IMC Asset Classes

Question 1

Which of the following is the primary characteristic of an equity investment?

Accepted Answer

Ownership stake in a company with a claim on residual profits and assets

Answer

Fixed regular income payments

Answer

Guaranteed return of principal

Answer

Priority claim over bondholders in liquidation

Question 2

What is the key difference between ordinary shares and preference shares?

Accepted Answer

Preference shares have priority over ordinary shares for dividends and capital repayment, usually with a fixed dividend

Answer

Ordinary shares pay fixed dividends; preference shares pay variable dividends

Answer

Ordinary shares are only available to institutional investors

Answer

Preference shares always carry voting rights; ordinary shares do not

Question 3

What is a 'coupon' on a bond?

Accepted Answer

The regular interest payment made to the bondholder

Answer

The discount at which a bond trades below par

Answer

The fee paid to the bond trustee

Answer

The bond's credit rating

Question 4

What happens to a bond's price when interest rates rise?

Accepted Answer

Bond prices fall

Answer

Bond prices rise proportionally

Answer

Bond prices are unaffected by interest rates

Answer

Bond prices rise then fall

Question 5

Which asset class is generally considered to have the lowest risk and lowest expected return?

Accepted Answer

Cash and cash equivalents

Answer

Equities

Answer

Property

Answer

Bonds

Question 6

What is a 'yield' in the context of a bond investment?

Accepted Answer

The annual return an investor receives relative to the bond's current market price

Answer

The bond's coupon rate set at issuance

Answer

The bond's credit rating

Answer

The bond's maturity date