Structured Products, Investment Funds, and Financial Concepts

[Music] anyway uh we can't spend any more time on this I'm sorry uh nidal search please tell him we've started so question number one as usual we read the question you've got 10 seconds to answer you give me your answers question number one Structured Products are designed to incorporate an element of capital protection while participating in the returns achieved from investment in a higher risk on the line security the capital protection is provided through which of the following welcome n all so uh a structure products are mainly based on derivatives derivatives like swaps Futures and options um and these derivatives will be based of course on other assets so they can be based on Commodities they can be based on stocks they can be based on bonds so structural products are mostly based on derivatives and that part of the derivatives is what guarantees the protection for the investor um uh I mean they do give you exposure to bonds stock here it says debenture stock what is debenture stock by the way here's a question give me your answer what is debenture stock okay so you're saying bonds Ahmed GDA not government bonds debenture is Corporate bonds secured bonds so the word stock here is confusing it's like where cisi says loan stock loan stock here doesn't mean stocks shares as home no loan stock means investment loan means Bond if it's a debenture then this loan is a secured loan a secured Bond of course secured debentures secured Bonds in the UK If you say debenture to an American am or to a Canadian to them is the opposite it's unsecured Bond but since this is a UK qualification a debenture is a secured Bond keep that in mind so they do give you exposure to bonds and to Commodities but not directly through it's through derivatives moving on question number two where an investment fund established in the UK satisfi IES the uset directive and is sold in another EU country what is the position regarding local taxes and local marketing laws what this is saying is that the fund comes from the UK and wants to attract investors from the EU so this fund wants European investors to give it money since let's say it's going to the EU let's say it's going to Germany It's a UK fund the question is asking you what does the UK fund has to do when it comes to taxes in Germany and when it comes to Marketing in Germany it will not be subject to either that means it doesn't have to follow it doesn't have to follow German tax or German marketing laws it is subject to German tax but not German marketing laws and so forth it will be subject to German marketing laws but not German taxes or it will be subject to both German taxes and German markety laws right so the answer is B any fund which wants to uh do marketing to retail in the EU needs to have uset approval and when they get the uset approval depending on which country they want to attract investors in France or Germany or Spain they'll still have to follow the the the the the rules and the laws in that country also so the answer is D moving on where funds are set aside to provide for the future Financial maintenance of a disabled child this can normally be achieved through the establishment of a legal document called a cicile trust a grant of representation power of attorney right so a trust yep easy one um so whenever you want to put money aside for usually a future beneficiary uh you can either do that as a will or you can do that as a trust trusts can be used as Wills it's not a codicil a codicil is a is an addendum attached to a contract contct in Arabic so so if you have a contract and you want you want to add something to the contract you attach a cile to it cils are usually attached to Wills so you've made a will and you want to attach a new document to the will that's called a Cil so it's not it a grant of representation is a document that proves if you are a lawyer that you have a power to represent your client when he's dead power fraternity is a document that you can uh represent somebody when he's live so that's not e either it's trust moving on participation where are the ladies May Leila Jamila we need participation HR ask me to take participation so not just attendance we need to because we we're going to be looking who's parti participa and who's not please participate which out the following is a factor that must be considered when constructing a portfolio when constructing a portfolio verification of the client's identity the client's risk tolerance the category of investment service required performance measurement so notice here we're saying that when constructing a portfolio so this is at the early stages right so the risk declines risk tolerance simple verification of the client's identity doesn't come when you are constructing a portfolio the verification comes when you are establishing the business relationship when you are opening the account a constructing a portfolio comes way later it comes after you've sat down and you've discussed the client's aims and goals um so it's not at the beginning the category of investment service required no performance measurement this comes not when you are constructing a portfolio when you are evaluating a portfolio evaluating this this comes after you've invested evaluating the portfolio moving on which mix of Investments is most appropriate for a risk averse investor 50% Commodities 50% equities 50% cash 50% guilt 50% foreign exchange 50% cfds cfds are contract for differences a type of derivative and 50% property and 50% pibs pibs I think are permanent interest bearing Securities such as Perpetual bonds right so 50% guilts 50% cash nice now the questions have been a bit easy right because we're still beginning we still need to be friends you know I'm not going to make you hate me from the first half an hour just when you've remembered how much you love me that's when the questions will start coming moving on which of the following is a feature of the Arbitrage pricing Theory a AP or Arbitrage pricing Theory relies on identified factors being correlated B the variables of AP include real economic factors C the principal component of AP is the return on an index of all shares D AP is equivalent to a single Factor cap right so the variables of an AP include real economic Factor this is the difference between AP and capm a a AP relies on identified factors being correlated no being uncorrelated that means when you are calculating AP and you are using different factors let's say you are using inflation you are using interest rates you are using GDP when you are calculating the AP the formula assumes that these are not correlated so a says which AP relies on the factors being correlated no it relies on them being uncorrelated the principal component of AP is the return on an index of all shares no it can be on an index of the top 50 shares it can be an index of whatever AP is equivalent to a single Factor capm no AP uses multiactor capm capm the capital asset pricing model this is single factor and this is the problem with capm is that people criticize capm because it takes only one risk into consideration which is beta right the P of the stock so that's why we came up with the a AP is the equivalent of a multiactor capm moving on which of the following is an offense under the market abuse legislation a a stock broker dealing in a stock in which they have received price sensitive information a stock broker fueling rumors of of outstanding results for a small company A Private Client buying outside normal Market size with one broker and not telling their usual broker about it a private client telling their friends about a company that they think is going to be taken over right Market abuse I said in the exam if you get a questions on Market abuse most likely look for the answer that says rumors so the answer is going to be a stock broker fuel rumors of outstanding results for a small oil company to its client because the stock broker wants to benefit so he probably wants the price to go up so uh he starts spr spreading rumors so people can buy right which of the following rules applying to financial intermediaries is directly underpinned by the principle of fiduciary duty so which of the following is related to fiduciary responsibility right no you are saying B think the answer is wrong the answer is D best execution fiduciary responsibility is the relationship between an advisor usually I'm just giving an example of course it has many relationship between an adviser and a client where an advisor is responsible for achieving uh the client's best interest so whenever receive fiduciary responsibility remember your responsibility towards your client disclosing commission no that's not the principle of fiduciary duty the very principle in Arabic assess of