Why are the needs of individual financial advisors getting bigger and bigger? Topic 1
I. Aging population in developed countries
II. Higher level of saving
III. The increased mobility of the labor force
IV. As the financial markets of investments becomes mature.
A I, II, III, IV Chapter 1

B I, II, IV Section 5.3

C I, III, IV QID 696

D II, III, IV Ans A Hot

Exp In many countries, the aging of the post-World War II baby-boomers has driven the growth of the
financial advisory industry. This aging has been brought about by increased longevity in the
majority of developed world populations. This large segment of the population is more highly
educated and wealthier than preceding generations. The high average savings of such people
represent a larger percentage of the population than earlier or subsequent generations, and their
accumulated savings have stimulated demand for financial advisory services.
19 Why is Hong Kong a popular place for fund management? Topic 1
I. Low tax rate
II. Have many professionals to back up
III. Transparent and sound rules
IV. It is the only place where investors in mainland China can invest overseas.
A I, II, III Chapter 1

B I, II, IV Section 5.3

C I, III, IV QID 679

D II, III, IV Ans A Hot

Exp With the globalization of investment activity, many independent fund managers have come to
Hong Kong. Hong Kong attracts fund managers for several reasons, including: (1) its central
location in Asia; (2) clear regulations on how to establish and become authorized in the local
market, a just and equitable legal system, the English language (mandatory for conducting
international business) and administration skills (needed to develop and maintain a viable
operation);
(3) a simple and low-tax regime; (4) a window to mainland China (and its mass market); (5) a
world class and technologically advanced communications system and telecommunication network;
(6) high liquidity in the local stock market; (7) a plentiful supply of professionals, such as
accountants, lawyers and stockbrokers, to support the fund management industry.

P.5
Website: www.2cexam.com Phone: 21109644
Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we
provide are not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and
Investment Institute (HKSI) does not offer any HKSI Past Paper or HKSI Mock Paper for sale.
20 Investing in managed fund has which of the following advantages? Topic 1
I. Have more investment opportunities than direct investment
II. Have professional services of investment management
III. Cost advantages with lower commission
IV. Focused investment to increase return
A I, II Chapter 1

B I, II, IV Section 7.1

C I, II, III QID 826

D II, IV Ans C Hot

Exp The key benefits of managed funds are (i) access to professional investment management services;
and (ii) diversification. Diversification is the ability to spread your assets across different asset
classes, sectors, countries or issuers of securities. A diversified portfolio aims to minimize risk by
offsetting losses from some securities with gains in others.
21 The advantages of investing in unit trusts or mutual funds include: Topic 1
I. Professional management
II. Various and diversified investment channels
III. Simple procedure
IV. Tax incentives
A I, II, III Chapter 1

B I, III, IV Section 7.1

C II, III, IV QID 1168

D I, II, III, IV Ans D Hot

Exp Individual investors benefit from professional management, diversification, a broader range of
opportunities, cost benefits, and convenience through managed funds.
22 The advantages of investing in unit trusts or mutual funds doesn't include: Topic 1

A Professional management Chapter 1

B Low custodian fees Section 7.1

C Various and diversified investment channels QID 1166

D Long investment periods Ans D Hot

Exp Having long investment periods is the disadvantage of investing in unit trusts or mutual funds. It
is because it is more risky.

P.6
Website: www.2cexam.com Phone: 21109644
Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we
provide are not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and
Investment Institute (HKSI) does not offer any HKSI Past Paper or HKSI Mock Paper for sale.
23 Why is investing in fund better than investing in stocks? Topic 1
I. Easy to diversify
II. Can invest in different markets
III. Cost reduction
IV. More easy to control investmnet directly
A I, II, III Chapter 1

B I, II, IV Section 7.1

C I, III, IV QID 703

D II, III, IV Ans A Hot

Exp The key benefits of managed funds are access to professional investment management services; and
diversification. Fund managers can also invest in a broader range of securities, and usually faster
and more cheaply, than individuals. Through managed funds, the investment range is broadened to
include overseas investments. In Hong Kong, this is particularly relevant as the majority of
authorized managed funds are based elsewhere, enabling the investor to choose the fund manager
with the best skill set and local knowledge in the market in which he wants to invest.

