English HKSI Paper 8 Topic 1
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HKSIP8ET1
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 Answered
 Review

Question 1 of 241
1. Question
1 pointsQID2419:Which of the following stock market has the least influence to Hong Kong stock market?
Correct
Malaysian has minor trade relations with Hong Kong. Besides, Malaysian stock market has the smallest market cap among the above options and hence has lesser influence on the global market.
Incorrect
Malaysian has minor trade relations with Hong Kong. Besides, Malaysian stock market has the smallest market cap among the above options and hence has lesser influence on the global market.
Hint
Reference Chapter:1.3.

Question 2 of 241
2. Question
1 pointsQID2421:China B shares settled in HKD are traded in which of the below exchanges?
Correct
B shares traded in the Shenzhen Stock Exchange are denoted in Hong Kong dollars
Incorrect
B shares traded in the Shenzhen Stock Exchange are denoted in Hong Kong dollars
Hint
Reference Chapter:1.2.3.2

Question 3 of 241
3. Question
1 pointsQID2424:If the nominal interest rate is 4% and the inflation rate is 2%, which of the following is the most accurate value of the real interest rate?
Correct
Real interest rate = (1nominal interest rate)/ (1inflation rate) 1
But these questions can be answered even without a calculator. Since real interest rate is approximately nominal interest rate minus inflation rate, the real interest rate must be positive in this case, so A and B can be eliminated. Although the simple calculation method is 4%2%, the question emphasizes the MOST ACCURATE, so the answer should be less than 4%2% by using the most accurate formula. Therefore, the answer is CIncorrect
Real interest rate = (1nominal interest rate)/ (1inflation rate) 1
But these questions can be answered even without a calculator. Since real interest rate is approximately nominal interest rate minus inflation rate, the real interest rate must be positive in this case, so A and B can be eliminated. Although the simple calculation method is 4%2%, the question emphasizes the MOST ACCURATE, so the answer should be less than 4%2% by using the most accurate formula. Therefore, the answer is CHint
Reference Chapter:1.4.1.2

Question 4 of 241
4. Question
1 pointsQID2426:If the face value of a 60day deposit certificate is $1000, purchased at $970, which is the annual interest rate? (assuming that there are 365 days in a year)
Correct
Present value x (1 is the principal itself + annual interest rate x number of days/365 days in a year) = face value
970x (1+ n% x 60/365) = 1000
1 + n% x 60/365 = 1000/970
n% x 60/365 = 1.030931
n% = 0.03093 x 365/60
n%= 0.18814Incorrect
Present value x (1 is the principal itself + annual interest rate x number of days/365 days in a year) = face value
970x (1+ n% x 60/365) = 1000
1 + n% x 60/365 = 1000/970
n% x 60/365 = 1.030931
n% = 0.03093 x 365/60
n%= 0.18814Hint
Reference Chapter:1.4.1.1

Question 5 of 241
5. Question
1 pointsQID2427:A 10,000,000 demand deposit was made this morning with an interest rate of 7%. How much interest will be received tomorrow? (Assuming there are 365 days in a year)
Correct
Principal x (1 + annual interest rate/number of days per year) ^ interest calculation several timesprincipal
Tomorrow, interest is given once (1 time a day)
10,000,000x(1+7%/365)^1 – 10,000,000
= 10,000,000×1.000191781 – 10,000,000
= 1917.8082Incorrect
Principal x (1 + annual interest rate/number of days per year) ^ interest calculation several timesprincipal
Tomorrow, interest is given once (1 time a day)
10,000,000x(1+7%/365)^1 – 10,000,000
= 10,000,000×1.000191781 – 10,000,000
= 1917.8082Hint
Reference Chapter:1.4.1.1

Question 6 of 241
6. Question
1 pointsQID2430:Which of the following is the correct description of the inverse yield curve?
Correct
The inverse yield curve indicates that the shortterm interest rate is higher than the longterm interest rate, which means that in the future, interest rate will fall
Incorrect
The inverse yield curve indicates that the shortterm interest rate is higher than the longterm interest rate, which means that in the future, interest rate will fall
Hint
Reference Chapter:1.4.1.3

Question 7 of 241
7. Question
1 pointsQID2431:The definition of QDIIs is?
Correct
QDIIs refers to Mainland Chinese investors who are permitted to invest in overseas financial markets, such as fund houses, banks, insurance companies and securities brokerage firms
Incorrect
QDIIs refers to Mainland Chinese investors who are permitted to invest in overseas financial markets, such as fund houses, banks, insurance companies and securities brokerage firms
Hint
Reference Chapter:1.4.7

Question 8 of 241
8. Question
1 pointsQID2432:Which of the following indices covers a wider range?
Correct
The Hang Seng Composite Index Series covers the top 95% of the market value of shares listed on the main board of the exchange which has a wider range than the other two HSIs
The S & P / HKEx Large Cap Index covers only dozens of stockIncorrect
The Hang Seng Composite Index Series covers the top 95% of the market value of shares listed on the main board of the exchange which has a wider range than the other two HSIs
The S & P / HKEx Large Cap Index covers only dozens of stockHint
Reference Chapter:1.5.2.1

Question 9 of 241
9. Question
1 pointsQID2237:To approximate financial instrument’s real interest rate:
Correct
To approximate financial instrument’s real interest rate: nominal interest rate – inflation
Incorrect
To approximate financial instrument’s real interest rate: nominal interest rate – inflation
Hint
Reference Chapter:1.4.1.2

Question 10 of 241
10. Question
1 pointsQID2238:When the longterm interest rate is smaller than the shortterm interest rate, it means that:
Correct
When the longterm interest rate is smaller than the shortterm interest rate, it means that the yield curve is reversed. It probably represents decreased inflation and economic downturn. The government may implement expansionary monetary policies to drive down the interest rate.
Incorrect
When the longterm interest rate is smaller than the shortterm interest rate, it means that the yield curve is reversed. It probably represents decreased inflation and economic downturn. The government may implement expansionary monetary policies to drive down the interest rate.
Hint
Reference Chapter:1.4.1.3

Question 11 of 241
11. Question
1 pointsQID2240:Which of the following is incorrect:
Correct
A decrease in the exchange rate leads to the weakening of the currency of a country. To foreign consumers, the products exporting from the nation become cheaper. It may strengthen the export of a country rather than weakening.
Incorrect
A decrease in the exchange rate leads to the weakening of the currency of a country. To foreign consumers, the products exporting from the nation become cheaper. It may strengthen the export of a country rather than weakening.
Hint
Reference Chapter:1.4.3

Question 12 of 241
12. Question
1 pointsQID2242:Which of the following index covers the widest range and biggest market value?
Correct
The Hang Seng Composite Index (“HSCI”) covers the highest 95% of market value on the Mainboard of the exchange.
Incorrect
The Hang Seng Composite Index (“HSCI”) covers the highest 95% of market value on the Mainboard of the exchange.
Hint
Reference Chapter:1.5.2.1

Question 13 of 241
13. Question
1 pointsQID2297:Under the same investment horizon, which of the following institution issue bonds with the highest yield?
Correct
The higher the credit risk of the issuer, the higher the yield theoretically. The yield of supranational institutions is lower than England and America, whereas quasigovernment entities are higher than the above. As a result, the yield of quasigovernment entities is the highest in theory.
Incorrect
The higher the credit risk of the issuer, the higher the yield theoretically. The yield of supranational institutions is lower than England and America, whereas quasigovernment entities are higher than the above. As a result, the yield of quasigovernment entities is the highest in theory.
Hint
Reference Chapter:1.4.1.3

Question 14 of 241
14. Question
1 pointsQID2301:What does a positive yield curve means?
Correct
A positive yield curve means the longterm yield is higher than shortterm yield, and it is expected that the inflation will become worse in the future.
Incorrect
A positive yield curve means the longterm yield is higher than shortterm yield, and it is expected that the inflation will become worse in the future.
Hint
Reference Chapter:1.4.1.3

Question 15 of 241
15. Question
1 pointsQID1686:B shares traded in Shenzhen Stock Exchange are settled in
Correct
Shenzhen Stock Exchange was established in December 1990, and also trades in A and B shares. A shares are traded and settled in the local currency (i.e. RMB) and B shares in Hong Kong dollars.
Incorrect
Shenzhen Stock Exchange was established in December 1990, and also trades in A and B shares. A shares are traded and settled in the local currency (i.e. RMB) and B shares in Hong Kong dollars.
Hint
Reference Chapter:1.2.3.2

Question 16 of 241
16. Question
1 pointsQID1687:The main purpose for China to promote new securities laws in 1998 is
Correct
In 1998, the government passed new securities laws to govern the emerging securities market, aiming to increase the levels of disclosure and to prevent insider trading.
Incorrect
In 1998, the government passed new securities laws to govern the emerging securities market, aiming to increase the levels of disclosure and to prevent insider trading.
Hint
Reference Chapter:1.2.3

Question 17 of 241
17. Question
1 pointsQID1688:The most representative market in Europe is
Correct
London is still the largest stock market in Europe and its total market capitalisation at the end of June 2016 was USD 3,480 billion. The Financial Times Stock Exchange (“FTSE”) 100 Index tracks the performance of the London stock market’s top 100 shares and is the most common performance indicator for the UK equity market.
Incorrect
London is still the largest stock market in Europe and its total market capitalisation at the end of June 2016 was USD 3,480 billion. The Financial Times Stock Exchange (“FTSE”) 100 Index tracks the performance of the London stock market’s top 100 shares and is the most common performance indicator for the UK equity market.
Hint
Reference Chapter:1.3.2

Question 18 of 241
18. Question
1 pointsQID716:If the price of stock index rises, what does it mean?
Correct
A stock market index represents the average price movement in a sample of shares traded on the stock market. If the price of stock index rises, the average price of stocks in the index rises for sure.
Incorrect
A stock market index represents the average price movement in a sample of shares traded on the stock market. If the price of stock index rises, the average price of stocks in the index rises for sure.
Hint
Reference Chapter:1.5.

