SDIA Professional Program = Professional Diploma in Securities & Derivatives
The SDIA Professional Program is replacing the SDIA Accreditation Program. Final enrolments for the SDIA Accreditation Program close 30 September 2008.
Exemptions will be given to those who have already completed the SDIA Accreditation Program, the ASX ADA 1 exam, and the SDIA/RMIT Superannuation Module.
The SDIA Professional Program is delivered in partnership between SDIA and DeakinPrime, the corporate education arm of Deakin University.
Further information on program structure, fees and assessment details can be found on the Professional Program section of the website. Please click here or contact the SDIA on 02 8080 3200.
To prepare yourself for the SDIA Accreditation Program exam,
click here to register for the SDIA Accreditation Preparation Workshop.
Questions
1. Two shares are said to be positively correlated if the prices for each:
(a) fall at the same time
(b) move against the All Ordinaries Index
(c) move in opposite directions at the same time
(d) remain static
2. To be in a fiduciary relationship means that you:
(a) Are merely providing facts and not giving advice
(b) Are acting as an agent on behalf of the client
(c) Cannot be a market-maker
(d) Are authorised to deal only with wholesale clients
3. If your client wishes to 'do a strangle' and seeks your advice, what matters must be seen to before the order is placed?
(a) you must be ASX Derivative Level 1 qualified to take the order
(b) you must be ASX Derivative Level 2 qualified to take the order
(c) the client must be on CHESS
(d) the client must lodge security with the OCH
4. The ASX Market Rule requirement to maintain an orderly market is contravened when:
(a) A large buy order is entered at a price far below the current market price of the security
(b) There is no attempt to manipulate prices
(c) Designated Trading Representatives attempt to cancel any obvious errors they made when entering orders
(d) Both (a) and (c)
5. The ACCC has a significant impact on share price movements and ASX market activity because of its:
(a) Regulation of brokers' anti-competitive retail client trade practices
(b) Prices surveillance authority
(c) Allowing or disallowing of mergers and takeovers of companies listed on ASX
(d) Cooperation with ASIC in the regulation of derivative contracts
6. An investor would most likely switch to high-beta shares in order to:
(a) benefit most from an expected market price rise
(b) receive more franked dividends
(c) achieve contrarian gains
(d) reduce systemic risk
7. In regard to a rights issue, 'renounceable' means:
(a) an investor can choose whether to take up and pay for the new shares offered, or sell the rights
(b) the company renounces the obligation to pay preference shareholders
(c) rights can never be traded on ASX
(d) any new shares will be a different class to those listed on the ASX
8. Investment risk is most appropriately defined as the risk of:
(a) one's financial objectives changing
(b) one's investment return falling below market
(c) not achieving one's long-term financial goals
(d) losing money on a portion of the portfolio
9. With regard to the relationship between standard deviation of returns and returns for investments, which statement is most reasonable?
(a) As expected returns increase, the standard deviation of returns increases.
(b) As expected returns increase, the standard deviation of returns falls.
(c) A standard deviation of 0 per cent guarantees a zero expected return.
(d) There is no discernible relationship between expected return and standard deviation.
10. Jack, your client, is a keen and active investor on the stock market, with a diversified share portfolio. He likes to play the market with a portion of his shareholdings. Fearing a market downturn, Jack seeks your advice. What type of shares would you recommend in order to rebalance his portfolio?
(a) high beta shares
(b) growth shares
(c) 'blue chip' stocks
(d) low beta shares
11. Your client's funds are held at call in a cash management trust. It is thought that interest rates in the international and Australian economies will rise. Your client seeks your advice how best to lock in the rate movement. Which is the most appropriate action for this risk-averse investor?
(a) Buy long bonds immediately (before the rate rise).
(b) Switch into shares now, then switch into long bonds once rates have risen.
(c) Remain in the cash management trust until rates move up, then start buying longer dated fixed-interest securities.