24 What is the advantage of investing in managed funds? Topic 1


I. Professional management
II. Risk diversification
III. Exempt from capital appreciation tax
IV. Higher returns than other investors for certain
A I, II Chapter 1

B I, III Section 7.1

C I, IV QID 492

D II, III Ans A Hot

Exp The key benefits of managed funds are (i) access to professional investment management services;
and (ii) diversification. Diversification is the ability to spread your assets across different asset
classes, sectors, countries or issuers of securities. A diversified portfolio aims to minimize risk by
offsetting losses from some securities with gains in others.
25 Which of the following fund does not violate the diversification rule in《Code on Unit Trusts and Topic 1
Mutual Funds》?
A Spring fund - invests in 15% of shares issued by company A equivalent to 50% of the fund's net Chapter 1
assets value
B Summer fund - invests in 15% of shares issued by company A equivalent to 5% of the fund's net Section 7.1
assets value
C Autumn fund - invests in 2% of shares issued by company A equivalent to 50% of the fund's net QID 825
assets value
D Winter fund - invests in 10% of shares issued by company A equivalent to 5% of the fund's net Ans D Hot
assets value
Exp The Securities and Futures Commission has set standards on diversification in Hong Kong. These
requirements are stated in the Code on Unit Trusts and Mutual Funds, and include: (1) A fund
cannot hold securities issued by a single issuer with value more than 10% of its total net assets
value. (2) A fund cannot hold more than 10% of the ordinary shares issued by a single issuer.

P.7
Website: www.2cexam.com Phone: 21109644
Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we
provide are not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and
Investment Institute (HKSI) does not offer any HKSI Past Paper or HKSI Mock Paper for sale.
26 Which of the following fund violates the diversification rule in《Code on Unit Trusts and Mutual Topic 1
Funds》?
I. Spring fund-invest 30% of the fund's net assets value in corporate bond of company A
II. Summer fund-invest 5% of the fund's net assets value in shares of company A
III. Autumn fund-invest 10% of the fund's net assets value in shares of company A and 5% of the
fund's net assets value in corporate bond of company A
IV. Winter fund-invest 10% of the fund's net assets value in shares of company A
A I, IV Chapter 1

B II, IV Section 7.1

C I, III QID 824

D II, III Ans C Hot

Exp The Securities and Futures Commission has set standards on diversification in Hong Kong. These
requirements are stated in the Code on Unit Trusts and Mutual Funds, and include : (1)A fund
cannot hold securities issued by a single issuer with value more than 10% of its total net assets
value. (2)A fund cannot hold more than 10% of the ordinary shares issued by a single issuer.
27 Investing in managed fund doesn't have which of the following advantages? Topic 1

A Higher return Chapter 1

B Technology Section 7.1

C Liquidity QID 827

D Convenience Ans A Hot

Exp Individuals, employers, institutions and companies are generally attracted to managed funds
because their money is handled by professionals who have the expertise to produce a higher return
for a given risk level than they would achieve themselves.
28 Why does Code on Unit Trusts and Mutual Funds prohibit funds from holding too much shares Topic 1
issued by a single issuer?
A To avoid fund managers manipulating the market Chapter 1

B The effect of diversification Section 7.1

C Because it is required by Securities and Futures Ordinance. QID 686

D To avoid liquidity risk Ans B Hot

Exp The Securities and Futures Commission has set standards on diversification in Hong Kong. These
requirements are stated in the Code on Unit Trusts and Mutual Funds.
29 A fund cannot hold more than how many percent of the ordinary shares issued by a single issuer. Topic 1

A 5% Chapter 1

B 10% Section 7.1

C 15% QID 685

D 20% Ans B Hot

Exp A fund cannot hold more than 10% of the ordinary shares issued by a single issuer.