fiduciary duty of fiduciary responsibility is that you need to act in your client's best interest moving on what is the main purpose of a power of attorney document it appoints someone to distribute the assets of a deceased person it enables ownership of property to transfer from one person to another it allows one person to conduct specific transactions on behalf of another person it entitles one trustee to override the demands of another truste so what is the main purpose of a power of attorney of course a power of attorney is a document where um it gives you the power to act uh on behalf of somebody else as long as that somebody else is alive and uh of sound mind that means he's not alive and in a coma for example or he's not alive and insane so u a powerful tney is a document that allows one person to conduct specific transactions on behalf of another person as long as as long as this other person is alive and of sound sound means good and he's not crazy of sound mind of course uh don't forget there is something else called el lasting power of attorney this one this power of attorney continues to be valid even after death moving on if a client wanted to make additional contributions to an occupational pension scheme which of the following options would give him the greatest choice of provider and a say in how the invest the funds are investment are invested so you have a pension scheme with your employer and you want to uh uh uh choose the provider and where the funds will be invested so not just so we're not talking about the actual scheme with your provider it's an additional scheme uh so usually we have a defined benefit or Define contribution most likely Define contribution this is your scheme with your employer but there is usually limits on how you can how much you can invest in these schemes what if you want to invest additionally uh you can actually look for an AVC additional voluntary schemes or additional voluntary contributions that are linked to this um but some of these avcs are not very flexible so if you want a flexible additionally additional voluntary contribution one that allows you to choose the provider and how much the fund is invested you need to go for a freand in ABC which is a more flexible version of an ABC Right Moving On units in a unit trust fund are sold by which one of the following the trustee the register the manager the depository right so when you are buying a unit or a share in a unit trust fund uh you are going to be buying that from um from the manager because a unit trust fund is not listed in a stock exchange um of course not from the register and not from the depository because the depository is usually linked to an open-ended Investment Company so a trustee is the owner of the underlying assets and the manager is the well the fund manager right so if you are going to buy that means invest in the unit trust fund you are going to give your you are going to buy them from the from the trust manager so the answer is C moving on an investment manager believes that markets are inefficient and that he can obtain abnormal returns after transaction charges which investment style is he most likely going to adopt or is he most likely to adopt passive indexation active satellite easy right active so if you believe you can beat the market you go active those who believe that the market is inefficient believe that they can beat the market passive and indexation are the same and anybody who follows or does passive or indexation believes that the market is efficient satellite it's not mentioned by itself in the book it's core satellite and this means a mixture of passive and active nice continuing when given Financial advice on the subject of protection why is it important to quanti ify a client's asset of course when we say protection that means insurance so whenever you are recommending an insurance product to a client why is it important for you to calculate how much assets he has is it in order to determine whether the cost can can be offset against tax liabilities is it because you need to establish what Shone might rise if an insured event occurs to ensure that the underwriters have sufficient information to identify the client appropriate risk profile right so the answer is B because usually insurance when you take insurance usually this insurance is over your assets so why do you calculate how much assets you have let's say if you have assets of $100,000 that is to make sure that the insurance will cover all of the Assets in case an insured event happens for example if you are insuring your house against theft or burglary theft why is it important to calculate how much assets you have in the house it's because when the actual theft happens when the actual insured invent happens the insurance will cover you the true value of your assets that's why we usually value our assets whenever we are taking insurance so that we can make sure that the insurance amount will cover this asset in case we lose it so the answer is B if it doesn't then there is a shortfall so if we calculate how much assets we have let's say we have taken insurance for $80,000 $80,000 but after calculating our assets we discovered that the value of our asset is $100,000 so if the insurance event happens then the insurance amount will not be enough to cover the asset that we lost so there is a shortfall of $20,000 which tells you that you need to change or take another insurance contract so when considering the money supply money is accurately described as anything that is generally convertible to Sterling currency acceptable as a means of settling a debt sustain able in value over defined period tradable and held outside a bank or a building Society deposit just one second just open the chat yep so money money is accurately described as anything that is yep you are right B accept able as a means of settling the debt and usually see it written on usually on currencies that please accept this currency as a legal tender for settling of debt nice so before we move on M is asking regarding the previous question yeah uh before we answer ihab you said c sustainable in value over defined period of Peri defined period no money doesn't have the same value over a period of time money loses value over a period of time in the previous question in case of depository and ACD Who Sold assets what do you mean who sold assets I don't know what this means who solds assets you mean who who uh the not sold assets me who sells me the the the the shares the units what this question is asking you is if you want to invest in a unit trust where do you buy units not the ass unit trust has assets and these assets are the shares or the bonds or the property what this is asking you is if you if you want to invest in the unit trust in this fund how do you invest in it how do you buy the units you buy it from the manager now if this is an O an open-ended Investment company uh he's still buying from the manager in this case this manager is the ACD his name is an ACD you are not buying the asset you are not the asset is what the fund is investing in you're not buying the asset you're buying a share a unit in that fund and you buy it from the AC now technically speaking if you want to be technical most of these managers the ACD or the or the manager or the mutual fund manager there's usually a third party between you and them and this third party can be a bank can be Insurance can be a fun Supermarket can be any third party which has an AG agreement with this fund but the whole point is is that you buy it from the manager you don't buy it from the stock market moving on so let's start with the math when what is a company's interest cover if its profit before interest and tax is10 million his post tax profit is £6 million and its interest payable is 22 million let's pick up our calculators right so interest cover equals to your interest payable over your profit which profit The Profit before interest and tax not the post tax post tax means after tax tax no you don't use your after tax profit you use your profit before tax before interest in tax so the interest payable is 2 million no I'm sorry I think this opposite is the pbit is the profit before interest in tax over the interest payable sorry I haven't had coffee yet so the profit before interest in tax is 10 Mill million and interest payable is2 million that means our interest cover is five times that means our profit can cover the interest that we have to pay on our loans five times over moving on what would a company's interest cover figure of 1.2 indicate now not is in the previous question uh uh our interest cover here is five right so the question is asking you in this one what if the interest cover is equal to 1.2 what does that mean its interest expenses have increased by 1.2% over the last 