Question 19 of 241
19. Question
1 pointsQID2302:There is a deposit of 10000 with a term of 5 years and an interest of 6%. Assuming the interest is not reinvested, the sum of interest in 5 years is:
Correct
There is a deposit of 10000 with a term of 5 years and an interest of 6%. Assuming the interest is not reinvested, the sum of interest in 5 years is:
Principal*terms*interest
10000*5*6%=$3000Incorrect
There is a deposit of 10000 with a term of 5 years and an interest of 6%. Assuming the interest is not reinvested, the sum of interest in 5 years is:
Principal*terms*interest
10000*5*6%=$3000Hint
Reference Chapter:1.4.1.1

Question 20 of 241
20. Question
1 pointsQID2317:The People’s Bank Of China adjusts the interest rate. Which of the following index will be affected the least?
Correct
Due to the linked exchange rate system, the interest rate on Hong Kong dollars is affected by the interest rate on US dollars rather than the interest rate on RMB.
Incorrect
Due to the linked exchange rate system, the interest rate on Hong Kong dollars is affected by the interest rate on US dollars rather than the interest rate on RMB.
Hint
Reference Chapter:1.4.2

Question 21 of 241
21. Question
1 pointsQID2318:Which of the central bank has the biggest impact on the interest rate of Hong Kong dollars?
Correct
Due to the linked exchange rate system, the interest rate on Hong Kong dollars is affected by the interest rate on US dollars rather than the interest rate on RMB.
Incorrect
Due to the linked exchange rate system, the interest rate on Hong Kong dollars is affected by the interest rate on US dollars rather than the interest rate on RMB.
Hint
Reference Chapter:1.4.2

Question 22 of 241
22. Question
1 pointsQID2321:Deflation is more likely to be caused by:
Correct
Government purchasing bonds increase the funds in the market which worsens inflation rather than deflation. An increase in the oil price will worsen the inflation rather than deflation. Foreign funds coming in will worsen the inflation rather than deflation. An appreciation of the currency leads to a decrease in the price of imported goods which may cause deflation.
Incorrect
Government purchasing bonds increase the funds in the market which worsens inflation rather than deflation. An increase in the oil price will worsen the inflation rather than deflation. Foreign funds coming in will worsen the inflation rather than deflation. An appreciation of the currency leads to a decrease in the price of imported goods which may cause deflation.
Hint
Reference Chapter:1.4.4

Question 23 of 241
23. Question
1 pointsQID2201:What’s the sum of the principal and interest for a deposit of $10000 compounded at 4% after two years?
Correct
Sum of principal and interest = principal*(1+annual interest)^term
Sum of principal and interest = 10000*(1+4%)^2
Sum of principal and interest = 10816Incorrect
Sum of principal and interest = principal*(1+annual interest)^term
Sum of principal and interest = 10000*(1+4%)^2
Sum of principal and interest = 10816Hint
Reference Chapter:1.4.1.1

Question 24 of 241
24. Question
1 pointsQID2202:What’s the sum of the interest for a deposit of $10000 compounded at 4% after two years?
Correct
interest = principal*(1+annual interest)^term – principal
interest = 10000*(1+4%)^210000
interest = 1081610000
interest = 816Incorrect
interest = principal*(1+annual interest)^term – principal
interest = 10000*(1+4%)^210000
interest = 1081610000
interest = 816Hint
Reference Chapter:1.4.1.1

Question 25 of 241
25. Question
1 pointsQID2203:What securities should you buy if there is a negative yield curve in the future?
Correct
A negative yield curve represents that shortterm interest rate is higher than longterm interest rate. It is expected that the interest rate will drop and the government impose an expansionary monetary policy. Therefore, you should buy longterm bonds or bond portfolios with extended terms.
Incorrect
A negative yield curve represents that shortterm interest rate is higher than longterm interest rate. It is expected that the interest rate will drop and the government impose an expansionary monetary policy. Therefore, you should buy longterm bonds or bond portfolios with extended terms.
Hint
Reference Chapter:1.4.1.3

Question 26 of 241
26. Question
1 pointsQID2204:What securities shouldn’t you buy if there is a positive yield curve and expected high inflation pressure?
Correct
A positive yield curve represents that the shortterm interest rate is lower than longterm interest rate. It is expected that the interest rate will increase and the government imposes a contractionary monetary policy. Therefore, you should not buy longterm bonds or bond portfolios with extended terms.
Incorrect
A positive yield curve represents that the shortterm interest rate is lower than longterm interest rate. It is expected that the interest rate will increase and the government imposes a contractionary monetary policy. Therefore, you should not buy longterm bonds or bond portfolios with extended terms.
Hint
Reference Chapter:1.4.1.3

Question 27 of 241
27. Question
1 pointsQID192:The main differences between Hang Seng ChinaAffiliated Corporations Index and Hang Seng China Enterprises Index is
Correct
ChinaAffiliated Corporations mean that the funds of the enterprises come from China but are registered in Hong Kong or overseas.
China Enterprises mean that the funds of the enterprises come from China and are registered in China at the same time.
Incorrect
ChinaAffiliated Corporations mean that the funds of the enterprises come from China but are registered in Hong Kong or overseas.
China Enterprises mean that the funds of the enterprises come from China and are registered in China at the same time.
Hint
Reference Chapter:1.5.2.3

Question 28 of 241
28. Question
1 pointsQID193:Which of the following description about H share is not correct?
Correct
The H Shares are shares issued by companies incorporated in the Mainland of China and which listed on the SEHK. Also, anyone can become Hshare company’s major shareholder.
Incorrect
The H Shares are shares issued by companies incorporated in the Mainland of China and which listed on the SEHK. Also, anyone can become Hshare company’s major shareholder.
Hint
Reference Chapter:1.5.2.3

Question 29 of 241
29. Question
1 pointsQID440:Both 5year and 10year bonds of the Exchange Fund had a 0.25% increase in the earnings yield. Which of the following is more likely to occur?
Correct
Bonds with longer term are more sensitive to interest rate than those with short term. It is because longterm bonds have longer maturity date and the attraction of each dividend drops when the interest rate rise. Therefore, the price decline effectively. Shortterm bonds have short maturity date and there is less effect of the increasing interest rate on the each dividend.
Incorrect
Bonds with longer term are more sensitive to interest rate than those with short term. It is because longterm bonds have longer maturity date and the attraction of each dividend drops when the interest rate rise. Therefore, the price decline effectively. Shortterm bonds have short maturity date and there is less effect of the increasing interest rate on the each dividend.
Hint
Reference Chapter:1.4.1.4

Question 30 of 241
30. Question
1 pointsQID441:The Dog Charity Fund is composed of 30% floatingrate bond and 70% fixedrate bond. If interest rate decrease, the manager of Dog Charity Fund should:
Correct
The Dog Charity Fund should rebalance his portfolio by reducing the weighting of floating rate bonds and increasing that of fixed rate bonds. In this way, it will benefit from the increased returns resulting from higher interest rates when the interest rate decreases.
Incorrect
The Dog Charity Fund should rebalance his portfolio by reducing the weighting of floating rate bonds and increasing that of fixed rate bonds. In this way, it will benefit from the increased returns resulting from higher interest rates when the interest rate decreases.
Hint
Reference Chapter:1.4.1.4

Question 31 of 241
31. Question
1 pointsQID2463:Which of the following index can represent the US stock market?
Correct
S&P 500 can best represent the US stock market.
Incorrect
S&P 500 can best represent the US stock market.
Hint
Reference Chapter:1.5.4.3

Question 32 of 241
32. Question
1 pointsQID2472:In terms of compound interest, Ms. Tse deposited a 100,000 Cat Medical Fund into Brown Cat Bank. The interest is calculated every six months and the annual interest rate is 4%. After 3 years, how much interest can be recovered?
Correct
Principal x (1 + annual interest rate/how many times the interest is calculated annually) ^ (remaining period x how many times the interest is calculated annually)principal = interest
100,000 x (1 + 0.04/2) ^ (3×2) 100,000
= $12,616.2419Incorrect
Principal x (1 + annual interest rate/how many times the interest is calculated annually) ^ (remaining period x how many times the interest is calculated annually)principal = interest
100,000 x (1 + 0.04/2) ^ (3×2) 100,000
= $12,616.2419Hint
Reference Chapter:1.4.1.1(b)

