QUESTION: 13

A UK investor holds a portfolio of overseas equities and is concerned about the exchange rate risk. Which strategy could he use to mitigate this risk?

Arbitrage
Gearing
Hedging
Pound cost averaging

Answer(s): C

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QUESTION: 14

When constructing a portfolio for a UK resident basic-rate taxpayer who requires an income, the most tax efficient solution would be achieved by:

Only investing in offshore products
Holding fixed-interest funds within a stocks and shares ISA
Purchasing National Savings & Investments (NS&I) Fixed-Interest Savings Certificates
Holding high-yielding equities within a stocks and shares ISA

Answer(s): B

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QUESTION: 15

The principal reasons for using the Sharpe ratio when calculating a portfolio's performance are:

It indicates the percentage return above/below the risk-free rate for each unit of risk taken
It will always be quoted on a rolling quarterly basis
A positive Sharpe ratio will always guarantee positive returns
The higher the number, the more a portfolio manager can be said to have added value

Answer(s): A,D

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QUESTION: 16

Pauline, a basic-rate taxpayer, has a portfolio which comprises of various equity and fixed-interest unit trusts and OEICs. She should be aware that:

Any losses from this portfolio are allowable for Capital Gains Tax calculations
Her entire portfolio will be subject to a 10% tax credit
Only the proceeds of sale from the OEICs could be subject to Capital Gains Tax
The taxation of dividends on the OEICs held will be treated the same way as the unit trusts
She can never reclaim any tax deducted at source

Answer(s): A,D

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Free CTFA Exam Braindumps (page: 4)

QUESTION: 13

QUESTION: 14

QUESTION: 15

QUESTION: 16