IMC Asset Classes and Valuation

Question 1

A UK government gilt with a coupon of 4% and a face value of £100 is currently trading at £95. What is its current yield?

Accepted Answer

4.21%

Answer

4.00%

Answer

5.00%

Answer

3.80%

Question 2

Which of the following is a key characteristic of preference shares?

Accepted Answer

They receive dividends before ordinary shareholders and have priority in liquidation

Answer

They always carry voting rights

Answer

They have no fixed dividend rate

Answer

Their dividends are guaranteed by the FCA

Question 3

What is the intrinsic value of an in-the-money call option?

Accepted Answer

The amount by which the underlying asset's price exceeds the strike price

Answer

The option premium minus the time value

Answer

The strike price minus the underlying asset's price

Answer

The total premium paid for the option

Question 4

Which valuation model estimates the value of a share by discounting expected future dividends?

Accepted Answer

The Dividend Discount Model (DDM)

Answer

The Capital Asset Pricing Model (CAPM)

Answer

The Arbitrage Pricing Theory (APT)

Answer

The Efficient Market Hypothesis (EMH)

Question 5

A corporate bond is described as 'investment grade'. According to major credit rating agencies, which of the following ratings qualifies?

Accepted Answer

BBB-

Answer

BB+

Answer

CCC

Answer

D

Question 6

What is the primary risk associated with investing in commercial property as an asset class?

Accepted Answer

Illiquidity risk

Answer

Currency risk

Answer

Reinvestment risk

Answer

Inflation risk