Question 33 of 241
33. Question
1 pointsQID462:What is the main reason Hong Kong had a slow development in bond market?
I. Hong Kong has a long history of budget surplus such that it has little need to issue government bonds.
II. Hong Kong has a more active stock market to absorb the majority of capital.
III. Government thinks debt securities are not suitable for general investors.
IV. Hong Kong Monetary Authority prohibits retail investors from securities trading.Correct
With its consistent budget surplus, the HKSAR Government does not have any need to raise capital by issuing debts. Thus, Hong Kong’s debt market has historically been illiquid and inactive when compared to its equity markets.
Incorrect
With its consistent budget surplus, the HKSAR Government does not have any need to raise capital by issuing debts. Thus, Hong Kong’s debt market has historically been illiquid and inactive when compared to its equity markets.
Hint
Reference Chapter:1.1.2

Question 34 of 241
34. Question
1 pointsQID464:Which of the following actions did the Hong Kong government take to boost the development of debt securities market?
I. The Hong Kong Monetary Authority issues different maturities of exchange fund bill and exchange fund notes.
II. The marketmaking system is introduced into exchange fund bill and exchange fund notes to increase liquidity.
III. Exchange fund bill and exchange fund notes can be listed on Stock Exchange of Hong Kong Limited(SEHK).
IV. There is no restriction in foreign investors investing in local debt securities market.Correct
To develop the debt market, the Hong Kong Monetary Authority (“HKMA”) issues a number of debt securities on behalf of the HKSAR Government including Exchange Fund Bills (“EFBs”) and Exchange Fund Notes (“EFNs”). To enhance secondary market liquidity, the HKMA has established an effective marketmaking system for EFBs and EFNs. There are currently no restrictions on foreign borrowers issuing and investing in the Hong Kong debt market, which has resulted in its internationalization. In an effort to appeal to retail investors and to encourage the development of Hong Kong’s debt market, some debt securities, EFNs and government bonds have been listed on the SEHK.
Incorrect
To develop the debt market, the Hong Kong Monetary Authority (“HKMA”) issues a number of debt securities on behalf of the HKSAR Government including Exchange Fund Bills (“EFBs”) and Exchange Fund Notes (“EFNs”). To enhance secondary market liquidity, the HKMA has established an effective marketmaking system for EFBs and EFNs. There are currently no restrictions on foreign borrowers issuing and investing in the Hong Kong debt market, which has resulted in its internationalization. In an effort to appeal to retail investors and to encourage the development of Hong Kong’s debt market, some debt securities, EFNs and government bonds have been listed on the SEHK.
Hint
Reference Chapter:1.1.2

Question 35 of 241
35. Question
1 pointsQID110:A phenomenon of a continuous increase in price in the past three years is called:
Correct
Inflation refers to the tendency for prices to continue to rise over a period of time, resulting in a decrease in the purchasing power of money – more money is needed to purchase the same value of goods and services.
Incorrect
Inflation refers to the tendency for prices to continue to rise over a period of time, resulting in a decrease in the purchasing power of money – more money is needed to purchase the same value of goods and services.
Hint
Reference Chapter:1.4.4

Question 36 of 241
36. Question
1 pointsQID172:Using simple interest, how many interest and principal will receive in three years assume a deposit of HKD$50,000 and an interest rate of 10%?
Correct
50000 x (1+0.1 x 3)
=65000$65000 interest and principal will receive in three years
Incorrect
50000 x (1+0.1 x 3)
=65000$65000 interest and principal will receive in three years
Hint
Reference Chapter:1.4.1.1

Question 37 of 241
37. Question
1 pointsQID173:Mr. Gao deposits HKD$15,000 in the British Construction Bank with an annual interest rate of 4.75%. Using simple interest rate, how many interest will Mr. Gao receive in a year?
Correct
15000 x 1 x 0.0475
=712.5Mr. Gao can receive $712.5 after one year.
Incorrect
15000 x 1 x 0.0475
=712.5Mr. Gao can receive $712.5 after one year.
Hint
Reference Chapter:1.4.1.1

Question 38 of 241
38. Question
1 pointsQID174:Mr. Gao deposits HKD$1,000,000 in the British Construction Bank with an annual interest rate of 5.25%. Using compound interest rate, how many interest will Mr. Gao receive in three year?
Correct
[1000000 x (1+5.25%) ^ 3] – 1000000 =165913.5Mr. GAO can receive $165913.5 interest after three years.
Incorrect
[1000000 x (1+5.25%) ^ 3] – 1000000 =165913.5Mr. GAO can receive $165913.5 interest after three years.
Hint
Reference Chapter:1.4.1.1

Question 39 of 241
39. Question
1 pointsQID175:Mr. Ma is a civil servant with lower income. His girlfriend Miss Fung wishes that Mr. Ma buys a property and marries her in a year. In order to reduce the burden on Mr. Ma’s property buying, Miss Fung is willing to give her own money to Mr. Ma to invest. Assume the property they like has a down payment of $500,000, the price increase of this property in a year is 0%, and the saving rate is 10%. How much should Miss Fung provide for Mr. Ma?
Correct
500000 / (1+10%) = 454545
Miss Fung should provide $454545 to Mr. Ma.
Incorrect
500000 / (1+10%) = 454545
Miss Fung should provide $454545 to Mr. Ma.
Hint
Reference Chapter:1.4.1.2

Question 40 of 241
40. Question
1 pointsQID176:Mr. Ma is a civil servant with lower income. His girlfriend Miss Fung wishes that Mr. Ma buys a property and marries her in a year. In order to reduce the burden on Mr. Ma’s property buying, Miss Fung is willing to give her own money to Mr. Ma to invest. Assume the property they like has a down payment of $500,000, the price increase of this property in a year is 10%, and the saving rate is 10%. How much should Miss Fung provide for Mr. Ma?
Correct
500000 (1+10%) / (1+10%) = 500000
Miss Fung should provide $500000 to Mr. Ma.
Incorrect
500000 (1+10%) / (1+10%) = 500000
Miss Fung should provide $500000 to Mr. Ma.
Hint
Reference Chapter:1.4.1.2

Question 41 of 241
41. Question
1 pointsQID177:Interest rate can be classified as:
Correct
Interest rate can be classified as nominal interest rate and official interest rate.
Incorrect
Interest rate can be classified as nominal interest rate and official interest rate.
Hint
Reference Chapter:1.4.1.2

Question 42 of 241
42. Question
1 pointsQID178:What is the main difference between nominal interest rate and real interest rate?
Correct
Nominal interest rates is the most common way of quoting annual interest rates, without considering the compounding effect. Real interest rates take into account changes in the purchasing power of money over time, i.e. inflation.
Incorrect
Nominal interest rates is the most common way of quoting annual interest rates, without considering the compounding effect. Real interest rates take into account changes in the purchasing power of money over time, i.e. inflation.
Hint
Reference Chapter:1.4.1.2

Question 43 of 241
43. Question
1 pointsQID179:In 2010~2015, nominal interest rate in Hong Kong was all positive. Why did real estate brokers usually state that negative interest rate is coming and encourage the public to buy properties?
Correct
Negative interest rate refers to the rate of inflation higher than nominal interest rates of the bank deposit, the price index (CPI) rapid rise resulting in the real bank deposit interest rate is actually negative.
Incorrect
Negative interest rate refers to the rate of inflation higher than nominal interest rates of the bank deposit, the price index (CPI) rapid rise resulting in the real bank deposit interest rate is actually negative.
Hint
Reference Chapter:1.4.1.2

Question 44 of 241
44. Question
1 pointsQID180:If economists expect an economic deflation, which of the following yield curves is more likely to happen?
Correct
A negative yield curve is consistent with expectations of falling inflation (or disinflation) over the longer term.
Incorrect
A negative yield curve is consistent with expectations of falling inflation (or disinflation) over the longer term.
Hint
Reference Chapter:1.4.1.3

Question 45 of 241
45. Question
1 pointsQID181:If economists expect an economic hyperinflation, which of the following yield curve is more likely to happen?
Correct
A positive yield curve is consistent with expectations of rising inflation over the longer term.
Incorrect
A positive yield curve is consistent with expectations of rising inflation over the longer term.
Hint
Reference Chapter:1.4.1.3

Question 46 of 241
46. Question
1 pointsQID497:What is it meant by upwardsloping yield curves?
Correct
Positive, or normal: this is the normal situation where yield increases with an increase in the term to maturity. The longer the term to maturity, the greater the uncertainty and therefore the greater the risk. Yields on securities therefore increase to reflect this greater risk for investors. A positive yield curve is consistent with expectations of rising inflation over the longer term.
Incorrect
Positive, or normal: this is the normal situation where yield increases with an increase in the term to maturity. The longer the term to maturity, the greater the uncertainty and therefore the greater the risk. Yields on securities therefore increase to reflect this greater risk for investors. A positive yield curve is consistent with expectations of rising inflation over the longer term.
Hint
Reference Chapter:1.4.1.3

Question 47 of 241
47. Question
1 pointsQID942:If longterm bond yield is lower than shortterm bond yield, it is more likely to represent:
Correct
An inverse yield curve reflects a situation where shortterm interest rates are higher than longterm interest rates. This may indicate that there are expectations of falling interest rates in the future.
Incorrect
An inverse yield curve reflects a situation where shortterm interest rates are higher than longterm interest rates. This may indicate that there are expectations of falling interest rates in the future.
Hint
Reference Chapter:1.4.1.3

