IFoA SP5 Practice Questions - IFoA SP5 Investment and Finance Specialist Principles Exam - IFoA SP5 Practice Questions - IFoA SP5 Investment and Finance Specialist Principles Exam

Question 1

An equity has a current price of 200p, an expected dividend in one year of 8p, and a constant expected dividend growth rate of 4% per annum. Using the dividend discount (Gordon growth) model, what required rate of return is implied?

8% 10% 12% 6%

Correct Answer:

Question 2

Which characteristic best distinguishes ordinary shares (equities) from conventional bonds as an asset class?

Ordinary shares give a fixed contractual income, whereas bonds pay a variable dividend Ordinary shares rank behind bondholders on a winding-up and have no fixed redemption date Ordinary shares are always secured on company assets, whereas bonds are unsecured Ordinary shares carry a legal obligation for the company to pay an annual coupon

Correct Answer:

Ordinary shares rank behind bondholders on a winding-up and have no fixed redemption date

Question 3

A conventional fixed-interest government bond trades above par (at a premium). Which statement about its yields is correct?

The running yield is below the coupon rate, but the redemption yield exceeds the running yield The running yield exceeds the coupon rate The gross redemption yield is below the running yield, which is below the coupon rate The gross redemption yield equals the coupon rate

Correct Answer:

The gross redemption yield is below the running yield, which is below the coupon rate

Question 4

Which feature is the defining characteristic of an index-linked government bond compared with a conventional government bond?

It is redeemable at the option of the issuer at any time It pays no coupon and is issued at a deep discount to par It pays a higher fixed coupon to compensate for default risk Its coupon and redemption payments are adjusted in line with a specified inflation index

Correct Answer:

Its coupon and redemption payments are adjusted in line with a specified inflation index

Question 5

An investor buys a property let on a full repairing and insuring (FRI) lease. What is the principal advantage of an FRI lease to the landlord?

The tenant bears the cost of repairs and insurance, so the rent received is effectively net to the landlord The landlord can increase the rent without an open-market review The lease guarantees that the property value will rise with inflation The tenant is prohibited from assigning or subletting the property

Correct Answer:

The tenant bears the cost of repairs and insurance, so the rent received is effectively net to the landlord

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About this Exam

Prepare with the IFoA SP5 Practice Questions - IFoA SP5 Investment and Finance Specialist Principles Exam practice quiz. This question bank includes 100 questions covering investor, portfolio, investment, market, and asset. Use it to review important concepts, identify knowledge gaps, and build confidence for the related exam, course, or assessment.

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IFoA SP5 Practice Questions - IFoA SP5 Investment and Finance Specialist Principles Exam

This practice set contains 100 questions from the matching question bank and focuses on investor, portfolio, investment, market, and asset. Work through each question carefully, review the provided solutions, and revisit topics that need more study before your next attempt.

This is an independent study resource intended for practice and review; it is not an official examination or an endorsement by any organization named in the title.

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IFoA SP5 Practice Questions - IFoA SP5 Investment and Finance Specialist Principles Exam

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