ABA CTFA Exam Questions

Question 6 of 794

When constructing a portfolio for a UK resident basic-rate taxpayer who requires an income, the most tax efficient solution would be achieved by:

Only investing in offshore products

Holding fixed-interest funds within a stocks and shares ISA

Purchasing National Savings & Investments (NS&I) Fixed-Interest Savings Certificates

Holding high-yielding equities within a stocks and shares ISA

Correct Answer: B

Question 7 of 794

The principal reasons for using the Sharpe ratio when calculating a portfolio's performance are:

It indicates the percentage return above/below the risk-free rate for each unit of risk taken

It will always be quoted on a rolling quarterly basis

A positive Sharpe ratio will always guarantee positive returns

The higher the number, the more a portfolio manager can be said to have added value

Correct Answer: A, D

Question 8 of 794

Pauline, a basic-rate taxpayer, has a portfolio which comprises of various equity and fixed-interest unit trusts and OEICs. She should be aware that:

Any losses from this portfolio are allowable for Capital Gains Tax calculations

Her entire portfolio will be subject to a 10% tax credit

Only the proceeds of sale from the OEICs could be subject to Capital Gains Tax

The taxation of dividends on the OEICs held will be treated the same way as the unit trusts

She can never reclaim any tax deducted at source

Correct Answer: A, D

Question 9 of 794

Philip took out a qualifying onshore endowment policy for 20 years which he made paidup in year 9. This means that he may become personally liable to tax on the policy proceeds:

At maturity

If he makes a partial surrender

If he assigns the policy to his wife

On settlement of a critical illness claim

Correct Answer: A, B

Question 10 of 794

Bill, a single man, having made full use of his annual gift allowances, made a potentially exempt transfer of Â£100,000 four and a half years before his death. He has made no other gifts. His residual estate is now valued at Â£500,000. The Inheritance Tax liability at death is:

Â£30,000

Â£46,000

Â£94,000

Â£110,000

Correct Answer: D