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CISI Securities Exam Questions and Answers
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CISI Securities Exam Questions and Answers
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CISI: Securities Exam Questions andAnswers
What is the difference between cross rate and direct rate? (2) - Answer -A direct rate
involves one domestic currency, while a cross rate involves two foreign currencies that
are calculated through a third currency eg (EUR/JPY, GBP/AUD, AUD/NZD, and
USD/CHF)
What are French gov bonds called, when are coupon interest payments paid and when
is settlement? (2) - Answer -OATs, PAID ANNUALLY and T+2
What are the different German gov bonds called, when are the interest payments paid,
and when is settlement? (2) - Answer -- Schatz < 2 years
- Bobl 5 years
- Bund > 10 years
PAID ANNUALLY
T+2
What are the names of the different US bonds, their maturities, and their settlement? (2)
- Answer -- T-bills, less than a year and T+0
- T-notes, 2-10 years and T+1
- T-bonds, > 10 years and T+1
What is meant by ex-dividend?(2) - Answer -This is the day on which a stock begins
trading without the dividend. If you buy the stock on or after this day, you are not entitled
to the dividend payment. In other words, the stock is trading "ex" or "without" the
dividend.
What is meant by cum-dividend?(2) - Answer -This is the opposite of ex-dividend. It
refers to a stock that is trading with the dividend included. If you buy the stock before
the ex-dividend date, you are entitled to receive the dividend payment, and the stock is
said to be trading "cum" or "with" the dividend.
What's the difference between floating and fixed charge? (2) - Answer -A floating charge
is created over a changing pool of assets, while a fixed charge is created over specific
assets that cannot be sold or used without the lender's consent until the debt is fully
repaid.
, What are bonds issued with a fixed charge referred to as?(2) - Answer -Debenture
What is the purpose of an SPV?(2) - Answer -A legal entity is set up for a specific
purpose or project to limit risk exposure and protect the interests of investors or lenders.
They can hold assets, enter contracts, and raise capital independently of the sponsor.
What are covered bonds?(2) - Answer -Debt securities backed by a pool of high-quality
assets, like mortgages or public sector loans. They are issued by banks and other
financial institutions and are considered lower-risk investments because they are
backed by assets that generate steady cash flows.
What are the different types of trustees in structured finance transactions?(2) - Answer
-- Note trustees: Represent the interests of securities holders.
- Security trustees: Hold securities or properties for the benefit of secured parties.
- Share trustees: Hold shares in an issuing SPV to ensure off-balance-sheet treatment.
- Successor trustees: Replace a trustee with conflicts of interest or cannot continue due
to work requirements.
What are the three tiers of debt?(2) - Answer -- Senior debt: This is the highest-ranking
debt, which has priority over all other debt and must be repaid first in the event of
default.
- Subordinated debt: This is a middle-ranking debt that is subordinated to senior debt
but has priority over equity.
- Mezzanine debt: This is the lowest-ranking debt, which is subordinated to senior and
subordinated debt.
What is the par value?(2) - Answer -The face value or nominal value of a bond or stock.
It represents the amount that the issuer agrees to pay back to the bondholder or
shareholder upon maturity or redemption of the security.
What is a preference share?(2) - Answer -Pay a fixed dividend and generally have no
voting rights, but get paid dividends before ordinary shareholders and are paid out
before them in the event of liquidation
What are the different types of preference shares?(2) - Answer -- Cumulative
preference shares: Accumulate unpaid dividends and pay them out in future years.
- Participating preference shares: Receive a fixed dividend and also share in the
company's profits with ordinary shareholders.
- Redeemable preference shares: Enable the company to buy back the shares from the
shareholder at an agreed price in the future.
- Convertible preference shares: Allow the shareholder to convert the preference shares
into a predetermined number of ordinary shares.
- Zero coupon preference shares: Pay no dividend, but offer an upside to the
shareholder in that they redeem at a price above that at which they are issued.
How do you calculate flat yield?(2) - Answer -Flat yield = (annual coupon/price) x 100
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