12 months its interest expenses have increased by 20% over the last 12 months its ability to meet interest expensive is relatively strong its ability to meet interest expenses is questionable so according to cisi in the book before we continue what is interest cover interest cover is do you have enough profit to cover your interest payment on your loans this is when a company has taken debt and of course they have to pay annual interest on the debt do they have enough profit to pay the interest on that debt that's the cover do you have enough profit to cover your interest payments so according to cisi the interest cover should be at least 1.5 and above to show you that this company is able to pay its interest cover or its interest expenses now since this question is is asking you that the company has an interest cover of 1.2 then that tells you H that this company might be in trouble they might not be able to pay their interest so the answer is D its ability to meet expense interest expenses may be questionable they might not be able to pay the interest on their loans this year next a company's profit after tax is 2 million it has 4 million ordinary shares in issue and it share price PR is 300 P what is its price earnings ratio or its PE ratio okay so PE ratio this means price over earnings price per share over earnings per share right so what is the price per share the price per share is 300 p now since the earnings are given to you in pound convert the share price to pound Pence is like Phils so 300 p is £3 so the price of a share is £3 what is the earnings per share well the company's profit or earnings is2 million but this2 million is not for one share this 22 million is for 4 million shares that means this2 million will have to be distributed on four on two this 2 million pounds will have to be distributed on four million shares how much will each one of these shares get each ones of these shares will get half a pound if 2 million shares if $2 million are distributed onto 4 million shares every every share will get 50 P or 50 cents or 50 fills so this is the earnings per share every share will get 50 cents so the answer is six the PA ratio is six moving on what is a company's price to book ratio if its share price is 300 P the nav per share is 150 and the PE Ratio is 10 right so PB ratio when we say price we mean market price when we say book we mean the net asset value of the share in its books the price of the share in the book so what's this is comparing is the price of the share in the market and the price of the share in its own account so what is the market price is 300 P that's the that's the price in the market to book how much the price is the nav of the nav or the price in the books 150 so this is going to give you two PE ratio of 10 is useless information and we are not good to use it in this question so the answer is B moving on ha let's see who's going to answer this one I wrote this question this morning I I just wanted to give you something a bit challenging um but let's see if you're going to solve it a firm's dividend yield is 5% and it distributes $2 per share what is the firm's PE ratio if its earnings are $200 million and total number of shares is 50 million I'm actually going to give you 30 seconds for this one that for so we're starting to get the answers let's see uh what is the question asking us what is is the PE Ratio so the question is asking us for the PE Ratio which is the price over the earnings right so the earnings earnings per share so do we have the price no do we have the earnings per share so the price we don't have it what is the earnings per share so you've got $200 million will be distributed to 50 million shares that means every share is going to get 200 million over 50 every share is going to get $4 in earnings so there will be $4 in earnings so what is the price of the share we don't have it but we can get it from this line right so this line says the dividend yield the dividend yield which is equal to uh the dividend you distribute over the price of the share so the dividend yield is 5% the dividend is $2 per share what is the price we can get the price here so price is X what we do X comes here five comes here so this tells you that X which is the price the price equals to $2 over 5% so this is going to give you 40 $ so now we have the price is $40 so we can put the price here $40 40 over 4 10 so the PA ratio is 10 right you guys got it right thank you next when recommending an investment product to a client what material information must must the advisor disclose in order to satisfy the fiduciary relationship that exists between the two parties so when you recommend a product what information you should give your client because of your fiduciary duty towards them only the details which have been specifically requested by the client that means if you didn't request other information don't give them that information whatever is needed to prod a guaranteed return only details which are considered to affect the investment risk whatever is needed in order for the client to make an informed decision right d whatever is needed in order for the client to make an informed decision so you cannot say oh the client did not ask me for this so I'm not going to tell him no you have to give him all of the information he needs to make a a an informed decision puts options derivatives yes so um I've created a few questions on options for you so I've got I think two or three tough ones for you let's see if you can solve them Mary sold a put option to John at a strike price of 50 on majority the market price was 45 which of the following statements is true Mary has benefited John has benefited neither has benefited both have benefited let's see what let's see if you can solve this just give it a few times if you draw Mary and John please maen before you continue neither has benefited someone this is a derivative contract in a derivative contract someone always benefits or you probably gave up MTH and you don't want to to even think about it so the the answers are either A or B okay fine let's see who's right again let's see if you've drawn the question so Mary in this case Mary she sold she offered a a a put option to John so in this case John is the holder and Mary is the writer good so when John the holder takes a put option from Mary that means John has the right to sell Mary is the one who sold the option offered the option to John so when you offer an option you sell it to the guy this action here when you sell an option to somebody else then you are the writer if that somebody else accepts it then he is the holder what is this option this option that you have offered him is a put option that means you are giving him the right to sell at what price you are giving him the right to sell at $50 good this is the price that you agree on on maturity the price in the market is $45 so what will JN do will John exercise his right and sell to you at 50 or will John take the asset and go sell it in the Market at 45 if he takes it to the market he's crazy because the market is offering him a lower price so if he goes to the market he's losing so what will John do John will exercise so John will make money John has benefited Maan is saying she will not exercise of course she will not exercise Mary is the writer the writer doesn't have any right the person who's going to exercise is John he is the holder so even though I know in the training I always say Mary is the holder but in the exam anybody can be a holder in this case John is the holder and not Mary good so um let's do another one and this one is tough a put option is at break even when the underly share price is equal to the exercise Price Less the premium the underlying share price is equal to the exercise Price Plus the premium the underly share price is equal to the exercise price a put option is never at break even it's a tough one let's see if you're going to get it I'm sorry I see a new person here Dua Han uh please are you part of the I don't think I have your name on the list is this a different person somebody new to the team who is Du hanif ah Jif okay okay sorry so most of you are saying C some of you are saying D some of you are saying a right so I am not asking you if a put option uh is at the money when we say an option is at the money that means the strike price is equal to the market price what does that mean in the previous example the price that John and Mary agreed on is $50 the market price was 45 now if the market price was also 50 then this is called at the money this is not a break even a break even is when the holder didn't profit didn't lose so when the underlying share price is equal to the xss price this is when the option is at the money so this is the wrong answer a put option is never at break even all