Question 48 of 241
48. Question
1 pointsQID943:If longterm rate is lower than shortterm rate, interest rate in the future may:
Correct
In the situation where shortterm interest rates are higher than longterm interest rates, there are expectations of falling interest rates in the future.
Incorrect
In the situation where shortterm interest rates are higher than longterm interest rates, there are expectations of falling interest rates in the future.
Hint
Reference Chapter:1.4.1.3

Question 49 of 241
49. Question
1 pointsQID944:Why does inflation have a bad effect on the stock price?
Correct
High inflation leads to an increase in interest rate and the borrowing cost of companies increases. Therefore, the profit of the companies is affected by the increasing cost.
Incorrect
High inflation leads to an increase in interest rate and the borrowing cost of companies increases. Therefore, the profit of the companies is affected by the increasing cost.
Hint
Reference Chapter:1.4.4

Question 50 of 241
50. Question
1 pointsQID945:Assume a country has a nominal interest rate of 7% and an inflation of 3%. What is the real interest rate?
Correct
Nominal interest rate = Real Interest rate + Inflation rate
Real Interest rate = 7% 3% = 4%
The real interest rate is 4%.
Incorrect
Nominal interest rate = Real Interest rate + Inflation rate
Real Interest rate = 7% 3% = 4%
The real interest rate is 4%.
Hint
Reference Chapter:1.4.1.1

Question 51 of 241
51. Question
1 pointsQID946:The fund manager of Kaohsiung fund, Mr. Yin, manages a bond portfolio which includes mainly US country bonds and corporate bonds. Mr. Yin expects the longterm rate will rise whereas shortterm rate will be unchanged. Mr. Yin is more likely to take which of the following investment strategies to make the highest return?
Correct
The yields of longterm bond increase when the longterm rate rises. The higher the yield, the lower the price. Thus, the price of longterm bond drops when the longterm rate rises.
Incorrect
The yields of longterm bond increase when the longterm rate rises. The higher the yield, the lower the price. Thus, the price of longterm bond drops when the longterm rate rises.
Hint
Reference Chapter:1.4.1.3

Question 52 of 241
52. Question
1 pointsQID948:How can the central bank intervene if the inflation worsens?
Correct
When there are overheating in the economy and inflation, it is likely that the government would institute a contractionary monetary policy by increasing shortterm interest rates and discouraging spending.
Incorrect
When there are overheating in the economy and inflation, it is likely that the government would institute a contractionary monetary policy by increasing shortterm interest rates and discouraging spending.
Hint
Reference Chapter:1.4.4

Question 53 of 241
53. Question
1 pointsQID950:Which of the following events is not the political factor which can affect the stock market?
Correct
The introduction of the Government Bond cannot be classified as political factor.
Incorrect
The introduction of the Government Bond cannot be classified as political factor.
Hint
Reference Chapter:1.4.6

Question 54 of 241
54. Question
1 pointsQID917:Linked exchange rate regime links:
Correct
Hong Kong has adopted a linked exchange rate regime, which is a variant of the fixed rate regime where the Hong Kong dollar is linked to the US dollar.
Incorrect
Hong Kong has adopted a linked exchange rate regime, which is a variant of the fixed rate regime where the Hong Kong dollar is linked to the US dollar.
Hint
Reference Chapter:1.3.1

Question 55 of 241
55. Question
1 pointsQID918:What indicator of the US has the most direct impact on the stock market of Hong Kong?
Correct
Hong Kong has adopted a linked exchange rate regime, which is a variant of the fixed rate regime where the Hong Kong dollar is linked to the US dollar. Thus, the US interest rate affect HK interest rate and the attraction of HK stock market to foreigner directly.
Incorrect
Hong Kong has adopted a linked exchange rate regime, which is a variant of the fixed rate regime where the Hong Kong dollar is linked to the US dollar. Thus, the US interest rate affect HK interest rate and the attraction of HK stock market to foreigner directly.
Hint
Reference Chapter:1.3.

Question 56 of 241
56. Question
1 pointsQID919:If the US stock market increases, Hong Kong stock market would most likely:
Correct
The HKD is linked to the USD through the Currency Board system. Any change in the US interest rates (and therefore the value of the USD) will influence interest rates in Hong Kong and the value of the HKD against other currencies. Thus, the performance of US and HK stock markets have positive relationship.
Incorrect
The HKD is linked to the USD through the Currency Board system. Any change in the US interest rates (and therefore the value of the USD) will influence interest rates in Hong Kong and the value of the HKD against other currencies. Thus, the performance of US and HK stock markets have positive relationship.
Hint
Reference Chapter:1.3.1

Question 57 of 241
57. Question
1 pointsQID920:Which of the following statements is incorrect regarding the stock market in Hong Kong?
Correct
Any changes in the US economy will therefore be reflected in its levels of trade and investment, which in turn affects Hong Kong’s levels of trade and investment and the value of the HKD.
Incorrect
Any changes in the US economy will therefore be reflected in its levels of trade and investment, which in turn affects Hong Kong’s levels of trade and investment and the value of the HKD.
Hint
Reference Chapter:1.3.1

Question 58 of 241
58. Question
1 pointsQID922:Which of the following is not the reason why investors use index?
Correct
Index and futures are made with reference to two different benchmarks. Thus, it cannot be hedged by using futures.
Incorrect
Index and futures are made with reference to two different benchmarks. Thus, it cannot be hedged by using futures.
Hint
Reference Chapter:1.5.

Question 59 of 241
59. Question
1 pointsQID908:Which of the following stocks are traded in the Shanghai Stock Exchange(SSE)?
I. A share
II. B share
III. Red chip stocks
IV. H shareCorrect
A share and B share are traded in the Shanghai Stock Exchange(SSE).
Incorrect
A share and B share are traded in the Shanghai Stock Exchange(SSE).
Hint
Reference Chapter:1.2.3

Question 60 of 241
60. Question
1 pointsQID909:Which of the following stocks are traded in the Shenzhen Stock Exchange(SZSE)?
I. A share
II. B share
III. Red chip stocks
IV. H shareCorrect
A share and B share are traded in the Shenzhen Stock Exchange(SZSE).
Incorrect
A share and B share are traded in the Shenzhen Stock Exchange(SZSE).
Hint
Reference Chapter:1.2.3.2

Question 61 of 241
61. Question
1 pointsQID910:Chinese A share is traded at which of the following exchanges?
I. Shanghai Stock Exchange(SSE)
II. Shenzhen Stock Exchange(SZSE)
II. Stock Exchange of Hong Kong Limited(SEHK)
IV. ShanghaiHong Kong Stock Connect Stock ExchangesCorrect
A share and B share are traded in the Shenzhen Stock Exchange(SZSE) and the Shanghai Stock Exchange(SSE).
Incorrect
A share and B share are traded in the Shenzhen Stock Exchange(SZSE) and the Shanghai Stock Exchange(SSE).
Hint
Reference Chapter:1.2.3.1

Question 62 of 241
62. Question
1 pointsQID911:ShanghaiHong Kong Stock Connect allows:
Correct
ShanghaiHong Kong Stock is open to all Hong Kong and foreign investors, including institutions and individuals. ShanghaiHong Kong Stock can be traded include the 180 index, the SSE 380 index constituent stocks, and the Shanghai Stock Exchange listed A + H shares of the company stock.
Incorrect
ShanghaiHong Kong Stock is open to all Hong Kong and foreign investors, including institutions and individuals. ShanghaiHong Kong Stock can be traded include the 180 index, the SSE 380 index constituent stocks, and the Shanghai Stock Exchange listed A + H shares of the company stock.
Hint
Reference Chapter:1.2.3.1

Question 63 of 241
63. Question
1 pointsQID912:Which of the following stock markets affects Hong Kong the most?
Correct
The US economy has a significant impact on Hong Kong’s economy because it is a major trading and investment partner, and also because the HKD is linked to the USD and hence the strength or weakness of the USD will affect the trade relations of Hong Kong with other trading partners.
Incorrect
The US economy has a significant impact on Hong Kong’s economy because it is a major trading and investment partner, and also because the HKD is linked to the USD and hence the strength or weakness of the USD will affect the trade relations of Hong Kong with other trading partners.
Hint
Reference Chapter:1.3.1

Question 64 of 241
64. Question
1 pointsQID924:Generally the relation between interest rate and the stock price is:
Correct
A decrease in interest rates will result in lower rates from lending institutions, and borrowers – for example, households or businesses – therefore have lower loan interest to pay. This results in borrowers effectively having higher disposable incomes, which may increase consumer and business investment, which in turn leads to stock price increases.
An increase in interest rates by institutions will increase borrowers’ loan interest and therefore effectively lower their disposable incomes. This results in investment in the economy, which could lead to capital market slowdown.
Incorrect
A decrease in interest rates will result in lower rates from lending institutions, and borrowers – for example, households or businesses – therefore have lower loan interest to pay. This results in borrowers effectively having higher disposable incomes, which may increase consumer and business investment, which in turn leads to stock price increases.
An increase in interest rates by institutions will increase borrowers’ loan interest and therefore effectively lower their disposable incomes. This results in investment in the economy, which could lead to capital market slowdown.
Hint
Reference Chapter:1.4.1