(d) Buy US dollars.
12. Preference shares are more secure than ordinary shares because:
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I
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institutional investors have a preference for them |
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II |
the securities usually offer a dividend yield higher than the dividend yield on the ordinary shares |
|
III |
they rank ahead of ordinary shares if the company is wound up |
|
IV |
the rate of dividend is fixed |
(a) I and II only
(b) III and IV only
(c) II, III and IV only
(d) I, II, III and IV
13. What is the main difference between a bonus issue and a rights issue:
(a) a rights issue may only need to be partly paid for by the shareholder, but a bonus issue must be fully paid for by the shareholder
(b) a rights issue must be paid for, whereas bonus issues are given to existing shareholders for free
(c) a rights issue provides shareholders with a fixed dividend, whereas the dividend on bonus issues is variable
(d) a rights issue may be purchased on lay-by, whereas bonus issues must be paid for up front.
14. From an investor's point of view, listed property trusts are mostly preferred to unlisted property trusts because:
(a) returns are generally higher in any one year
(b) they are generally more diversified
(c) the unit price is determined by the market and not the trust manager
(d) there is less risk
15. Many corporate bonds are actually unsecured notes because:
(a) They are a form of debenture issued by companies
(b) The coupons are paid quarterly in arrears
(c) Repayment of the capital amount is not secured by company assets
(d) Both (a) and (c)
16. The liquidity of shares in a particular company may fall if:
(a) An issue of new shares increases turnover as a percentage of total capitalisation
(b) A takeover bid for the company is disallowed by ACCC
(c) The company is replaced by another company in the S&P / ASX 200 index
(d) Both (b) and (c)
17. Which of the following statements concerning the benefits of an exchange-traded option are true?
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I |
Buying a call option will benefit investors if the price of the underlying security rises without them having to own the security itself. |
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II |
Buying a call option will benefit investors if the price of the underlying security they own falls, in which case they receive a refund of premium. |
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III |
Buying a put option will benefit investors if the price of the underlying security they own falls.
|
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IV |
Buying a put option will benefit investors if the price of the underlying security rises. |
(a) II and IV only
(b) I and III only
(c) II and III only
(d) I and IV only
18. Which one of the following is not an advantage of warrants over exchange-traded options?
(a) There are a greater range of warrant types.
(b) Warrants can be longer dated than options.
(c) Warrants are generally more liquid than options.
(d) Some warrant types are self funding.
19. Your stockbroking firm is contacted by an existing client who is considering dealing in warrants. Your firm in the first instance must forward to the client:
(a) a copy of the ASX 'Warrants' booklet and warrant agreement
(b) a list of all warrants traded on the ASX
(c) a statement of the client's financial position
(d) a bank guarantee
20. The liquidity of any particular issue of warrants is most affected by:
(a) The level of warrants issued in the market
(b) Whether the market maker for the warrants is active
(c) The bid offer price spreads for the warrants
(d) The size of the issue relative to other similar issues in the underlying security
21. Which one of the following is a key objective of the RBA?
(a) maintaining unemployment levels no higher than 10 per cent
(b) maintaining the dollar's exchange rate
(c) maintaining zero growth in GDP
(d) maintaining a low inflation environment
22. What does 'TWI' stand for?
(a) telecommunications weekly indicator
(b) Taiwan world index
(c) trade-weighted index
(d) traders wholesale index
23. Which of the following are leading economic indicators?
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I |
consumer confidence |
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II |
job vacancies |
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III |
new motor vehicle registrations |
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IV |
housing starts |
(a) II and IV only
(b) II and III only
(c) I, II and III only
(d) I, II, III and IV
24. Any current account deficit:
(a) Is included in the balance of payments (BOP)
(b) Reduces the gross domestic product (GDP)
(c) Is likely to improve if the Australian dollar falls and exports become more competitive
(d) Both (a) and (c)