options can be at break even a call or a put can be at break given so put option again draw them so in this case let's say we draw John offers a put to Mary and Mary accepts it in this case Mary is the holder and John is the writer so he offers our a put at $50 that means she can sell this asset at $50 on maturity right right let's say on maturity of the option the price in the market is 48 will Mary exercise this put option yes why because instead of selling to the market at 48 Mary will sell to John at 50 because that was the agreement so when the price went down Mary benefited because she can now sell at $50 instead of going to the market to sell at 48 but you will say wait a minute Mary when you entered into this contract with John you pay the premium every option putor call has has a premium where the holder pays the writer what was the premium that Mary paid Mary paid a premium of $2 so technically speaking when the option matured and Mary could sell the option to John at 50 instead of selling it at 48 Mary made $2 on the difference here but Mary already paid $2 as a premium so Mary did not make any money that is the break even so what is the break even the break even for Mary is $50 the strike price minus $2 premium 48 that means if the market was $48 on maturity Mary will not lose but will not profit that is her break even price it's not $50 $50 is the price that they agreed on but Mary paid a premium and this premium is gone kalas she will not get it anymore so this premium is a cost on Mary so in order for Mary to break even with the market the market needs to go down to 48 in order for Mary to profit the market needs to go down below 48 probably to 47 in this case if the market price goes down to 47 and Mary has the right to sell the asset at 50 Mary will sell the asset to John at 50 she will sell it to John at 50 and this has cost her $2 so what she will actually make is 48 what is the price in the market 47 the difference for her is $1 profit so the answer is the underly share price is equal to the exercise price price minus the premium of course and the opposite is true if this is a call option in a call option you've got Mary the holder and you've got John Mary has the right to buy an asset for 50 that's a call option huh now when they came to the market the market price let's say was $55 let's say $52 so Mary can either buy this asset from John at 50 or she can go and buy it from the market at 52 she's not crazy she's not going to go buy it at the higher price so she'll say no I won't buy it from the market I will buy it from John at 50 but that doesn't mean that Mary made a profit on the difference because when Mary came into this call option contract Mary gave John a $2 premium that means technically if she's buying this stock from him at $50 she doesn't have she doesn't she shouldn't forget the $2 that she gave him at the beginning so technically speaking this stock has cost her $52 the $2 premium plus the $50 that she is now paying to buy it so all in all this stock has cost her 52 and the market is at 52 two that means Mary is breaking even so in a call option the break even is the strike Price Plus the premium which is the answer B so B is a call option break even question a answer a sorry is a put option break even s already hates me okay sir since you already hate me continue with that and do this mathematical question please calculate the geometric mean for the following data set so 3 7 3% 7% -2% 9% 1% please give me the geometric mean so let's let me do it quickly for right we've started to see answers uh let's just give our colleagues uh just a few more seconds for them to give their answers so so all of you are wrong it's all right let's solve it together uh geometric mean geometric mean is basically the numbers m multiplied by each other and then the square root right square root of their n so what is the geometric mean of this is I mean in normal cases it would be 3x 7 by -2 by 9 by -1 Square < TK 5 but that won't work for us why doesn't that work for us it's because you have a negative number and you cannot square root a negative number let let me give you an example what is the square root of 16 four why because it is 4 by 4 that means the number multiplied by itself twice equals to 16 right what is the square root of -16 there is no square root of16 because there is no two numbers that you can multiply that will give you a negative by themselves at the same time so negative 4 by --4 = to + 16 the this is what a square is -4 SAR = to + 16 so it's impossible for you to have a negative for a square root it's impossible it's mathematically impossible now in this case I know in this case I know that you've got negative by negative so that's going to give you positive I know that I'm with you but assume in the exam that you get one of these numbers is just one of these numbers is a negative so let's say this is positive one so you cannot use this number that you just Ed the same way that you have calculated it the second problem with this is these are percentages so again this method of calculation is not recommended for percentages that's why when you have negative numbers in a data set it is best to add one to every number so if we have 3% 7% -2% 9% and -1% so what is 3% it is actually 0.03 right and this is 0.07 and this is NE 0.02 and this is 0.09 and this isga 0.01 right so we've removed the percentage we've now made it decimal so instead of multiplying these numbers by themselves add one to each of them and then the answer you get deduct one so 0.03 + 1 this is going to give you 1.03 times 1.07 notice that is not 3x 7 anymore or 3% by 7% anymore no it's 1.03 because we added one to it and 1.07 * 0.02 + 1 is going to give you 0.0 0.98 right 1us 0.02 = to 0.98 * 0.09 time 0.1 + 0.01 is 0.99 and then you square root it by five and whatever answer you get you remove one from it so in this case you you're going to get 1.031 one remove one from it this is going to get 0.031 one or if you want to convert it to percentage you just multiply by 100 to get a percentage you will get 3.11% so the answer is a so geometric mean you can follow this idea of just multiplying all of them together at the same time and then square root the answer this is where we call it quick and dirty that means it's a quick method gives you sort of a good enough answer but it's not 100% accurate if you look at the answers that we've given you here I made this question I have given you answers which are all close to each other so if you've got an answer which is 3.1 and then 6.7 and then 11 something yes these answers are very far using any method quickly might give you a Clos enough answer but in this case the answers are very close so you need to use the most accurate method secondly the answer the data set includes a negative number so you need to use the more accurate uh accur accurate method and the more accurate method is you add one to every number and then you remove one at the end please keep that in mind when we calculate in geometric mean so an investor buys a 6.5% per anom treasury bond in September how much will the next coupon payment be if the nominal value of the bond is $10,000 $1,300 $650 325 162.5 forgot everything he studied I'm going to resign I think you guys are going to make me probably retire and go back to Lebanon on a farm I'm not going to teach cisi anymore because of you guys so what are the answers are a mixture of ah shad and Muhammad are now changing their answers good so you figure out your mistake huh so um a treasure a bond is $10,000 that's the nominal and how much is the coupon the coupon is 6.5% that means the annual coupon is 650 this is the annual right now I told you during the training that assume that bonds pay coupon twice a year so if you buy a a bond in September when is the next payment the payments are every six months so the next payment is always going to be half of this because this 650 is going to be 3 to5 every 6 months so the first 6 months 3 to5 the second 6 month is 325 so whenever you buy this Bond if you buy it at this time or you buy it at this time the next coupon payment is going to be 350 right the next coupon payment is always going to be three sorry 325 and not 650 650 is the total coupon you are going to get at the end of the year so the next coupon payment is always going to be 325 in the exam assume that bonds pay coupon twice a year unless cisi tells you [Music] otherwise