Question 65 of 241
65. Question
1 pointsQID925:Interest rate reflects:
Correct
A change in shortterm interest rates set by the central bank results in authorized banks adjusting interest rates accordingly. Thus, interest rate reflects borrowing cost.
Incorrect
A change in shortterm interest rates set by the central bank results in authorized banks adjusting interest rates accordingly. Thus, interest rate reflects borrowing cost.
Hint
Reference Chapter:1.4.1

Question 66 of 241
66. Question
1 pointsQID926:Which of the following is the most accurate statement regarding the impact of an interest rate hike on the stock price?
Correct
When the interest rates rises, the borrowing cost of borrower increases correspondingly. This results in borrowers effectively having lower disposable incomes, the profit of the corporations decreases and the cost of expanding the business of corporations will increase.
Incorrect
When the interest rates rises, the borrowing cost of borrower increases correspondingly. This results in borrowers effectively having lower disposable incomes, the profit of the corporations decreases and the cost of expanding the business of corporations will increase.
Hint
Reference Chapter:1.4.1

Question 67 of 241
67. Question
1 pointsQID927:Which of the following statements is correct regarding the impact of stocks on interest rate.
Correct
Often news is preempted in the market (i.e. market expectations) and as a result the expected impact has already been factored into the prices of securities.
The relation between interest rate and the stock price is negatively correlated and thus the unexpected increase in interest rate has a bad impact on the stock price.Incorrect
Often news is preempted in the market (i.e. market expectations) and as a result the expected impact has already been factored into the prices of securities.
The relation between interest rate and the stock price is negatively correlated and thus the unexpected increase in interest rate has a bad impact on the stock price.Hint
Reference Chapter:1.4.1

Question 68 of 241
68. Question
1 pointsQID913:Why does American stock market affect Hong Kong the most?
Correct
The US economy has a significant impact on Hong Kong’s economy because it is a major trading and investment partner, and also because the HKD is linked to the USD and hence the strength or weakness of the USD will affect the trade relations of Hong Kong with other trading partners. Any changes in the US economy will therefore be reflected in its levels of trade and investment, which in turn affects Hong Kong’s levels of trade and investment and the value of the HKD.
Incorrect
The US economy has a significant impact on Hong Kong’s economy because it is a major trading and investment partner, and also because the HKD is linked to the USD and hence the strength or weakness of the USD will affect the trade relations of Hong Kong with other trading partners. Any changes in the US economy will therefore be reflected in its levels of trade and investment, which in turn affects Hong Kong’s levels of trade and investment and the value of the HKD.
Hint
Reference Chapter:1.3.1

Question 69 of 241
69. Question
1 pointsQID914:Why is that global market has an impact on the stock market in Hong Kong?
Correct
There are other global and regional economic factors that affect Hong Kong’s financial markets. Some of the major economic factors include the stability of regional economies and currencies and free trade versus tariffs/quotas.
Incorrect
There are other global and regional economic factors that affect Hong Kong’s financial markets. Some of the major economic factors include the stability of regional economies and currencies and free trade versus tariffs/quotas.
Hint
Reference Chapter:1.3.

Question 70 of 241
70. Question
1 pointsQID915:Why is that a change in US interest rate has an impact on the stock market in Hong Kong?
Correct
The US economy has a significant impact on Hong Kong’s economy because it is a major trading and investment partner, and also because the HKD is linked to the USD and hence the strength or weakness of the USD will affect the trade relations of Hong Kong with other trading partners. Any changes in the US economy will therefore be reflected in its levels of trade and investment, which in turn affects Hong Kong’s levels of trade and investment and the value of the HKD.
Incorrect
The US economy has a significant impact on Hong Kong’s economy because it is a major trading and investment partner, and also because the HKD is linked to the USD and hence the strength or weakness of the USD will affect the trade relations of Hong Kong with other trading partners. Any changes in the US economy will therefore be reflected in its levels of trade and investment, which in turn affects Hong Kong’s levels of trade and investment and the value of the HKD.
Hint
Reference Chapter:1.3.1

Question 71 of 241
71. Question
1 pointsQID916:The stock market volatility in the US leads to market volatility in Hong Kong because:
Correct
Because global investment portfolios are large, they can have a significant impact on the volume, pricing and direction of international capital flows, and on regulatory and stability conditions in both domestic and international markets. In addition, international capital flows can be very volatile in nature, with a tendency to reverse direction when there is the slightest hint of risk or concern over the fragility of the financial sector. Globalization can result in global instability.
Incorrect
Because global investment portfolios are large, they can have a significant impact on the volume, pricing and direction of international capital flows, and on regulatory and stability conditions in both domestic and international markets. In addition, international capital flows can be very volatile in nature, with a tendency to reverse direction when there is the slightest hint of risk or concern over the fragility of the financial sector. Globalization can result in global instability.
Hint
Reference Chapter:1.3.

Question 72 of 241
72. Question
1 pointsQID487:What is the main reason Hong Kong issues exchange fund notes and exchange fund bills?
Correct
To develop the debt market, the Hong Kong Monetary Authority (“HKMA”) issues a number of debt securities on behalf of the HKSAR Government including Exchange Fund Bills (“EFBs”) and Exchange Fund Notes (“EFNs”) .
Incorrect
To develop the debt market, the Hong Kong Monetary Authority (“HKMA”) issues a number of debt securities on behalf of the HKSAR Government including Exchange Fund Bills (“EFBs”) and Exchange Fund Notes (“EFNs”) .
Hint
Reference Chapter:1.4.1.2

Question 73 of 241
73. Question
1 pointsQID1956:QFIIs are foreign institutional investors who are allowed to invest
Correct
Qualified Domestic Institutional Investors (“QDIIs”) and Qualified Foreign Institutional Investors (“QFIIs”) are introduced in China in 2002. QDIIs are local institutional investors (such as fund houses, banks, insurance companies and securities brokerages) in Mainland China who have been granted permission to invest in overseas financial markets, while QFIIs are foreign institutional investors who are allowed to invest in China A shares. These have an impact on the flow of funds in the market. Investment by QFIIs, for instance, has a positive impact
on the flow of funds into the country.Incorrect
Qualified Domestic Institutional Investors (“QDIIs”) and Qualified Foreign Institutional Investors (“QFIIs”) are introduced in China in 2002. QDIIs are local institutional investors (such as fund houses, banks, insurance companies and securities brokerages) in Mainland China who have been granted permission to invest in overseas financial markets, while QFIIs are foreign institutional investors who are allowed to invest in China A shares. These have an impact on the flow of funds in the market. Investment by QFIIs, for instance, has a positive impact
on the flow of funds into the country.Hint
Reference Chapter:1.4.7

Question 74 of 241
74. Question
1 pointsQID1957:The most commonly used index in the Hong Kong stock market is
Correct
The HSI was publicly launched on 24 November 1969 (the HSI was set to 100 on 31 July 1964 as the base date) and was designed as a barometer of share price movements on the Hong Kong stock market.
Incorrect
The HSI was publicly launched on 24 November 1969 (the HSI was set to 100 on 31 July 1964 as the base date) and was designed as a barometer of share price movements on the Hong Kong stock market.
Hint
Reference Chapter:1.5.1

Question 75 of 241
75. Question
1 pointsQID1958:After 2006, which of the following methods is used to calculate the Hang Seng Index?
Correct
From 11 September 2006, the calculation methodology of the HSI was also changed from the full market capitalisation weighted approach to a free floatadjusted market capitalisation weighted approach 14 (to reflect strategic holdings), with a capping level on the weighting of individual stocks in the HIS.
Incorrect
From 11 September 2006, the calculation methodology of the HSI was also changed from the full market capitalisation weighted approach to a free floatadjusted market capitalisation weighted approach 14 (to reflect strategic holdings), with a capping level on the weighting of individual stocks in the HIS.
Hint
Reference Chapter:1.5.1

Question 76 of 241
76. Question
1 pointsQID1959:The most commonly used index in the Hong Kong stock market is
The most commonly used index in the Hong Kong stock market is
I. Hang Seng Index
II. Hang Seng China Enterprises Index (“HSCEI”)
III. Hang Seng ChinaAffiliated Corporations Index(“HSCCI”)
IV. HSI Volatility Index (“VHSI”)Correct
The HSI was publicly launched on 24 November 1969 (the HSI was set to 100 on 31 July 1964 as the base date) and was designed as a barometer of share price movements on the Hong Kong stock market. The HSI was publicly launched on 24 November 1969 (the HSI was set to 100 on 31 July 1964 as the base date) and was designed as a barometer of share price movements on the Hong Kong stock market.
Incorrect
The HSI was publicly launched on 24 November 1969 (the HSI was set to 100 on 31 July 1964 as the base date) and was designed as a barometer of share price movements on the Hong Kong stock market. The HSI was publicly launched on 24 November 1969 (the HSI was set to 100 on 31 July 1964 as the base date) and was designed as a barometer of share price movements on the Hong Kong stock market.
Hint
Reference Chapter:1.5.1