25. What are the steps in the investment process?
(a) security analysis and selection; outlook and strategy formation; asset allocation; portfolio management
(b) outlook and strategy formation; asset allocation; security analysis and selection; portfolio management
(c) asset allocation; security analysis and selection; outlook and strategy formation; portfolio management
(d) outlook and strategy formation; security analysis and selection; asset allocation; portfolio management
26. A low PE may indicate:
(a) an expectation of low growth or lower profit
(b) the market expects an immediate reduction in sales
(c) the company is about to announce increased earnings
(d) the company debt ratios are critical
27. Which of the following is not a liquidity ratio?
(a) quick ratio
(b) current ratio
(c) debt to equity ratio
(d) debt to cash flow ratio
28. The price earnings (PE) ratio is calculated by:
(a) market price divided by EPS
(b) EPS divided by number of shares on issue
(c) market price divided by DPS
(d) DPS multiplied by shares on issue
29. 'Value companies' are companies that:
(a) Can offer value to their customers because of their competitive position
(b) Are trading at a share price that does not reflect the full value of their assets
(c) Have the potential for superior growth in earnings per share
(d) Stand to benefit from the current stage of the business cycle
30. A company may change from being a growth company to being a cyclical company because:
(a) A reduction in trade barriers exposes them to world economic activity
(b) Low inflation and price cutting increases their earnings per share
(c) There is consistent demand for their products and services during recessions
(d) High exchange rates
31. Which one of the following questions is correct regarding capital losses on the sale of shares?
(a) Residual capital losses cannot be used to offset capital gains in any one year.
(b) Residual capital losses can be used to offset assessable income in any one year.
(c) Residual capital losses can be carried forward to the following year to offset capital gains in that year.
(d) Residual capital gains can be carried forward until a year of capital loss.
32. Excess dividend franking credits are:
(a) lost forever
(b) returned to the taxpayer if refund requested
(c) carried forward to next year
(d) used by the Government for consolidated revenue
33. GST is imposed on:
(a) the purchase of shares
(b) the sale of shares
(c) brokerage fees
(d) net capital gains from share trading
34. Your client wants to purchase $30,000 worth of shares on behalf of his self-managed superannuation fund and claim the full amount as a concessionally taxed superannuation contribution. This would reduce his income tax liability for the year. This is possible only if he:
(a) Intends to hold the shares for at least 12 months
(b) Is the deemed retirement age for his birth year or older
(c) Is 35 years old or older
(d) Has not made any other concessionally taxed contributions to the fund during the year
35. Which of the following is a good reason for an investor to purchase shares on behalf of a self-managed superannuation fund, rather than purchase them directly as an individual taxpayer?
(a) His age-based limit for concessionally taxed superannuation contributions is greater than the purchase price of the shares
(b) His personal franking credit offset entitlement for the year is less than $5,000
(c) His personal marginal tax rate is 47 per cent
(d) He is self-employed
36. Under the Corporations Act, a financial services guide for a broking service need not include information on:
(a) the nature of the services or products being offered
(b) the charges and other amounts payable to the broking firm
(c) a general discussion of risks of investing in listed securities
(d) complaint procedures
37. In accordance with ASX Market Rules, all order records to buy and sell shares must include which one of the following?
(a) brokerage rates
(b) both the person (client) giving and person (at the broking firm) receiving the order
(c) the firm's research recommendation on the stock
(d) settlement details
38. In general terms, the minimum holding period to enable an investor to claim a dividend imputation credit from a dividend paid on a preference share is:
(a) one calendar month
(b) 45 days
(c) 60 days
(d) 90 days
39. When must you provide a financial services guide to the client:
(a) must occur at the earliest practicable opportunity
(b) must take place within seven days after the trade if only execution-related telephone advice
(c) must take place within five days after the trade following telephone advice (ASG was 3 days.)
(d) is not mandated provided that information is conveyed to the client verbally
40. Which of the following steps may be taken by your broking firm where a client fails to deliver stock that you have sold for him/her?