[Music] anyway uh we can&#39;t spend any more time on this I&#39;m sorry uh nidal search please tell him we&#39;ve started so question number one as usual we read the question you&#39;ve got 10 seconds to answer you give me your answers question number one Structured Products are designed to incorporate an element of capital protection while participating in the returns achieved from investment in a higher risk on the line security the capital protection is provided through which of the following welcome n all so uh a structure products are mainly based on derivatives derivatives like swaps Futures and options um and these derivatives will be based of course on other assets so they can be based on Commodities they can be based on stocks they can be based on bonds so structural products are mostly based on derivatives and that part of the derivatives is what guarantees the protection for the investor um uh I mean they do give you exposure to bonds stock here it says debenture stock what is debenture stock by the way here&#39;s a question give me your answer what is debenture stock okay so you&#39;re saying bonds Ahmed GDA not government bonds debenture is Corporate bonds secured bonds so the word stock here is confusing it&#39;s like where cisi says loan stock loan stock here doesn&#39;t mean stocks shares as home no loan stock means investment loan means Bond if it&#39;s a debenture then this loan is a secured loan a secured Bond of course secured debentures secured Bonds in the UK If you say debenture to an American am or to a Canadian to them is the opposite it&#39;s unsecured Bond but since this is a UK qualification a debenture is a secured Bond keep that in mind so they do give you exposure to bonds and to Commodities but not directly through it&#39;s through derivatives moving on question number two where an investment fund established in the UK satisfi IES the uset directive and is sold in another EU country what is the position regarding local taxes and local marketing laws what this is saying is that the fund comes from the UK and wants to attract investors from the EU so this fund wants European investors to give it money since let&#39;s say it&#39;s going to the EU let&#39;s say it&#39;s going to Germany It&#39;s a UK fund the question is asking you what does the UK fund has to do when it comes to taxes in Germany and when it comes to Marketing in Germany it will not be subject to either that means it doesn&#39;t have to follow it doesn&#39;t have to follow German tax or German marketing laws it is subject to German tax but not German marketing laws and so forth it will be subject to German marketing laws but not German taxes or it will be subject to both German taxes and German markety laws right so the answer is B any fund which wants to uh do marketing to retail in the EU needs to have uset approval and when they get the uset approval depending on which country they want to attract investors in France or Germany or Spain they&#39;ll still have to follow the the the the the rules and the laws in that country also so the answer is D moving on where funds are set aside to provide for the future Financial maintenance of a disabled child this can normally be achieved through the establishment of a legal document called a cicile trust a grant of representation power of attorney right so a trust yep easy one um so whenever you want to put money aside for usually a future beneficiary uh you can either do that as a will or you can do that as a trust trusts can be used as Wills it&#39;s not a codicil a codicil is a is an addendum attached to a contract contct in Arabic so so if you have a contract and you want you want to add something to the contract you attach a cile to it cils are usually attached to Wills so you&#39;ve made a will and you want to attach a new document to the will that&#39;s called a Cil so it&#39;s not it a grant of representation is a document that proves if you are a lawyer that you have a power to represent your client when he&#39;s dead power fraternity is a document that you can uh represent somebody when he&#39;s live so that&#39;s not e either it&#39;s trust moving on participation where are the ladies May Leila Jamila we need participation HR ask me to take participation so not just attendance we need to because we we&#39;re going to be looking who&#39;s parti participa and who&#39;s not please participate which out the following is a factor that must be considered when constructing a portfolio when constructing a portfolio verification of the client&#39;s identity the client&#39;s risk tolerance the category of investment service required performance measurement so notice here we&#39;re saying that when constructing a portfolio so this is at the early stages right so the risk declines risk tolerance simple verification of the client&#39;s identity doesn&#39;t come when you are constructing a portfolio the verification comes when you are establishing the business relationship when you are opening the account a constructing a portfolio comes way later it comes after you&#39;ve sat down and you&#39;ve discussed the client&#39;s aims and goals um so it&#39;s not at the beginning the category of investment service required no performance measurement this comes not when you are constructing a portfolio when you are evaluating a portfolio evaluating this this comes after you&#39;ve invested evaluating the portfolio moving on which mix of Investments is most appropriate for a risk averse investor 50% Commodities 50% equities 50% cash 50% guilt 50% foreign exchange 50% cfds cfds are contract for differences a type of derivative and 50% property and 50% pibs pibs I think are permanent interest bearing Securities such as Perpetual bonds right so 50% guilts 50% cash nice now the questions have been a bit easy right because we&#39;re still beginning we still need to be friends you know I&#39;m not going to make you hate me from the first half an hour just when you&#39;ve remembered how much you love me that&#39;s when the questions will start coming moving on which of the following is a feature of the Arbitrage pricing Theory a AP or Arbitrage pricing Theory relies on identified factors being correlated B the variables of AP include real economic factors C the principal component of AP is the return on an index of all shares D AP is equivalent to a single Factor cap right so the variables of an AP include real economic Factor this is the difference between AP and capm a a AP relies on identified factors being correlated no being uncorrelated that means when you are calculating AP and you are using different factors let&#39;s say you are using inflation you are using interest rates you are using GDP when you are calculating the AP the formula assumes that these are not correlated so a says which AP relies on the factors being correlated no it relies on them being uncorrelated the principal component of AP is the return on an index of all shares no it can be on an index of the top 50 shares it can be an index of whatever AP is equivalent to a single Factor capm no AP uses multiactor capm capm the capital asset pricing model this is single factor and this is the problem with capm is that people criticize capm because it takes only one risk into consideration which is beta right the P of the stock so that&#39;s why we came up with the a AP is the equivalent of a multiactor capm moving on which of the following is an offense under the market abuse legislation a a stock broker dealing in a stock in which they have received price sensitive information a stock broker fueling rumors of of outstanding results for a small company A Private Client buying outside normal Market size with one broker and not telling their usual broker about it a private client telling their friends about a company that they think is going to be taken over right Market abuse I said in the exam if you get a questions on Market abuse most likely look for the answer that says rumors so the answer is going to be a stock broker fuel rumors of outstanding results for a small oil company to its client because the stock broker wants to benefit so he probably wants the price to go up so uh he starts spr spreading rumors so people can buy right which of the following rules applying to financial intermediaries is directly underpinned by the principle of fiduciary duty so which of the following is related to fiduciary responsibility right no you are saying B think the answer is wrong the answer is D best execution fiduciary responsibility is the relationship between an advisor usually I&#39;m just giving an example of course it has many relationship between an adviser and a client where an advisor is responsible for achieving uh the client&#39;s best interest so whenever receive fiduciary responsibility remember your responsibility towards your client disclosing commission no that&#39;s not the principle of fiduciary duty the very principle in Arabic assess of fiduciary duty of fiduciary responsibility is that you need to act in your client&#39;s best interest moving on what is the main purpose of a power of attorney document it appoints someone to distribute the assets of a deceased person it enables ownership