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CISI International Certificate in Wealth & Investment Management Sample Questions (Q167-Q172):
NEW QUESTION # 167
The supply curve for an industry would be expected to shift to the left if:
- A. Technology is introduced
- B. The price of raw materials increased
- C. The price of raw materials decreased
- D. Competition from firms entering the industry increased
Answer: B
Explanation:
The supply curve shifts left when production becomes more expensive or difficult.
* Why Does a Leftward Shift Occur?
* Increased raw material costs make production more expensive, leading to a reduction in supply.
* Higher wages, taxes, or stricter regulations can also shift the supply curve left.
* What Causes a Rightward Shift?
* Technological improvements lower costs and increase supply.
* Lower raw material costs reduce production expenses, encouraging more supply.
# Reference: CISI Wealth & Investment Management (Economic Principles), Microeconomics - Supply & Demand.
NEW QUESTION # 168
Which financial instrument is the corporate equivalent of a Treasury Bill?
- A. Bill of Exchange
- B. Commercial Paper
- C. Certificates of Deposit
- D. Bearer Securities
Answer: B
Explanation:
Commercial Paper (CP) is the corporate equivalent of a Treasury Bill and is used for short-term funding by companies.
* Key Features:
* Issued by corporations with high credit ratings.
* Unsecured, short-term debt instrument (maturity up to 270 days).
* Used to finance working capital or short-term obligations.
* Comparison to Treasury Bills:
* Treasury Bills (T-Bills) # Issued by governments (risk-free).
* Commercial Paper # Issued by corporations (higher risk).
# Reference: Bank of England (Commercial Paper Market), CISI Wealth & Investment Management.
NEW QUESTION # 169
Earnings before interest and tax provides a better picture of a company's operational performance and profitability from its core business activities because it:
- A. Removes the effects of financing expenses
- B. Ignores capital expenditure
- C. Is a standardised measure of a company's performance
- D. Highlights a trend in a company's earnings per share
Answer: A
Explanation:
Earnings before interest and tax is a measure of profit generated from operations before considering how the business is financed and before tax effects. By excluding interest, it removes the impact of capital structure choices such as how much debt versus equity the company uses and the level of interest costs that result. This makes it easier to compare operating performance across companies with different leverage levels, different borrowing costs, or different refinancing histories. It also supports analysis of operating efficiency because it focuses attention on revenue generation and operating expenses rather than financing decisions. Earnings per share is influenced by the number of shares, buybacks, and financing structure, so it does not isolate operational performance in the same way. Earnings before interest and tax is not fully standardised across all reporting practices, so that is not the best rationale. It also does not ignore capital expenditure, since capital expenditure affects depreciation and investment needs and is better assessed through cash flow measures. The key examinable benefit is that it strips out financing expenses to show core operating profitability.
NEW QUESTION # 170
Unsecured negotiable bearer securities that are issued by companies with a full stock market listing are known as:
- A. Bills of Exchange
- B. Commercial Paper
- C. Certificates of Deposit
- D. Treasury Bills
Answer: B
Explanation:
Commercial Paper (CP) is a short-term, unsecured debt instrument issued by large, creditworthy corporations to finance short-term liabilities.
* Why is Option B Correct?
* CP is negotiable (can be sold on secondary markets).
* It is unsecured (not backed by assets).
* Maturity ranges from 1 day to 270 days.
* Why Not Other Options?
* A (Certificates of Deposit) # Issued by banks, not corporations.
* C (Bills of Exchange) # Used for trade finance, not corporate funding.
* D (Treasury Bills) # Issued by governments, not companies.
# Reference: Bank of England (Commercial Paper Market), CISI Wealth & Investment Management.
NEW QUESTION # 171
If someone in a fiduciary position has personal or professional interests that compete with their duty to act in the client's best interest, this is called:
- A. A conflict of interest
- B. Full disclosure
- C. A regulatory breach
- D. Discretionary management
Answer: A
Explanation:
A conflict of interest arises when a financial professional's own interests compete with their duty to act in the best interest of the client.
* Examples:
* A financial adviser recommending a high-commission product instead of the best investment for the client.
* An investment manager trading ahead of client orders to profit personally (front-running).
* Regulatory Requirements:
* Under FCA and MiFID II regulations, firms must disclose conflicts and take reasonable steps to manage them.
# Reference: FCA Handbook (COBS 2.1 - Acting Honestly & Fairly), CISI Ethical Standards.
NEW QUESTION # 172
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