Question 77 of 241
77. Question
1 pointsQID1960:The criteria of being a constituent of HSI is
I. belonging to the top 90% of the total market value
II. belonging to the top 90% of the total turnover
III. having a listing history of 24 months
IV. having the top 90% of the profitsCorrect
The 50 stocks included in the index are selected according to the following criteria: they must belong to the top 90% of the total market value (expressed as an average of the past 12 months) of all eligible shares listed on SEHK; they must belong to the top 90% of the total turnover (aggregated and individually assessed for eight quarterly subperiods over the past 24 months) of all eligible shares listed on SEHK; and they should normally have a listing history of 24 months or meet the requirements of the Guidelines for Handling Largecap Stocks Listed for Less Than 24 Months shown below.
Incorrect
The 50 stocks included in the index are selected according to the following criteria: they must belong to the top 90% of the total market value (expressed as an average of the past 12 months) of all eligible shares listed on SEHK; they must belong to the top 90% of the total turnover (aggregated and individually assessed for eight quarterly subperiods over the past 24 months) of all eligible shares listed on SEHK; and they should normally have a listing history of 24 months or meet the requirements of the Guidelines for Handling Largecap Stocks Listed for Less Than 24 Months shown below.
Hint
Reference Chapter:1.5.1

Question 78 of 241
78. Question
1 pointsQID1961:If Company A has 100 issued shares and its price is $5; Company B has 100 issued shares and its price is $6; Company C has 200 issued shares and its price is $5. The index is 150. For the coming day, if Company A’s price is $10, B’s price is $12 and C ’s price is $10, according to the Aggregated market capitalisation weighted approach, what is the tomorrow’s index?
Correct
Aggregated market capitalisation weighted approach uses the following formula to calculate the level of an index:
Current Index = (today’s current aggregate market capitalisation of constituent stocks / yesterday’s closing aggregate market capitalisation of constituent stocks x yesterday’s closing indexToday’s current index = ( 100 x 10 + 100 x12 + 200 x 10) / ( 100 x 5 + 100 x6 + 200 x 5) x 150 = 300
Incorrect
Aggregated market capitalisation weighted approach uses the following formula to calculate the level of an index:
Current Index = (today’s current aggregate market capitalisation of constituent stocks / yesterday’s closing aggregate market capitalisation of constituent stocks x yesterday’s closing indexToday’s current index = ( 100 x 10 + 100 x12 + 200 x 10) / ( 100 x 5 + 100 x6 + 200 x 5) x 150 = 300
Hint
Reference Chapter:1.5.1.1

Question 79 of 241
79. Question
1 pointsQID1962:If Hang Seng Composite Index increases 1.5% while Hang Seng Index increases 1.0%, this represents
Correct
The Hang Seng Composite Index (“HSCI”) covers about the top 95th percentile of the market capitalisation of the stocks listed on the Main Board of SEHK. The HSI comprised 50 stocks, whose aggregate capitalisation accounted for approximately 56.7% of the total market capitalization. Therefore, when the Hang Seng Composite Index increases more than HIS, this represents the price of constituent stocks increase less than others.
Incorrect
The Hang Seng Composite Index (“HSCI”) covers about the top 95th percentile of the market capitalisation of the stocks listed on the Main Board of SEHK. The HSI comprised 50 stocks, whose aggregate capitalisation accounted for approximately 56.7% of the total market capitalization. Therefore, when the Hang Seng Composite Index increases more than HIS, this represents the price of constituent stocks increase less than others.
Hint
Reference Chapter:1.5.2

Question 80 of 241
80. Question
1 pointsQID1963:If Hang Seng Composite Index increases 1.0% while Hang Seng Index increases 1.5%, this represents
Correct
The Hang Seng Composite Index (“HSCI”) covers about the top 95th percentile of the market capitalisation of the stocks listed on the Main Board of SEHK. The HSI comprised 50 stocks, whose aggregate capitalisation accounted for approximately 56.7% of the total market capitalization. Therefore, when the Hang Seng Composite Index increases less than HIS, this represents the price of constituent stocks increase more than others.
Incorrect
The Hang Seng Composite Index (“HSCI”) covers about the top 95th percentile of the market capitalisation of the stocks listed on the Main Board of SEHK. The HSI comprised 50 stocks, whose aggregate capitalisation accounted for approximately 56.7% of the total market capitalization. Therefore, when the Hang Seng Composite Index increases less than HIS, this represents the price of constituent stocks increase more than others.
Hint
Reference Chapter:1.5.2

Question 81 of 241
81. Question
1 pointsQID1964:If Company A has 1000000 issued shares and its price is $50; Company B has 500000 issued shares and its price is $75; Company C has 750000 issued shares and its price is $25. The index is 10000. For the coming day, if Company A’s price is $52, B’s price is $70 and C ’s price is $30, according to the Aggregated market capitalisation weighted approach, what is the tomorrow’s index?
Correct
Aggregated market capitalisation weighted approach uses the following formula to calculate the level of an index:
Current Index = (today’s current aggregate market capitalisation of constituent stocks / yesterday’s closing aggregate market capitalisation of constituent stocks) x yesterday’s closing indexToday’s current index = ( 1000000 x 50 + 500000 x750000 + 200 x 25) / ( 1000000 x 52 + 500000 x70 + 750000 x 30) x 10000 = 10306
Incorrect
Aggregated market capitalisation weighted approach uses the following formula to calculate the level of an index:
Current Index = (today’s current aggregate market capitalisation of constituent stocks / yesterday’s closing aggregate market capitalisation of constituent stocks) x yesterday’s closing indexToday’s current index = ( 1000000 x 50 + 500000 x750000 + 200 x 25) / ( 1000000 x 52 + 500000 x70 + 750000 x 30) x 10000 = 10306
Hint
Reference Chapter:1.5.1.1

Question 82 of 241
82. Question
1 pointsQID1965:Before 2006, which of the following methods is used to calculate the Hang Seng Index?
Correct
Since the establishment of the HSI in 1969, it has adopted a full market capitalisation weighted approach to calculate the index level. From 11 September 2006, the calculation methodology of the HSI was also changed from the full market capitalisation weighted approach to a free floatadjusted market capitalisation weighted approach 14 (to reflect strategic holdings), with a capping level on the weighting of individual stocks in the HIS.
Incorrect
Since the establishment of the HSI in 1969, it has adopted a full market capitalisation weighted approach to calculate the index level. From 11 September 2006, the calculation methodology of the HSI was also changed from the full market capitalisation weighted approach to a free floatadjusted market capitalisation weighted approach 14 (to reflect strategic holdings), with a capping level on the weighting of individual stocks in the HIS.
Hint
Reference Chapter:1.5.1

Question 83 of 241
83. Question
1 pointsQID1378:What is the calculating methodology of Hang Seng China Enterprises Index?
Correct
The Hang Seng China Enterprises Index is reviewed quarterly and is calculated
with free float adjustment; no constituents can have a weighting exceeding 10%.Incorrect
The Hang Seng China Enterprises Index is reviewed quarterly and is calculated
with free float adjustment; no constituents can have a weighting exceeding 10%.Hint
Reference Chapter:1.5.2.2

Question 84 of 241
84. Question
1 pointsQID966:A downwardsloping yield curve means the inflation:
Correct
An downwardsloping yield curve is the negative, or inverse yield curve. A negative yield curve is consistent with expectations of falling inflation (or disinflation) over the longer term.
Incorrect
An downwardsloping yield curve is the negative, or inverse yield curve. A negative yield curve is consistent with expectations of falling inflation (or disinflation) over the longer term.
Hint
Reference Chapter:1.4.1.3

Question 85 of 241
85. Question
1 pointsQID967:An upwardsloping yield curve is called:
Correct
An upwardsloping yield curve is called normal/positive yield curve.
Incorrect
An upwardsloping yield curve is called normal/positive yield curve.
Hint
Reference Chapter:1.4.1.3

Question 86 of 241
86. Question
1 pointsQID968:An downwardsloping yield curve is called:
Correct
An downwardsloping yield curve is called negative/inverted yield curve.
Incorrect
An downwardsloping yield curve is called negative/inverted yield curve.
Hint
Reference Chapter:1.4.1.3

Question 87 of 241
87. Question
1 pointsQID969:In a normal/positive yield curve,
Correct
Positive, or normal yield curve is the normal situation where yield increases with an increase in the term to maturity. The longer the term to maturity, the greater the uncertainty and therefore the greater the risk. Yields on securities therefore increase to reflect this greater risk for investors.
Incorrect
Positive, or normal yield curve is the normal situation where yield increases with an increase in the term to maturity. The longer the term to maturity, the greater the uncertainty and therefore the greater the risk. Yields on securities therefore increase to reflect this greater risk for investors.
Hint
Reference Chapter:1.4.1.3

Question 88 of 241
88. Question
1 pointsQID970:In a negative/inverted yield curve,
Correct
Negative, or inverse yield curve is the opposite scenario to the positive yield curve. An inverse yield curve reflects a situation where shortterm interest rates are higher than longterm interest rates.
Incorrect
Negative, or inverse yield curve is the opposite scenario to the positive yield curve. An inverse yield curve reflects a situation where shortterm interest rates are higher than longterm interest rates.
Hint
Reference Chapter:1.4.1.3

Question 89 of 241
89. Question
1 pointsQID822:In the future, the advantage of the market for funds in Hong Kong doesn’t include:
Correct
Local tax rate is not the main concern because fund is tended to invest in many other countries.
Incorrect
Local tax rate is not the main concern because fund is tended to invest in many other countries.
Hint
Reference Chapter:1.1.