of property to transfer from one person to another it allows one person to conduct specific transactions on behalf of another person it entitles one trustee to override the demands of another truste so what is the main purpose of a power of attorney of course a power of attorney is a document where um it gives you the power to act uh on behalf of somebody else as long as that somebody else is alive and uh of sound mind that means he&#39;s not alive and in a coma for example or he&#39;s not alive and insane so u a powerful tney is a document that allows one person to conduct specific transactions on behalf of another person as long as as long as this other person is alive and of sound sound means good and he&#39;s not crazy of sound mind of course uh don&#39;t forget there is something else called el lasting power of attorney this one this power of attorney continues to be valid even after death moving on if a client wanted to make additional contributions to an occupational pension scheme which of the following options would give him the greatest choice of provider and a say in how the invest the funds are investment are invested so you have a pension scheme with your employer and you want to uh uh uh choose the provider and where the funds will be invested so not just so we&#39;re not talking about the actual scheme with your provider it&#39;s an additional scheme uh so usually we have a defined benefit or Define contribution most likely Define contribution this is your scheme with your employer but there is usually limits on how you can how much you can invest in these schemes what if you want to invest additionally uh you can actually look for an AVC additional voluntary schemes or additional voluntary contributions that are linked to this um but some of these avcs are not very flexible so if you want a flexible additionally additional voluntary contribution one that allows you to choose the provider and how much the fund is invested you need to go for a freand in ABC which is a more flexible version of an ABC Right Moving On units in a unit trust fund are sold by which one of the following the trustee the register the manager the depository right so when you are buying a unit or a share in a unit trust fund uh you are going to be buying that from um from the manager because a unit trust fund is not listed in a stock exchange um of course not from the register and not from the depository because the depository is usually linked to an open-ended Investment Company so a trustee is the owner of the underlying assets and the manager is the well the fund manager right so if you are going to buy that means invest in the unit trust fund you are going to give your you are going to buy them from the from the trust manager so the answer is C moving on an investment manager believes that markets are inefficient and that he can obtain abnormal returns after transaction charges which investment style is he most likely going to adopt or is he most likely to adopt passive indexation active satellite easy right active so if you believe you can beat the market you go active those who believe that the market is inefficient believe that they can beat the market passive and indexation are the same and anybody who follows or does passive or indexation believes that the market is efficient satellite it&#39;s not mentioned by itself in the book it&#39;s core satellite and this means a mixture of passive and active nice continuing when given Financial advice on the subject of protection why is it important to quanti ify a client&#39;s asset of course when we say protection that means insurance so whenever you are recommending an insurance product to a client why is it important for you to calculate how much assets he has is it in order to determine whether the cost can can be offset against tax liabilities is it because you need to establish what Shone might rise if an insured event occurs to ensure that the underwriters have sufficient information to identify the client appropriate risk profile right so the answer is B because usually insurance when you take insurance usually this insurance is over your assets so why do you calculate how much assets you have let&#39;s say if you have assets of $100,000 that is to make sure that the insurance will cover all of the Assets in case an insured event happens for example if you are insuring your house against theft or burglary theft why is it important to calculate how much assets you have in the house it&#39;s because when the actual theft happens when the actual insured invent happens the insurance will cover you the true value of your assets that&#39;s why we usually value our assets whenever we are taking insurance so that we can make sure that the insurance amount will cover this asset in case we lose it so the answer is B if it doesn&#39;t then there is a shortfall so if we calculate how much assets we have let&#39;s say we have taken insurance for $80,000 $80,000 but after calculating our assets we discovered that the value of our asset is $100,000 so if the insurance event happens then the insurance amount will not be enough to cover the asset that we lost so there is a shortfall of $20,000 which tells you that you need to change or take another insurance contract so when considering the money supply money is accurately described as anything that is generally convertible to Sterling currency acceptable as a means of settling a debt sustain able in value over defined period tradable and held outside a bank or a building Society deposit just one second just open the chat yep so money money is accurately described as anything that is yep you are right B accept able as a means of settling the debt and usually see it written on usually on currencies that please accept this currency as a legal tender for settling of debt nice so before we move on M is asking regarding the previous question yeah uh before we answer ihab you said c sustainable in value over defined period of Peri defined period no money doesn&#39;t have the same value over a period of time money loses value over a period of time in the previous question in case of depository and ACD Who Sold assets what do you mean who sold assets I don&#39;t know what this means who solds assets you mean who who uh the not sold assets me who sells me the the the the shares the units what this question is asking you is if you want to invest in a unit trust where do you buy units not the ass unit trust has assets and these assets are the shares or the bonds or the property what this is asking you is if you if you want to invest in the unit trust in this fund how do you invest in it how do you buy the units you buy it from the manager now if this is an O an open-ended Investment company uh he&#39;s still buying from the manager in this case this manager is the ACD his name is an ACD you are not buying the asset you are not the asset is what the fund is investing in you&#39;re not buying the asset you&#39;re buying a share a unit in that fund and you buy it from the AC now technically speaking if you want to be technical most of these managers the ACD or the or the manager or the mutual fund manager there&#39;s usually a third party between you and them and this third party can be a bank can be Insurance can be a fun Supermarket can be any third party which has an AG agreement with this fund but the whole point is is that you buy it from the manager you don&#39;t buy it from the stock market moving on so let&#39;s start with the math when what is a company&#39;s interest cover if its profit before interest and tax is10 million his post tax profit is £6 million and its interest payable is 22 million let&#39;s pick up our calculators right so interest cover equals to your interest payable over your profit which profit The Profit before interest and tax not the post tax post tax means after tax tax no you don&#39;t use your after tax profit you use your profit before tax before interest in tax so the interest payable is 2 million no I&#39;m sorry I think this opposite is the pbit is the profit before interest in tax over the interest payable sorry I haven&#39;t had coffee yet so the profit before interest in tax is 10 Mill million and interest payable is2 million that means our interest cover is five times that means our profit can cover the interest that we have to pay on our loans five times over moving on what would a company&#39;s interest cover figure of 1.2 indicate now not is in the previous question uh uh our interest cover here is five right so the question is asking you in this one what if the interest cover is equal to 1.2 what does that mean its interest expenses have increased by 1.2% over the last 12 months its interest expenses have increased by 20% over the last 12 months its ability to meet interest expensive is relatively