Financial Services
Practice Exam
Course Introduction
Financial Services introduces students to the broad landscape of financial institutions, products, and markets that drive the global economy. This course examines the functions and operations of banks, insurance companies, investment firms, and other financial intermediaries, exploring topics such as lending, asset management, risk assessment, regulatory frameworks, and technological innovations. Through real-world examples and case studies, students gain a foundational understanding of how financial services impact individuals, businesses, and the economy as a whole, while also learning about ethical considerations and emerging trends in the industry.
Recommended Textbook
Financial Planning 2nd Edition by Warren McKeown
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15 Chapters
443 Verified Questions
443 Flashcards
Source URL: https://quizplus.com/study-set/3555
Page 2
Chapter 1: Personal Financial Planning
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70601
Sample Questions
Q1) The currency risk effects from holding an investment valued in an overseas currency will result in:
A) a rise in the Australian dollar value of the investment if the Australian dollar falls relative to the overseas currency
B) a rise in the Australian dollar value of the investment if the Australian dollar rises relative to the overseas currency
C) a fall in the Australian dollar value of the investment if the Australian dollar rises relative to the overseas currency
D) both a and c
Answer: D
Q2) A financial service is defined by the Corporations Act to be provided in the circumstances where people:
A) give financial advice in relation to financial products
B) give legal advice in relation to financial products
C) make a market in a financial product
D) both a and c
Answer: D
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Chapter 2: Financial Planning Skills
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31 Verified Questions
31 Flashcards
Source URL: https://quizplus.com/quiz/70600
Sample Questions
Q1) Outline circumstances where the NPV form of investment analysis is preferred to using the IRR method.
Answer: Where there is more than one sign change in the periodic cash flows (inflows and outflows) for an investment proposal the NPV form of investment analysis is preferred to using the IRR. This is because given the nature of the IRR calculation more than one IRR value can be calculated where multiple cash flow sign changes occur. As only a single NPV will be calculated regardless of the presence of multiple cash flow sign changes, this method will be preferred in these circumstances.
Q2) The NPV of an investment requiring an initial outlay of $10,000 at a discount rate of 6% which provides end-of-year cash flows of; year 1 - $3,000 (inflow), year 2 - $11,000 (inflow), year 3 - $1,500 (outflow) and year 4 - $7,000 (inflow) will be approximately:
A) $6,163.
B) $6,905.
C) $9,424.
D) $19,500.
Answer: B
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Chapter 3: Taxation Planning
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26 Verified Questions
26 Flashcards
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Sample Questions
Q1) Examples of income tax offsets in Australia include:
A) subscriptions to professional journals.
B) imputation or franked credits.
C) interest on loans used for investment purposes.
D) all of the above.
Answer: B
Q2) The term(s) used to describe an employee taking a lower cash salary in lieu of other non- cash benefits include(s):
A) salary packaging.
B) salary sacrificing.
C) both a and b
D) none of the above.
Answer: C
Q3) Which of the following are not tax deductible expenses?
A) Expenses of a domestic nature.
B) Expenses of a capital nature.
C) Expenses incurred in earning exempt income.
D) All of the above.
Answer: D
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Page 5
Chapter 4: Investment Choices
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) The relative investment performance of the major asset classes in the last 10 and 20 years as included in the text shows:
A) Australian shares to have underperformed listed property.
B) Australian bonds to have underperformed listed property.
C) hedged international shares to have outperformed unhedged international shares.
D) all of the above.
Q2) Describe how investor behaviour can challenge the assumption that investors are rational.
Q3) The importance of the efficient frontier lies in the fact that it:
A) identifies where the most efficient portfolios are.
B) is a curve and shows how diversification lets investors improve their efficient risk / return ratio.
C) represents the optimal mix of return and risk for a portfolio of investments given a required level of risk.
D) all of the above.
Q4) Briefly explain the effect of a multiple asset class portfolio as reported by Gibson (2000).
Q5) How does diversification reduce risk?
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Chapter 5: Direct Investment Fixed Interest and Shares
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) Outline the primary differences between ordinary and preference shares.
Q2) The ASX Trade platform facilitates share trading in Australia based on:
A) time-price priority.
B) price-volume priority.
C) price-time priority.
D) none of the above.
Q3) Examples of market risk factors include:
A) an oil spill by an exploration company resulting in a large fine.
B) the death of a key director of a company.
C) safety concerns leading to union activities undertaken in a particular industry.
D) none of the above.
