aba ctfa practice test

Simon has experience of dealing with retail clients and is now in training to qualify as a pension
transfer specialist. As a consequence, which of the following statements are true?

• A. He must have at least 3 years experience as an adviser before his training can commence
• B. His firm is allowed to impose a time limit on completion of the qualification
• C. His supervisor must also be suitably qualified
• D. Once qualified, CPD requirements are waived for 12 months
• E. Once qualified, records of his training must be maintained for at least 5 years

The efficient frontier curve shows the optimum balance between:

• A. Risk and return
• B. Return and taxation
• C. Taxation and risk
• D. Inflation and return

A UK investor holds a portfolio of overseas equities and is concerned about the exchange rate risk.
Which strategy could he use to mitigate this risk?

• A. Arbitrage
• B. Gearing
• C. Hedging
• D. Pound cost averaging

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

• A. Only investing in offshore products
• B. Holding fixed-interest funds within a stocks and shares ISA
• C. Purchasing National Savings & Investments (NS&I) Fixed-Interest Savings Certificates
• D. Holding high-yielding equities within a stocks and shares ISA

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

• A. It indicates the percentage return above/below the risk-free rate for each unit of risk taken
• B. It will always be quoted on a rolling quarterly basis
• C. A positive Sharpe ratio will always guarantee positive returns
• D. The higher the number, the more a portfolio manager can be said to have added value

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:

• A. Any losses from this portfolio are allowable for Capital Gains Tax calculations
• B. Her entire portfolio will be subject to a 10% tax credit
• C. Only the proceeds of sale from the OEICs could be subject to Capital Gains Tax
• D. The taxation of dividends on the OEICs held will be treated the same way as the unit trusts
• E. She can never reclaim any tax deducted at source

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:

• A. At maturity
• B. If he makes a partial surrender
• C. If he assigns the policy to his wife
• D. On settlement of a critical illness claim

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

• A. £30,000
• B. £46,000
• C. £94,000
• D. £110,000

On Brian’s death, his estate was valued at £820,000. He bequeathed £40,000 to a registered charity
and split the balance equally between his registered civil partner and his brother. Assuming he made
no lifetime transfers, what will the Inheritance Tax liability be?

• A. £22,750
• B. £26,000
• C. £29,750
• D. £34,000

Trevor is a member of a defined benefit company pension scheme. Which factor relating to his
circumstances confirms that he will avoid incurring a special annual allowance charge in the current
tax year?

• A. He is a member of an Employer Financed Retirement Benefit Scheme (EFRBS)
• B. He is aged 61
• C. His total annual earnings have never exceeded £110,000
• D. His benefits include the maximum level of death benefit