strong its ability to meet interest expenses is questionable so according to cisi in the book before we continue what is interest cover interest cover is do you have enough profit to cover your interest payment on your loans this is when a company has taken debt and of course they have to pay annual interest on the debt do they have enough profit to pay the interest on that debt that&#39;s the cover do you have enough profit to cover your interest payments so according to cisi the interest cover should be at least 1.5 and above to show you that this company is able to pay its interest cover or its interest expenses now since this question is is asking you that the company has an interest cover of 1.2 then that tells you H that this company might be in trouble they might not be able to pay their interest so the answer is D its ability to meet expense interest expenses may be questionable they might not be able to pay the interest on their loans this year next a company&#39;s profit after tax is 2 million it has 4 million ordinary shares in issue and it share price PR is 300 P what is its price earnings ratio or its PE ratio okay so PE ratio this means price over earnings price per share over earnings per share right so what is the price per share the price per share is 300 p now since the earnings are given to you in pound convert the share price to pound Pence is like Phils so 300 p is £3 so the price of a share is £3 what is the earnings per share well the company&#39;s profit or earnings is2 million but this2 million is not for one share this 22 million is for 4 million shares that means this2 million will have to be distributed on four on two this 2 million pounds will have to be distributed on four million shares how much will each one of these shares get each ones of these shares will get half a pound if 2 million shares if $2 million are distributed onto 4 million shares every every share will get 50 P or 50 cents or 50 fills so this is the earnings per share every share will get 50 cents so the answer is six the PA ratio is six moving on what is a company&#39;s price to book ratio if its share price is 300 P the nav per share is 150 and the PE Ratio is 10 right so PB ratio when we say price we mean market price when we say book we mean the net asset value of the share in its books the price of the share in the book so what&#39;s this is comparing is the price of the share in the market and the price of the share in its own account so what is the market price is 300 P that&#39;s the that&#39;s the price in the market to book how much the price is the nav of the nav or the price in the books 150 so this is going to give you two PE ratio of 10 is useless information and we are not good to use it in this question so the answer is B moving on ha let&#39;s see who&#39;s going to answer this one I wrote this question this morning I I just wanted to give you something a bit challenging um but let&#39;s see if you&#39;re going to solve it a firm&#39;s dividend yield is 5% and it distributes $2 per share what is the firm&#39;s PE ratio if its earnings are $200 million and total number of shares is 50 million I&#39;m actually going to give you 30 seconds for this one that for so we&#39;re starting to get the answers let&#39;s see uh what is the question asking us what is is the PE Ratio so the question is asking us for the PE Ratio which is the price over the earnings right so the earnings earnings per share so do we have the price no do we have the earnings per share so the price we don&#39;t have it what is the earnings per share so you&#39;ve got $200 million will be distributed to 50 million shares that means every share is going to get 200 million over 50 every share is going to get $4 in earnings so there will be $4 in earnings so what is the price of the share we don&#39;t have it but we can get it from this line right so this line says the dividend yield the dividend yield which is equal to uh the dividend you distribute over the price of the share so the dividend yield is 5% the dividend is $2 per share what is the price we can get the price here so price is X what we do X comes here five comes here so this tells you that X which is the price the price equals to $2 over 5% so this is going to give you 40 $ so now we have the price is $40 so we can put the price here $40 40 over 4 10 so the PA ratio is 10 right you guys got it right thank you next when recommending an investment product to a client what material information must must the advisor disclose in order to satisfy the fiduciary relationship that exists between the two parties so when you recommend a product what information you should give your client because of your fiduciary duty towards them only the details which have been specifically requested by the client that means if you didn&#39;t request other information don&#39;t give them that information whatever is needed to prod a guaranteed return only details which are considered to affect the investment risk whatever is needed in order for the client to make an informed decision right d whatever is needed in order for the client to make an informed decision so you cannot say oh the client did not ask me for this so I&#39;m not going to tell him no you have to give him all of the information he needs to make a a an informed decision puts options derivatives yes so um I&#39;ve created a few questions on options for you so I&#39;ve got I think two or three tough ones for you let&#39;s see if you can solve them Mary sold a put option to John at a strike price of 50 on majority the market price was 45 which of the following statements is true Mary has benefited John has benefited neither has benefited both have benefited let&#39;s see what let&#39;s see if you can solve this just give it a few times if you draw Mary and John please maen before you continue neither has benefited someone this is a derivative contract in a derivative contract someone always benefits or you probably gave up MTH and you don&#39;t want to to even think about it so the the answers are either A or B okay fine let&#39;s see who&#39;s right again let&#39;s see if you&#39;ve drawn the question so Mary in this case Mary she sold she offered a a a put option to John so in this case John is the holder and Mary is the writer good so when John the holder takes a put option from Mary that means John has the right to sell Mary is the one who sold the option offered the option to John so when you offer an option you sell it to the guy this action here when you sell an option to somebody else then you are the writer if that somebody else accepts it then he is the holder what is this option this option that you have offered him is a put option that means you are giving him the right to sell at what price you are giving him the right to sell at $50 good this is the price that you agree on on maturity the price in the market is $45 so what will JN do will John exercise his right and sell to you at 50 or will John take the asset and go sell it in the Market at 45 if he takes it to the market he&#39;s crazy because the market is offering him a lower price so if he goes to the market he&#39;s losing so what will John do John will exercise so John will make money John has benefited Maan is saying she will not exercise of course she will not exercise Mary is the writer the writer doesn&#39;t have any right the person who&#39;s going to exercise is John he is the holder so even though I know in the training I always say Mary is the holder but in the exam anybody can be a holder in this case John is the holder and not Mary good so um let&#39;s do another one and this one is tough a put option is at break even when the underly share price is equal to the exercise Price Less the premium the underlying share price is equal to the exercise Price Plus the premium the underly share price is equal to the exercise price a put option is never at break even it&#39;s a tough one let&#39;s see if you&#39;re going to get it I&#39;m sorry I see a new person here Dua Han uh please are you part of the I don&#39;t think I have your name on the list is this a different person somebody new to the team who is Du hanif ah Jif okay okay sorry so most of you are saying C some of you are saying D some of you are saying a right so I am not asking you if a put option uh is at the money when we say an option is at the money that means the strike price is equal to the market price what does that mean in the previous example the price that John and Mary agreed on is $50 the market price was 45 now if the market price was also 50 then this is called at the money this is not a break even a break even is when the holder didn&#39;t profit didn&#39;t lose so when the underlying share price is equal to the xss price this is when the option is at the money so this is the wrong