Q4) The electronic transfer and settlement system for representing share ownership in Australia is referred to as:
A) CHECKERS.
B) CARDS.
C) CHESS.
D) SFE.
Q5) What characteristics are typically associated with ethical investments?
Q6) Outline the general characteristics of the Securities Market Line (SML).
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Chapter 6: Direct Investment - Property
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) a) Given the following information, calculate the net tangible asset (NTA) price per unit of the "Futuristic Office Property Fund" which is an A-REIT.
Market value of property held by the fund is $80,000,000; the mortgage owed to lenders is $50,000,000; and the number of units issued to the public is 20,000,000.
b) The market price of the fund is currently trading at a discount of 10% to the answer derived in part a) of this question. Calculate this market price and discuss why a price different to the NTA may occur for an A-REIT.
Q2) Outline the taxation advantages of investing in a property trust.
Q3) Imagine you are having a discussion with a friend about investment in property. Your friend favours a direct form of investment because of the costs involved with a property fund but would like to know the benefits of investing in a property fund. Provide an outline of these benefits.
Q4) As compared to an A-REIT, an unlisted property trust is likely to:
A) be smaller in size holding less properties. B) have relatively more debt as a proportion of the total trust assets. C) both a and D) both a and b
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8
Chapter 7: Managed Funds
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Calculate the absolute return on a pre-tax and after-tax basis for Alicia Mallyon's current investment of 250 units in the Viber Commodities Fund ("Viber ") assuming it was sold after one year based on the information below: \(\begin{array} { l r }
\text { Unit price at start of year (purchase date) } & \$ 3.14 \\ \text { Unit price at end of year (sale date) } & \$ 3.96 \\ \text { Marginal tax rate on taxable capital gain } & 15 \% \end{array}\)
Q2) The indirect cost ratio (ICR):
A) measures management costs not deducted directly from investors' account balances to the average net assets of the fund. B) measures the average net assets of the fund divided by the management costs deducted directly from investors' account balances. C) approximates current performance bonuses. D) all of the above.
Q3) Briefly explain the reasons why the unit price of an unlisted managed fund is likely to change on a regular basis.
Q4) Briefly differentiate active and passive fund management styles.
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Page 9
Chapter 8: Leveraged Investments
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) An option:
A) is an agreement to trade something in the future, either to buy or to sell a specific amount of a specific asset
B) is an agreement that gives the buyer (holder) of the option the right but not the obligation to buy or sell something in the future at a fixed price
C) is an agreement that gives the holder the right to buy or sell the underlying asset, so, as with all investment assets, the investor wishes to be long if they expect prices to rise and wishes to be short if they expect them to fall D) none of the above
Q2) The general risk/reward trade-off associated with warrants shows that:
A) capital protected warrants are more risky than self funding instalment warrants
B) self funding instalment warrants are more risky than hot instalment warrants C) instalment warrants are more risky than hot instalment warrants
D) none of the above
Q3) What is the significance to the borrower of the loan-to-valuation ratio (LVR) adopted for margin lending?
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Page 10
Chapter 9: Risk Management and Insurance
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Methods of minimising insurance premiums from the insurer's perspective include:
A) reducing the average risk profile of new entrant.
B) increasing the average risk profile of new entrant.
C) reducing the total number of entrants.
D) both a and c
Q2) Tony Verdello's 4-year old property located on a fault line was recently severely affected by an earthquake. The total replacement value of Tony's property including contents at the time of the earthquake was $400,000. The percentage of the property damaged by the earthquake was estimated by the insurance company claims officer to be 60%. The property was originally built by Tony at a total cost including contents of $245,000. The specific information included in Tony's home and contents insurance policy relating to claims made are as follows:
? insurance is provided on a 'new for old' basis
? the total sum insured is $280,000
? a co-insurance clause operates which is set at 80% of the current replacement value of the home and contents.
Advise Tony as to the amount of the total home and contents claim payable by the insurance company and how this would compare to the maximum claim otherwise available.
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Page 11
Chapter 10: Superannuation
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Other than for disability or financial hardship, the earliest age that a person can generally access all of their accumulated superannuation balance is:
A) 55 years of age
B) 59 years of age
C) 65 years of age
D) none of the above
Q2) The tax rate withheld by the recipient superannuation fund on non-concessional contributions within the relevant cap is:
A) 15%.
B) 30%.
C) 0%.
D) none of the above.
Q3) Briefly discuss why a superannuation fund member's benefit balance is subject to the preservation rules.
