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TDQ: Test Your Knowledge – Questions

27 September 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 October 2018 issue, relate to examinable Tax year 18/19, examinable by the CII until 31 August 2019.

1.         What is the difference in legal status between an IFA and a representative of a product provider?
A.         A provider’s representative is the agent of the provider, an IFA is the agent of the client
B.         A provider’s representative can only be self-employed whereas an IFA can be a sole trader, partnership or limited company
C.         A provider’s representative can only offer advice in one product area, whereas an IFA can offer advice from across the financial services spectrum
D.         A provider representative acts as an introducer only, an IFA is authorised to advise

2.         Which of the following is not an underlying assumption for the Capital Asset Pricing Model (CAPM)?
A.         Information is free and available to all investors
B.         All investors have identical holding periods
C.         The quantity of risky assets is limitless to include liquidity
D.         Investors are rational and risk averse

3.         Which of the following individuals has a potential Capital Gains Tax liability? Tick all that apply.
A.         Susan lived in her home for 5 years before moving out 18 months prior to its sale
B.         Jim’s house was empty for 3 years while he was travelling although he lived there before he went away and came back to it on his return
C.         Peter and Paul are civil partners and have owned two homes for the past 3 years and now wish to claim exemptions on one property each
D.         Mark has owned his house for 10 years although only lived in it for 5 years

4.         Which of the following would be seen as an advantage in drawing benefits by way of phased retirement through capped drawdown?
A.         Full tax-free cash at the outset.
B.         Funds can be used to provide unlimited withdrawal amounts.
C.         It will not trigger the money purchase annual allowance rules.
D.         Mortality drag.

5.         Beverly and Ian have limited disposable income.  They want a life assurance policy as protection for their children but do not know how long they will need the protection for. Which of the following options would be the most suitable?
A.         A term assurance policy with a renewability option
B.         A term assurance policy with a convertible option
C.         A whole of life policy
D.         A family income benefit policy

6.         Interest rate risk is particularly important for fixed income or floating/variable rate securities. Which of the following factors would tend to have the effect of reducing short-term interest rates?
A.         Quantitative easing
B.         Government plans to issue gilts to fund a deficit
C.         Expectations of rising inflation
D.         Strong economic activity

7.         Which of the following is true of a Eurobond?
A.         A conventional bond with a fixed nominal value and fixed coupon
B.         A conventional bond with a variable nominal value and variable coupon
C.         A conventional bond with a variable nominal value and index linked coupon
D.         An index linked bond with a fixed nominal value and index linked coupon

8.         How are benefits taxed under a deferred care plan?
A.         All benefits liable to basic rate tax
B.         Treated as part income and part capital whoever benefits are paid to
C.         Free of tax if paid to a care provider, treated as part income and part capital if paid to the planholder
D.         All benefits free of tax

9.         If a customer takes out a home reversion plan and subsequently is declared bankrupt what may the Trustee in Bankruptcy be able to do?
A.         Sell the property, repay the loan then repay creditors
B.         No action is possible because the property is no longer in the bankrupt’s estate
C.         Pursue legal action to recover the funds in the interests of the creditors
D.         Sell the property, repay creditors and if any funds left repay the loan

10.       Amy wants to use a Lifetime ISA to help her buy her first home.  Which of the following will prevent her from doing so?
A.         She has already invested £10,000 in her stocks and shares ISA
B.         She only has a 5% deposit
C.         The property she has her eye on is currently valued at £180,000
D.         She has just celebrated her 41st birthday

Need help with your CII exams? For resources including mock exam papers, calculation workbooks, study notes, audio masterclass and e-learning visit Brand Financial Training where you can also download free taster versions.

Professional Paraplanner