P.8
Website: www.2cexam.com Phone: 21109644
Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we
provide are not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and
Investment Institute (HKSI) does not offer any HKSI Past Paper or HKSI Mock Paper for sale.
30 A fund cannot hold securities issued by a single issuer with value more than how many perecent of Topic 1
its total net assets value?
A 5% Chapter 1

B 10% Section 7.1

C 20% QID 684

D 25% Ans B Hot

Exp A fund cannot hold securities issued by a single issuer with value more than 10% of its total net
assets value.
31 Mr. Gao is an elderly retiree who knows little about investments. What is the more likely reason Topic 1
for Mr. Gao to invest in fund?
I. Increase investment opportunity
II. Diversification
III. Increase the control for investment
IV. Reduce the cost of investment
A I, III, IV Chapter 1

B I, II, III Section 7.1

C I, II, IV QID 683

D II, III, IV Ans C Hot

Exp The key benefits of managed funds are access to professional investment management services; and
diversification.Fund managers can also invest in a broader range of securities, and usually faster
and more cheaply, than individuals.Certain investment opportunities may only be available to large
investors, such as bonds and direct property. Through managed funds, small retail investors can
gain exposure to such assets.
32 Which of the following statement correctly describes the activities of asset management? Topic 1
I. A fund cannot hold securities issued by a single issuer with value more than 10% of its total net
assets value.
II. A fund cannot hold more than 10% of the ordinary shares issued by a single issuer.
III. A fund should manage its assets according to its target and strategy.
IV. A fund can be sold publicly in Hong Kong only if it is registered in Hong Kong.
A I, II, III Chapter 1

B I, II, IV Section 7.1

C I, III, IV QID 682

D II, III, IV Ans A Hot

Exp - A fund cannot hold securities issued by a single issuer with value more than 10% of its total net
assets value.
- A fund cannot hold more than 10% of the ordinary shares issued by a single issuer.
Investments in a particular fund will be made in line with the fund’s investment objective and
strategy.

P.9
Website: www.2cexam.com Phone: 21109644
Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we
provide are not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and
Investment Institute (HKSI) does not offer any HKSI Past Paper or HKSI Mock Paper for sale.
33 Through managed fund, investors can: Topic 1
I. achieve higher return than direct investment for sure.
II. delegate their investment management to professionals
III. pool their money to invest with other investors of similar goals.
IV. have more investment opportunity than direct investment.
A I, III Chapter 1

B II, IV Section 7.1

C II, III, IV QID 823

D I, II, III, IV Ans C Hot

Exp Managed funds are indirect investments known as collective, pooled or investment funds. Managed
funds allow individual investors to pool their money with other investors who have similar
investment goals. Investment professionals invest this pool of money in assets such as equities,
fixed interest, real estate and/or cash. Investments in a particular fund will be made in line with the
fund’s investment objective and strategy. Also, investors can invest in managed funds offering a
wide scope of securities with a low minimum investment.
34 Why is collective investment schemes more popular to investors? Topic 1
I. It is managed by group of professionals.
II. Costs reduction
III. Increase investment opportunities
IV. Diversification
A I, II, III Chapter 1

B II, III, IV Section 7.1

C I, III, IV QID 680

D I, II, III, IV Ans D Hot

Exp The key benefits of managed funds are access to professional investment management services; and
diversification.Fund managers can also invest in a broader range of securities, and usually faster
and more cheaply, than individuals.Certain investment opportunities may only be available to large
investors, such as bonds and direct property. Through managed funds, small retail investors can
gain exposure to such assets.
35 The disadvantages of investing in unit trusts or mutual funds doesn't include: Topic 1

A Investors don't have control over what to invest. Chapter 1

B Investors have to continuously pay management fees. Section 7.2

C Various and diversified investment channels QID 1167

D Long investment periods Ans C Hot

Exp Having various and diversified investment channels is the advantage of investing in unit trusts or
mutual funds because the investment risk can be diversified.

P.10
Website: www.2cexam.com Phone: 21109644
Please be reminded our company has no relationship with the Hong Kong Securities and Investment Institute (HKSI). The study materials we
provide are not related to the Hong Kong Securities and Investment Institute (HKSI) in any manner. The Hong Kong Securities and
Investment Institute (HKSI) does not offer any HKSI Past Paper or HKSI Mock Paper for sale.