Q4) Unfunded superannuation schemes in Australia:
A) represent a financial liability to the fund employer/sponsor.
B) are typically limited to public sector schemes.
C) both an and b
D) none of the above.
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Chapter 11: Retirement Planning
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) The issue of longevity risk has been identified as an increasing problem in more recent times, particularly in a relatively low-inflationary environment. Comment on this statement.
Q2) David Sweet, 56 years of age, has recently visited your office for advice regarding undertaking a recontribution strategy with his accumulated superannuation retirement funds of $650,000 (allocated as 25% tax-free component and 75% taxable component).
Given that he has satisfied a condition of release but is on the highest individual marginal tax rate, he is seeking your assistance for the 2014 financial year to maximise a lump-sum withdrawal from his accumulated retirement funds that will not be taxable and then recontributing this amount as a non-concessional superannuation contribution. Outline how assistance could be provided to David in order to meet his objective and state the percentages forming the tax-free and taxable components of his accumulated superannuation retirement funds of $650,000 after the process has been undertaken. Briefly comment on this outcome.
Q3) A lower relative inflation rate for a given real rate results in:
A) a lower nominal rate of return.
B) a higher nominal rate of return.
C) no change in the nominal rate of return.
D) none of the above.
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Page 13
Chapter 12: Self-Managed Superannuation Funds
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Why are there likely economies of scale in operating a SMSF?
Q2) An APRA approved trustee can be appointed to run a:
A) small APRA fund.
B) SMSF.
C) both a and b
D) none of the above.
Q3) The purchase of an asset by a SMSF from a member will be regarded as being on an arm's length basis when it is purchased at:
A) not more than market value.
B) not less than market value.
C) market value.
D) none of the above.
Q4) At a recent SMSF seminar on suitable SMSF investments it was stated by the presenter that SMSF trustees must be careful when undertaking transactions with fund members or related parties that such transactions are conducted on an 'arm's length basis'. What is the meaning of the term 'arm's length basis' and what is its relevance to transactions with fund members or related parties?
Q5) Under what circumstances must an actuary be appointed to a SMSF and what is their primary role when appointed?
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Chapter 13: Social Security
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) The age pension is:
A) available to people who are past their average life expectancy.
B) available to people who are aged 67 or older.
C) a means of government income support for retirees who satisfy eligibility requirements based on age, residency and means testing.
D) none of the above.
Q2) The Department of Human Services (DHS) pays:
A) 5 different types of benefits.
B) 23 different types of benefits.
C) more than 140 types of benefits.
D) none of the above.
Q3) The youth allowance will not be paid in which of the following circumstances to applicants?
A) To full-time students aged 16-24.
B) To apprentices under the age of 16 years.
C) To 15-year olds who have left school and are living independently.
D) None of the above.
Q4) In your opinion, why is the government in the process of changing the eligibility age for the age pension for some applicants?
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Chapter 14: Estate Planning
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70588
Sample Questions
Q1) Outline how the use of a trust can provide useful asset protection for individuals.
Q2) Summarise the principal capital gains tax (CGT) considerations in the event of death.
Q3) A will may be successfully contested on which of the following grounds?
A) Lack of testamentary capacity.
B) Undue duress.
C) Incorrect execution.
D) All of the above.
Q4) In Australia, probate:
A) is granted by the Supreme Court.
B) means 'proof of the will'.
C) is required for all estates.
D) both a and b
Q5) Differentiate between estate and non-estate assets and include examples of each type.
Q6) Outline how the 3-year rule may be potentially used to provide beneficial taxation outcomes for estate beneficiaries.
Q7) Briefly explain the differences between a testamentary trust and an inter vivos trust.
Page 16
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Chapter 15: Development of a Statement of Advice
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Sample Questions
Q1) When is a statement of advice (SOA) required?
A) A financial planner must provide the client with a SOA at the same time as, or as soon as practicable after, the advice is provided.
B) A financial planner must provide the client with a statement of advice SOA within 21 days after, the advice is provided.
C) A financial planner is not under an obligation to provide written advice to the client.
D) None of the above.
Q2) (a) Using examples, differentiate between a comprehensive financial plan and a limited advice plan as the 2 principal types of SOA documents the financial planner is expected to provide to clients.
(b) What is an alternative SOA document to those discussed above that is sometimes prepared by the financial planner in particular circumstances?
Q3) In what circumstances can a record of advice (ROA) document be prepared for a financial planning client and what format does the financial planner need to follow in its preparation?
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