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I |
Buy back the securities to cover the client's obligation |
|
II |
Contact the buying broker and recommend they take the matter to ASIC.
|
|
III |
Terminate the client's account and report him to the Stockbrokers' Mutual Reference Society. |
|
IV |
Report the matter to the Securities Clearing House. |
(a) I and III only
(b) II and IV only
(c) I, III and IV only
(d) I, II, III and IV
41. To operate a managed discretionary account for a client which of the following must be compiled with:
(a) the client must sign a managed discretionary account agreement
(b) the client must pay full rates of brokerage
(c) the client must have a CMT account
(d) the client must receive all relevant research reports
42. Subject to certain conditions being met, it is not necessary to provide a statement of advice (SOA) when:
(a) You are providing a new client with personal advice on trading strategies
(b) You are providing a warning about the limitations of your advice to a client who has not revealed sufficient personal information
(c) You are providing further market-related advice (FMRA - now further advice)
(d) You are executing orders for a client's managed discretionary account
43. As an adviser, the disclosure of interests rules require that in all cases you should disclose to a client:
(a) Your own substantial holding of any of securities you are recommending to a client
(b) Any holding of ASX200 shares being recommended
(c) Relevant holdings by the adviser, but only if you are providing the advice in writing, not verbally
(d) Your own holding of any securities being recommended no matter how large
44. Under ASX Market Rules, key requirements to short sell securities include:
(a) any stock can be short sold
(b) the number of shares to be no more than 50% of the total number of approved securities
(c) the seller to provide a margin cover of 10% of the contract consideration before making the sale
(d) the settlement date to be no later than 10 days of the date of sale
45. The Corporations Act carefully defines 'insider trading'. For the purposes of the Act, which of the following could be deemed an 'insider'?
(a) a person working for a broking firm's corporate advisory department
(b) a person that has no connection with the company, but is in possession of the insider information
(c) the spouse of a person who is in possession of inside information
(d) all the above
46. One of your clients calls. You know he has a substantial holding in ABC. He asks you to place three separate orders to buy XYZ at a range of different prices above the last sale price. The least appropriate action on your part would be to:
(a) refer the matter to the firm's compliance officer before considering placing the orders
(b) ascertain with the client if there is a legitimate commercial reason for the orders to be placed
(c) confirm, and clearly note, the instructions on the order form, then place the orders immediately on market
(d) determine whether the orders would have an influence on the market price of ABC shares
47. 'Unconscionable' conduct includes:
(a) putting the interests of yourself or the firm before the interests of the client
(b) making false and misleading statements with regard to investment performance
(c) fraudulently inducing a person to deal
(d) participating in insider trading
48. With respect to the securities dealings of representatives on their own account:
| |
I |
all trades must be approved by a senior executive or nominee of their broking firm |
|
II |
representatives cannot receive credit from their own firm for the purposes of buying or subscribing for securities |
|
III |
representatives cannot jointly buy or subscribe for securities with the firm of the firm |
|
IV |
all trades must be transacted at market |
(a) II and III only
(b) I and IV only
(c) I, II and III only
(d) I, II, III and IV
49. Which of the following best describes the conduct prohibited under the Corporations Act as "false trading"?
(a) Disseminating false information about some shares that is likely to induce others to buy them
(b) Creating an appearance of active trading in shares by buying and selling the shares between associates at approximately the same price
(c) Transactions that have the effect of increasing or stabilising the price of some shares with the intent of inducing others to buy them
(d) Placing entries on 'chat room' investment forums that a certain share is going up, when you have no reason to believe that they will
50. Manipulative trading, including false trading and market rigging, often involves:
(a) Transactions where there is no change in beneficial ownership
(b) Transactions for the purposes of money laundering
(c) Selling when the price rises, and buying when the price falls'
(d) Transactions for the purposes of tax evasion
Answers