Question 90 of 241
90. Question
1 pointsQID411:British construction bank is offering a tenyear time deposit with a 6% interest rate. How many interests can a HK$35,000 deposit obtain after ten years?
Correct
Simple interest = principal (1+the interest rate x period)
S =35,000 (1+0.06×10)
S =56,000Thus,
Interests=56,00035,000 = $21,000Incorrect
Simple interest = principal (1+the interest rate x period)
S =35,000 (1+0.06×10)
S =56,000Thus,
Interests=56,00035,000 = $21,000Hint
Reference Chapter:1.4.1.1

Question 91 of 241
91. Question
1 pointsQID412:British construction bank is offering a tenyear time deposit with a 6% interest rate. How many principal and interests can a HK$35,000 deposit obtain after ten years?
Correct
Simple interest = principal (1+the interest rate x period)
S =35,000 (1+0.06×10)
S =56,000Incorrect
Simple interest = principal (1+the interest rate x period)
S =35,000 (1+0.06×10)
S =56,000Hint
Reference Chapter:1.4.1.2

Question 92 of 241
92. Question
1 pointsQID413:What is the main difference between simple interest and compound interest?
Correct
Simple interest involves interest being calculated on a constant principal amount throughout the period of the loan. Compound interest assumes that all income earned in a period is reinvested at the same interest rate so that for each succeeding period that the interest is calculated, the principal amount has increased by the amount of interest earned up to the end of the previous period.
Incorrect
Simple interest involves interest being calculated on a constant principal amount throughout the period of the loan. Compound interest assumes that all income earned in a period is reinvested at the same interest rate so that for each succeeding period that the interest is calculated, the principal amount has increased by the amount of interest earned up to the end of the previous period.
Hint
Reference Chapter:1.4.1.1

Question 93 of 241
93. Question
1 pointsQID414:Nominal interest rate British construction bank paid is 5%. What is the real interest rate if compounded monthly?
Correct
Real interest rate =[(1+0.05/12)^12]1 = 0.0512
Thus, the real interest rate is 5.12%
Incorrect
Real interest rate =[(1+0.05/12)^12]1 = 0.0512
Thus, the real interest rate is 5.12%
Hint
Reference Chapter:1.4.1.2

Question 94 of 241
94. Question
1 pointsQID415:Nominal interest rate British construction bank paid is 5%. What is the real interest rate if compounded semiannually?
Correct
Real interest rate =[(1+0.05/2)^2]1=0.0506
Thus, the real interest rate is 5.06%
Incorrect
Real interest rate =[(1+0.05/2)^2]1=0.0506
Thus, the real interest rate is 5.06%
Hint
Reference Chapter:1.4.1.2

Question 95 of 241
95. Question
1 pointsQID416:Mr. GAO has a business of making usurious loan. According to Hong Kong’s law, interest rate cannot be higher than 60%. Which of the following loans may exceed the legal interest rate limit?
Correct
Real interest rate for the daily payment:
[(1+0.475/365)^365]1 = 0.608Thus, the real interest rate is 60.8% and it exceeds the legal interest rate limit.
Incorrect
Real interest rate for the daily payment:
[(1+0.475/365)^365]1 = 0.608Thus, the real interest rate is 60.8% and it exceeds the legal interest rate limit.
Hint
Reference Chapter:1.4.1.2

Question 96 of 241
96. Question
1 pointsQID417:Vitamilk bond has a 5year timetomaturity with a coupon rate of 6% whose interest can be reinvested continuously with a 6% return. What is the future value if investing $20,000 now?
Correct
Future value:
20000(1×0.06)^5
=26764Thus, the future value is $26,764.
Incorrect
Future value:
20000(1×0.06)^5
=26764Thus, the future value is $26,764.
Hint
Reference Chapter:1.4.1.1

Question 97 of 241
97. Question
1 pointsQID418:Ms. Yu wanted to get married and forced his conservative boyfriend Mr. Zhou to invest. Mr. Zhou had a deposit of HK$500,000 now. Mr. GAO, an obliging bank clerk recommended Mr. Zhou to buy a high risk bond of a Chinese company with a coupon rate of 30% paying interest annually which can be reinvested with the same coupon rate. How much can Mr. Zhou have five years later if he invests HK$500,000 and upcoming interests in this bond?
Correct
500000(1+0.3)^5 = 1856465
Mr. Zhou will have $1,856,465 after 5 years.
Incorrect
500000(1+0.3)^5 = 1856465
Mr. Zhou will have $1,856,465 after 5 years.
Hint
Reference Chapter:1.4.1.2

Question 98 of 241
98. Question
1 pointsQID419:Ms. Yu wanted to get married and forced his conservative boyfriend Mr. Zhou to invest. Mr. Zhou had a deposit of HK$500,000 now. Mr. GAO, an obliging bank clerk recommended Mr. Zhou to buy a high risk bond of a Chinese company with a coupon rate of 30% paying interest annually which can be reinvested with the same coupon rate. How much interests can Mr. Zhou have five years later if he invests HK$500,000 and upcoming interests in this bond?
Correct
1856465500000 = 1,356,465
Mr. Zhou will have $1,856,465 after 5 years.
Incorrect
1856465500000 = 1,356,465
Mr. Zhou will have $1,856,465 after 5 years.
Hint
Reference Chapter:1.4.1.2

Question 99 of 241
99. Question
1 pointsQID420:Ms. Yu wanted to get married and forced his conservative boyfriend Mr. Zhou to invest. Mr. Zhou had a deposit of HK$500,000 now. Mr. GAO, an obliging bank clerk recommended Mr. Zhou to buy a high risk bond of a Chinese company with a coupon rate of 30% paying interest semiannually which can be reinvested with the same coupon rate. How much can Mr. Zhou have five years later if he invests HK$500,000 and upcoming interests in this bond?
Correct
500000[(1+(0.3/2)]^(5×2)= 2022778.868
Mr. Zhou will have $2,022,779 after 5 years.
Incorrect
500000[(1+(0.3/2)]^(5×2)= 2022778.868
Mr. Zhou will have $2,022,779 after 5 years.
Hint
Reference Chapter:1.4.1.2

Question 100 of 241
100. Question
1 pointsQID871:Assume the principal is HKD$1,000,000 with a simple interest rate of 60%. How many years are needed to reach HKD$25,000,000?
Correct
1000000x(1+0.6 x t) = 25000000
t=40
40 years is needed.
Incorrect
1000000x(1+0.6 x t) = 25000000
t=40
40 years is needed.
Hint
Reference Chapter:1.4.1.1a

Question 101 of 241
101. Question
1 pointsQID872:Assume the principal is HKD$1,000,000 with a simple interest rate of 22%. How many years are needed to reach HKD$25,000,000?
Correct
1,000,000x(1+0.22 x t) = 25,000,000
t = (25000000/1000000 – 1) / 0.22
t = 109.09109 years are needed.
Incorrect
1,000,000x(1+0.22 x t) = 25,000,000
t = (25000000/1000000 – 1) / 0.22
t = 109.09109 years are needed.
Hint
Reference Chapter:1.4.1.1a

Question 102 of 241
102. Question
1 pointsQID873:Assume an annual nominal interest rate of 22% and then borrow HKD$20,000 for ten years with seasonal compounding. How many compound periods are there?
Correct
The period of the loan is 10 years with seasonal compounding. Thus, there are 40 compound periods.
Incorrect
The period of the loan is 10 years with seasonal compounding. Thus, there are 40 compound periods.
Hint
Reference Chapter:1.4.1.2

Question 103 of 241
103. Question
1 pointsQID874:Assume an annual nominal interest rate of 22% and then borrow HKD$20,000 for ten years with seasonal compounding. What is the return?
Correct
[(1+0.22/4) ^ (10)(4)] – 1=7.5133
Thus, the return is751.33%
Incorrect
[(1+0.22/4) ^ (10)(4)] – 1=7.5133
Thus, the return is751.33%
Hint
Reference Chapter:1.4.1.2

Question 104 of 241
104. Question
1 pointsQID875:Assume an annual nominal interest rate of 22% and then borrow HKD$20,000 for ten years with daily compounding. How many compound periods are there?
Correct
The period of the loan is 10 years with daily compounding. Thus, there are 3650 compound periods.
Incorrect
The period of the loan is 10 years with daily compounding. Thus, there are 3650 compound periods.
Hint
Reference Chapter:1.4.1.2

Question 105 of 241
105. Question
1 pointsQID876:Assume an annual nominal interest rate of 22% and then borrow HKD$20,000 for ten years with daily compounding. What is the return?
Correct
[(1+0.22/365) ^ (10)(365)] – 1=8.019
Thus, the return is 801.9%
Incorrect
[(1+0.22/365) ^ (10)(365)] – 1=8.019
Thus, the return is 801.9%
Hint
Reference Chapter:1.4.1.2

