CMFAS Securities Products M2 2

Question 1

What is the yield of a bond?

Accepted Answer

The return an investor earns on the bond, expressed as a percentage

Answer

Bond yield is the return earned by an investor, typically expressed as a percentage of the bond's price. It includes interest payments.

Question 2

What is a rights issue?

Accepted Answer

An offer to existing shareholders to buy additional shares at a discounted price

Answer

A rights issue gives existing shareholders the right to purchase additional shares at a discounted price, usually to raise new capital.

Question 3

What is the price-to-earnings (P/E) ratio?

Accepted Answer

The price of a share divided by earnings per share

Answer

The P/E ratio compares a company's share price to its earnings per share, indicating how much investors are willing to pay for each dollar of earnings.

Question 4

What is a warrant?

Accepted Answer

A derivative that gives the holder the right to buy shares at a predetermined price

Answer

A warrant is a security that gives the holder the right, but not the obligation, to buy underlying shares at a fixed exercise price before expiry.

Question 5

What does 'market capitalisation' mean?

Accepted Answer

The total market value of a company's outstanding shares

Answer

Market capitalisation = share price × total number of outstanding shares. It represents the total market value of a company.

CMFAS Practice Test

CMFAS Practice Test

CMFAS Securities Products M2 2