RSE Practice Questions

A.  

Comparing the fund’s diversification with similar products in the market

B.  

Reviewing the fund’s historical returns to confirm steady performance

C.  

Assessing the fund’s exposure to interest rate fluctuations and credit risks

D.  

Evaluating the fund’s marketing materials for clarity on investment objectives

A.  

To avoid liquidity risk, all assets in a portfolio should be short-term and traded on a secondary market

B.  

A diversified portfolio with a mix of liquid and illiquid assets helps improve returns while reducing liquidity risk

C.  

Investing in private securities generally provides more liquidity than investing in publicly traded stocks

D.  

Liquidity risk is specific to fixed-income securities and has little impact on equity investments

A.  

Execute the sale because the Trusted Contact Person is acting to protect the client

B.  

Execute the sale after obtaining the Trusted Contact Person’s written confirmation

C.  

Decline to accept the trading instruction and follow the firm’s procedures for addressing the capacity concern

D.  

Transfer control of the account temporarily to the Trusted Contact Person

A.  

It would favor the high-earnings company if earnings growth is sustainable

B.  

It would suggest investing only in dividend-paying stocks

C.  

It would prioritize short-term price movements over long-term performance

D.  

It would disregard earnings data and focus only on trading volume

A.  

Legitimate arbitrage

B.  

Wash trading

C.  

Best execution

D.  

Passive market making

A.  

Proceed because the loan is interest-free and the client has voluntarily agreed

B.  

Proceed after documenting the arrangement in the client’s account notes

C.  

Do not proceed because borrowing from a client generally creates a prohibited personal financial dealing

D.  

Proceed if the client signs a conflict-of-interest disclosure

A.  

They are highly liquid but suffer from regulatory restrictions on trading volume

B.  

They are the most liquid security type, offering better price execution

C.  

They have equal liquidity risk as all are exchange traded

D.  

They are typically less liquid, leading to wider bid-ask spreads

A.  

They provide voting rights in corporate decisions, allowing shareholders more influence over management

B.  

They offer more predictable dividend payments than common shares, reducing income uncertainty

C.  

They have the highest claim on assets in case of liquidation, ensuring stronger financial protection

D.  

They provide additional dividends when company profits exceed a set threshold, increasing investor returns

A.  

Continue the existing strategy until the next scheduled annual review

B.  

Immediately sell all equity investments

C.  

Update the client’s KYC information and reassess the account’s suitability

D.  

Transfer the account to an order execution only platform

A.  

Fixed-rate perpetual bond

B.  

Floating-rate bond

C.  

Zero-coupon bond

D.  

Strip bond