Question 106 of 241
106. Question
1 pointsQID877:Nominal return =
Correct
Nominal interest rates are the most common way of quoting annual interest rates, without considering the compounding effect. Real interest rates take into account changes in the purchasing power of money over time, i.e. inflation. Therefore, nominal interest rates are the sum of real returns and inflation rate.
Incorrect
Nominal interest rates are the most common way of quoting annual interest rates, without considering the compounding effect. Real interest rates take into account changes in the purchasing power of money over time, i.e. inflation. Therefore, nominal interest rates are the sum of real returns and inflation rate.
Hint
Reference Chapter:1.4.1.2

Question 107 of 241
107. Question
1 pointsQID1696:Which of the following statements about China’s financial market is correct?
I. China has two stock exchanges
II. A shares can only be traded by QFII investors or local Chinese investors
III. China Securities Regulatory Commission is responsible for monitoring China’s securities market
IV. CSRC encourages speculationCorrect
Exchanges were established in Shenzhen and Shanghai. The exchange facilitates
the trading of A shares, which are purchased by local Chinese investors. In 1998, the
government passed new securities laws to govern the emerging securities market, aiming to increase the levels of disclosure and to prevent insider trading. Also, China Securities Regulatory Commission is responsible to monitor China’s securities market.Incorrect
Exchanges were established in Shenzhen and Shanghai. The exchange facilitates
the trading of A shares, which are purchased by local Chinese investors. In 1998, the
government passed new securities laws to govern the emerging securities market, aiming to increase the levels of disclosure and to prevent insider trading. Also, China Securities Regulatory Commission is responsible to monitor China’s securities market.Hint
Reference Chapter:1.2.3

Question 108 of 241
108. Question
1 pointsQID426:Mr. GAO works as a manager for the Dog Charity Fund whose assets are mainly invested in fixedrate bonds. Mr. GAO got an insider information from the Monetary Authority such that there will be a huge increase in Hong Kong’s interest rate. Not concerning about moral and legal problems, which of the following way is more likely to make profits for the Dog Charity Fund?
Correct
The interest payment or coupon on a fixed rate bond remains constant throughout the life of the bond while interest payment or coupon of a floating rate bond is based on a reference rate. If there will be a huge increase in Hong Kong’s interest rate, The interest payment on a fixed rate bond remains unchanged but that on a floating rate bond may increase. Therefore, he will benefit from the increased returns resulting from higher interest rates after selling fixedrate bond and purchasing floatingrate bond.
Incorrect
The interest payment or coupon on a fixed rate bond remains constant throughout the life of the bond while interest payment or coupon of a floating rate bond is based on a reference rate. If there will be a huge increase in Hong Kong’s interest rate, The interest payment on a fixed rate bond remains unchanged but that on a floating rate bond may increase. Therefore, he will benefit from the increased returns resulting from higher interest rates after selling fixedrate bond and purchasing floatingrate bond.
Hint
Reference Chapter:1.4.1.4

Question 109 of 241
109. Question
1 pointsQID427:Mr. GAO works as a manager for the Dog Charity Fund whose assets are mainly invested in fixedrate bonds. Mr. GAO got an insider information from the Monetary Authority such that there will be a huge increase in Hong Kong’s interest rate, knowing that earnings yield on 10year and 30year bonds will increase 1%. Not concerning about moral and legal problems, which of the following ways is more likely to make profits for the Dog Charity Fund?
Correct
The interest payment or coupon on a fixed rate bond remains constant throughout the life of the bond while interest payment or coupon of a floating rate bond is based on a reference rate. If there will be a huge increase in Hong Kong’s interest rate, The interest payment on a fixed rate bond remains unchanged but that on a floating rate bond may increase. Therefore, he will benefit from the increased returns resulting from higher interest rates after selling sell 10year and 30year fixedrate bond and purchasing floatingrate bond.
Incorrect
The interest payment or coupon on a fixed rate bond remains constant throughout the life of the bond while interest payment or coupon of a floating rate bond is based on a reference rate. If there will be a huge increase in Hong Kong’s interest rate, The interest payment on a fixed rate bond remains unchanged but that on a floating rate bond may increase. Therefore, he will benefit from the increased returns resulting from higher interest rates after selling sell 10year and 30year fixedrate bond and purchasing floatingrate bond.
Hint
Reference Chapter:1.4.1.4

Question 110 of 241
110. Question
1 pointsQID428:Mr. GAO works as a manager for the Dog Charity Fund whose assets are mainly invested in fixedrate bonds. Mr. GAO got an insider information from the Monetary Authority such that there will be a huge increase in Hong Kong’s interest rate, knowing that earnings yield on 10year and 30year bonds will increase 1%. Which of the following is more likely to occur.
Correct
An increase in shortterm interest rates results in a decrease in the value of longterm debt securities. Since 30year bond is longer than 10year bond, it will drop more when shortterm interest rates increases.
Incorrect
An increase in shortterm interest rates results in a decrease in the value of longterm debt securities. Since 30year bond is longer than 10year bond, it will drop more when shortterm interest rates increases.
Hint
Reference Chapter:1.4.1.4

Question 111 of 241
111. Question
1 pointsQID430:Ms. Yu wanted to get married and forced his conservative boyfriend Mr. Zhou to invest. Ms. Yu’s mother requested a gift of money of 500,000. The interest rate in banks is 5% with a semiannual interest payment. How much should Mr. Zhou invest if he wants to have that amount of money in two years?
Correct
S=P(1+r/m)^(tm)
500000=P(1+0.05/2)^(2X2)
P=4529753
Thus, Mr. Zhou need to invest $452,975.Incorrect
S=P(1+r/m)^(tm)
500000=P(1+0.05/2)^(2X2)
P=4529753
Thus, Mr. Zhou need to invest $452,975.Hint
Reference Chapter:1.4.1.2

Question 112 of 241
112. Question
1 pointsQID878:Elephant fund offers 50% annual return. If the inflation is 9% annually, what is the real return?
Correct
Nominal return = real returns + inflation rate
Thus,
50% = real returns +9%Real returns = 41%
Incorrect
Nominal return = real returns + inflation rate
Thus,
50% = real returns +9%Real returns = 41%
Hint
Reference Chapter:1.4.1.2

Question 113 of 241
113. Question
1 pointsQID879:Assume the real return of Elephant fund is 10% and inflation is 9% annually. What is the nominal return of Elephant fund?
Correct
Nominal return = real returns + inflation rate
Thus,
Nominal return = 10% +9%
Nominal return = 19%Incorrect
Nominal return = real returns + inflation rate
Thus,
Nominal return = 10% +9%
Nominal return = 19%Hint
Reference Chapter:1.4.1.2

Question 114 of 241
114. Question
1 pointsQID406:Which of the following assets are traded at Stock Exchange of Hong Kong Limited(SEHK)?
I. Stock warrants
II. Derivative warrants
III. The Link Real Estate Investment Trust(The Link)
IV. The Tracker Fund of Hong KongCorrect
The following assets can be traded at Stock Exchange of Hong Kong: Stock warrants; Derivative warrants; The Link Real Estate Investment Trust(The Link); The Tracker Fund of Hong Kong.
Incorrect
The following assets can be traded at Stock Exchange of Hong Kong: Stock warrants; Derivative warrants; The Link Real Estate Investment Trust(The Link); The Tracker Fund of Hong Kong.
Hint
Reference Chapter:1.1.1

Question 115 of 241
115. Question
1 pointsQID1287:Which of the following factors are more likely to affect Hong Kong stocks?
I. the exchange rate in American.
II. the interest rate in American.
III. inflation in China.
IV. QDIICorrect
The HKD is linked to the USD through the Currency Board system. Any change in the US interest rates (and therefore the value of the USD) will influence interest rates in Hong Kong and the value of the HKD against other currencies. Therefore, local stock market will also be affected. QDII will affect the capital which invest in the local capital market.
Incorrect
The HKD is linked to the USD through the Currency Board system. Any change in the US interest rates (and therefore the value of the USD) will influence interest rates in Hong Kong and the value of the HKD against other currencies. Therefore, local stock market will also be affected. QDII will affect the capital which invest in the local capital market.
Hint
Reference Chapter:1.4.6

Question 116 of 241
116. Question
1 pointsQID939:Risk premium is:
Correct
The component above the riskfree rate, the risk premium, represents the additional reward to investors for investing in higher risk securities.
Incorrect
The component above the riskfree rate, the risk premium, represents the additional reward to investors for investing in higher risk securities.
Hint
Reference Chapter:1.4.1.3

Question 117 of 241
117. Question
1 pointsQID940:Duration measures:
Correct
Duration measures the sensitivity of securities to changes in interest rates, by taking into account the maturity date and the coupon cash flows. It approximates to the percentage bond price change that results from a 1% change in interest rates. It also measures the average number of years it takes for the discounted cash flow to be returned to an investor.
Incorrect
Duration measures the sensitivity of securities to changes in interest rates, by taking into account the maturity date and the coupon cash flows. It approximates to the percentage bond price change that results from a 1% change in interest rates. It also measures the average number of years it takes for the discounted cash flow to be returned to an investor.
Hint
Reference Chapter:1.4.1.4

Question 118 of 241
118. Question
1 pointsQID941:Which of the following factors affect the security market?
I. Exchange rate
II. Inflation
III. Economic cycle
IV. Political factor