Free CeMAP Module I Questions and Answers 1

Question 1

Building societies and banks carry out a crucial economic purpose by

Accepted Answer

Using short-term deposits to fund long-term loans

Answer

Collecting tax from savings

Answer

Raising public awareness of financial issues

Answer

Using long-term deposits to fund short-term loans

Question 2

Which organization determines base rates in the United Kingdom?

Accepted Answer

The Bank of England

Answer

The Treasury Select Committee

Answer

The Interenational Monetary Fund

Answer

The European Central Bank

Question 3

On a bank account, a taxpayer would always earn a real rate of return when the

Accepted Answer

Interest after tax is less than inflation

Answer

Gross interest is greater than inflation

Answer

Gross interest is less than inflation

Answer

Interest after tax is greater than inflation

Question 4

A portion of the cash in an investment portfolio would be held in reserve to supply

Accepted Answer

A readily accessible source of money

Answer

The capital to pay any Capital Gains Tax liability

Answer

For long-term growth

Answer

A hedge against inflation

Question 5

Gilt: what is it?

Accepted Answer

An investment in the form of a loan to the Government

Answer

An investment in the form of a loan to a local authority

Answer

An equity-based investment guaranteed by the Government

Answer

An investment in the Bank of England

Question 6

Of the four primary asset classes, which one has the highest level of risk yet may yield the largest returns in the medium to long run?

Accepted Answer

Equities

Answer

Gilts

Answer

Commercial property

Answer

Deposits

Question 7

What is the primary motivation behind stock investing?

Accepted Answer

There is a potential for long-term growth

Answer

There is no liability to tax

Answer

There is a guaranteed increase in income levels

Answer

To provide short-term security

Question 8

Which asset class provides the most liquidity?

Accepted Answer

Blue chip equities

Answer

Corporate bonds

Answer

Commercial property

Answer

Building society deposits

Question 9

When an individual wants to invest in commercial real estate, they often do it through

Accepted Answer

Collective funds

Answer

The land Registry House Price Index

Answer

Property derivatives

Answer

Direct property purchase

Question 10

Which type of tax is totally free from equity kept under an ISA?

Accepted Answer

Income Tax and Capital Gains Tax

Answer

Income Tax only

Answer

Corporation Tax

Answer

Capital Gains Tax only