answer a put option is never at break even all options can be at break even a call or a put can be at break given so put option again draw them so in this case let&#39;s say we draw John offers a put to Mary and Mary accepts it in this case Mary is the holder and John is the writer so he offers our a put at $50 that means she can sell this asset at $50 on maturity right right let&#39;s say on maturity of the option the price in the market is 48 will Mary exercise this put option yes why because instead of selling to the market at 48 Mary will sell to John at 50 because that was the agreement so when the price went down Mary benefited because she can now sell at $50 instead of going to the market to sell at 48 but you will say wait a minute Mary when you entered into this contract with John you pay the premium every option putor call has has a premium where the holder pays the writer what was the premium that Mary paid Mary paid a premium of $2 so technically speaking when the option matured and Mary could sell the option to John at 50 instead of selling it at 48 Mary made $2 on the difference here but Mary already paid $2 as a premium so Mary did not make any money that is the break even so what is the break even the break even for Mary is $50 the strike price minus $2 premium 48 that means if the market was $48 on maturity Mary will not lose but will not profit that is her break even price it&#39;s not $50 $50 is the price that they agreed on but Mary paid a premium and this premium is gone kalas she will not get it anymore so this premium is a cost on Mary so in order for Mary to break even with the market the market needs to go down to 48 in order for Mary to profit the market needs to go down below 48 probably to 47 in this case if the market price goes down to 47 and Mary has the right to sell the asset at 50 Mary will sell the asset to John at 50 she will sell it to John at 50 and this has cost her $2 so what she will actually make is 48 what is the price in the market 47 the difference for her is $1 profit so the answer is the underly share price is equal to the exercise price price minus the premium of course and the opposite is true if this is a call option in a call option you&#39;ve got Mary the holder and you&#39;ve got John Mary has the right to buy an asset for 50 that&#39;s a call option huh now when they came to the market the market price let&#39;s say was $55 let&#39;s say $52 so Mary can either buy this asset from John at 50 or she can go and buy it from the market at 52 she&#39;s not crazy she&#39;s not going to go buy it at the higher price so she&#39;ll say no I won&#39;t buy it from the market I will buy it from John at 50 but that doesn&#39;t mean that Mary made a profit on the difference because when Mary came into this call option contract Mary gave John a $2 premium that means technically if she&#39;s buying this stock from him at $50 she doesn&#39;t have she doesn&#39;t she shouldn&#39;t forget the $2 that she gave him at the beginning so technically speaking this stock has cost her $52 the $2 premium plus the $50 that she is now paying to buy it so all in all this stock has cost her 52 and the market is at 52 two that means Mary is breaking even so in a call option the break even is the strike Price Plus the premium which is the answer B so B is a call option break even question a answer a sorry is a put option break even s already hates me okay sir since you already hate me continue with that and do this mathematical question please calculate the geometric mean for the following data set so 3 7 3% 7% -2% 9% 1% please give me the geometric mean so let&#39;s let me do it quickly for right we&#39;ve started to see answers uh let&#39;s just give our colleagues uh just a few more seconds for them to give their answers so so all of you are wrong it&#39;s all right let&#39;s solve it together uh geometric mean geometric mean is basically the numbers m multiplied by each other and then the square root right square root of their n so what is the geometric mean of this is I mean in normal cases it would be 3x 7 by -2 by 9 by -1 Square &lt; TK 5 but that won&#39;t work for us why doesn&#39;t that work for us it&#39;s because you have a negative number and you cannot square root a negative number let let me give you an example what is the square root of 16 four why because it is 4 by 4 that means the number multiplied by itself twice equals to 16 right what is the square root of -16 there is no square root of16 because there is no two numbers that you can multiply that will give you a negative by themselves at the same time so negative 4 by --4 = to + 16 the this is what a square is -4 SAR = to + 16 so it&#39;s impossible for you to have a negative for a square root it&#39;s impossible it&#39;s mathematically impossible now in this case I know in this case I know that you&#39;ve got negative by negative so that&#39;s going to give you positive I know that I&#39;m with you but assume in the exam that you get one of these numbers is just one of these numbers is a negative so let&#39;s say this is positive one so you cannot use this number that you just Ed the same way that you have calculated it the second problem with this is these are percentages so again this method of calculation is not recommended for percentages that&#39;s why when you have negative numbers in a data set it is best to add one to every number so if we have 3% 7% -2% 9% and -1% so what is 3% it is actually 0.03 right and this is 0.07 and this is NE 0.02 and this is 0.09 and this isga 0.01 right so we&#39;ve removed the percentage we&#39;ve now made it decimal so instead of multiplying these numbers by themselves add one to each of them and then the answer you get deduct one so 0.03 + 1 this is going to give you 1.03 times 1.07 notice that is not 3x 7 anymore or 3% by 7% anymore no it&#39;s 1.03 because we added one to it and 1.07 * 0.02 + 1 is going to give you 0.0 0.98 right 1us 0.02 = to 0.98 * 0.09 time 0.1 + 0.01 is 0.99 and then you square root it by five and whatever answer you get you remove one from it so in this case you you&#39;re going to get 1.031 one remove one from it this is going to get 0.031 one or if you want to convert it to percentage you just multiply by 100 to get a percentage you will get 3.11% so the answer is a so geometric mean you can follow this idea of just multiplying all of them together at the same time and then square root the answer this is where we call it quick and dirty that means it&#39;s a quick method gives you sort of a good enough answer but it&#39;s not 100% accurate if you look at the answers that we&#39;ve given you here I made this question I have given you answers which are all close to each other so if you&#39;ve got an answer which is 3.1 and then 6.7 and then 11 something yes these answers are very far using any method quickly might give you a Clos enough answer but in this case the answers are very close so you need to use the most accurate method secondly the answer the data set includes a negative number so you need to use the more accurate uh accur accurate method and the more accurate method is you add one to every number and then you remove one at the end please keep that in mind when we calculate in geometric mean so an investor buys a 6.5% per anom treasury bond in September how much will the next coupon payment be if the nominal value of the bond is $10,000 $1,300 $650 325 162.5 forgot everything he studied I&#39;m going to resign I think you guys are going to make me probably retire and go back to Lebanon on a farm I&#39;m not going to teach cisi anymore because of you guys so what are the answers are a mixture of ah shad and Muhammad are now changing their answers good so you figure out your mistake huh so um a treasure a bond is $10,000 that&#39;s the nominal and how much is the coupon the coupon is 6.5% that means the annual coupon is 650 this is the annual right now I told you during the training that assume that bonds pay coupon twice a year so if you buy a a bond in September when is the next payment the payments are every six months so the next payment is always going to be half of this because this 650 is going to be 3 to5 every 6 months so the first 6 months 3 to5 the second 6 month is 325 so whenever you buy this Bond if you buy it at this time or you buy it at this time the next coupon payment is going to be 350 right the next coupon payment is always going to be three sorry 325 and not 650 650 is the total coupon you are going to get at the end of the year so the next coupon payment is always going to be 325 in the exam assume that bonds pay coupon twice a year unless cisi tells you [Music] otherwise

Transcript for:Structured Products, Investment Funds, and Financial Concepts

Transcript for:
Structured Products, Investment Funds, and Financial Concepts