CISI IAD Investment Environment

Question 1

Which of the following best describes the 'risk-free rate' in the context of UK investment analysis?

Accepted Answer

The yield on UK Government gilts

Answer

The Bank of England base rate

Answer

The LIBOR interbank rate

Answer

The rate offered on instant-access savings accounts

Question 2

What is the primary purpose of the Debt Management Office (DMO) in the UK?

Accepted Answer

To manage the UK Government's debt portfolio and issue gilts

Answer

To regulate consumer credit lending

Answer

To set the Bank of England base rate

Answer

To supervise building societies

Question 3

In a period of quantitative easing (QE) by the Bank of England, what is the expected effect on gilt prices?

Accepted Answer

Gilt prices rise as the Bank purchases gilts

Answer

Gilt prices fall as supply increases

Answer

Gilt prices remain unchanged

Answer

Gilt prices become more volatile but trend-neutral

Question 4

Which economic indicator is most commonly used to measure inflation in the UK for the purpose of the Bank of England's monetary policy target?

Accepted Answer

Consumer Price Index (CPI)

Answer

Retail Price Index (RPI)

Answer

GDP deflator

Answer

Producer Price Index (PPI)

Question 5

What is the key difference between a 'bull' and 'bear' market?

Accepted Answer

A bull market is characterised by rising prices and optimism while a bear market by falling prices and pessimism

Answer

A bull market has high trading volumes while a bear market has low volumes

Answer

A bull market only applies to equities while a bear market applies to bonds

Answer

A bull market occurs during economic recession while a bear market occurs during expansion

Question 6

Which of the following is a characteristic of the UK's open-ended investment company (OEIC) structure?

Accepted Answer

The fund can issue and cancel shares based on investor demand

Answer

Shares trade at a premium or discount to NAV on a stock exchange

Answer

It must be structured as a limited partnership

Answer

It cannot invest in overseas securities