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TDQ: Test Your Knowledge – Questions

29 November 2018

For Professional Paraplanner’s TDQ (Training, Development and Qualifications) series, we have teamed up with key support providers, such as Brand Financial Training, to provide our readers with the very best in training, development and exam support.

This series aims to provide you with valuable advice and guidance materials to help you achieve your training goals, perfect your exam techniques and test your knowledge of the financial services market.

The following 10 questions, which can also be found in our December 2018 issue, relate to examinable Tax year 18/19, examinable by the CII until 31 August 2019.


1.         What is the correct definition of a derivative?
A.         A contract stating that one or two of the parties will give the other party the difference between the current value of an asset and its value at a later date
B.         The right to buy another type of asset at a higher price within a specified time frame
C.         The obligation to sell another type of asset at a higher price within a specified time frame
D.         The right or obligation to buy or sell another type of asset at a specified price at a specific date and time in the future

2.         Which of the following is regarded as a common danger specific to investing in offshore accounts?
A.         Reduced compensation schemes
B.         Interest rate risk
C.         Higher taxation rates
D.         Reinvestment risk

3.         One of your clients has recently been asked to be a trustee on a discretionary trust which has the bulk of its investment in equities. He is concerned about the taxation of any dividends for the trust and the beneficiaries.  You tell him that:
A.         the trust is liable for 38.1% income tax and the beneficiary is deemed to have received trust income not dividend income
B.         the trust is not liable for any income tax and the beneficiary pays an extra 22.5% if they are a higher rate tax payer
C.         the trust is liable for 37.5% Income tax with the first 10% covered by the tax credit and the beneficiary is deemed to have received trust income not dividend income
D.         the trust is liable for 38.1% Income tax after they have exceeded their dividend allowance and the beneficiary is deemed to have received trust income not dividend income

4.         Annuity rates have fallen in recent years due to the fact that people are living for longer and also because of:
A.         falling gilt yields.
B.         rising equity prices.
C.         lower charges.
D.         higher inflation.

5.         Carla aged 20 cares for her disabled mother who receives disability living allowance.  She applied for carer’s allowance but her claim was refused.  This was because:
A.         Carla is under age 21
B.         Carla has net earnings of £75 per week
C.         Carla’s mother is receiving another state benefit
D.         Carla is on a full-time course at college

6.         Caren has savings in her local building society of £100,000. She feels that cash is the only safe place for her money and is fearful of the stock market. You explain to her that, in fact, her savings are exposed to each of the following risks with the exception of?
A.         Inflation risk
B.         Investment risk
C.         Default risk
D.         Interest rate risk

7.         An investment trust has a net asset value per share of 150p with a share price of 100p.  It is therefore trading at a:
A.         premium of 50%
B.         discount of 33.33%
C.         premium of 33.33%
D.         discount of 50%
8.         Which of the following is classified as a pre-funded care plan?
A.         Long term care bond
B.         Immediate care annuity
C.         Equity release mortgage
D.         Health cash plan

9.         Kevin has taken out a lifetime mortgage with a loan-to-value of 25%. How much of the ongoing maintenance costs of the property will his plan provider be liable to pay?
A.         Nil
B.         25%
C.         75%
D.         100%

10.       Rob is applying for a mortgage to buy a commercial property. He should be aware that:
A.         it will not be a regulated mortgage contract
B.         it will be classed as a business loan
C.         it will be treated as other regulated mortgage contracts
D.         it will be classed as a lifetime mortgage

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