When an investment manager manages and makes changes to a portfolio without referring to the client, this is known as:
Answer(s): C
Discretionary management allows an investment manager to make decisions and changes to a client's portfolio without prior consultation. The manager has full authority to buy and sell investments on the client's behalf within the agreed mandate.
Stablecoins were introduced to overcome the volatility issues associated with speculative cryptocurrencies. Many hold treasury securities and commercial paper as their reserves. What is the greatest concern in relation to this?
Answer(s): B
The greatest concern with stablecoins holding large amounts of treasury securities and commercial paper is that if these assets had to be liquidated rapidly, it could trigger serious liquidity issues and potential contagion in credit markets. This systemic risk arises because stablecoins could destabilize financial markets if redemption pressures force mass asset sales.
If someone in a fiduciary position has personal or professional interests that compete with their duty to act in the client's best interest, this is called:
Answer(s): D
A conflict of interest arises when someone in a fiduciary position has personal or professional interests that may interfere with their obligation to act solely in the best interest of the client. Managing such conflicts is essential to maintain trust and regulatory compliance.
Which of the following types of fund is able to cancel units?
An open-ended fund can create or cancel units in response to investor demand. This structure allows the fund to expand or contract in size as investors buy or redeem units, keeping the unit price closely aligned with the net asset value (NAV).
How does the inclusion of a bond fund within a portfolio provide benefits over direct investing?
Including a bond fund in a portfolio allows for diversification, as the fund holds a wide range of bonds across issuers, sectors, and maturities. This level of diversification would be difficult and costly for an individual investor to achieve through direct bond purchases.
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