Collective Investment Schemes Quiz

Comprehensive quiz covering collective investment vehicles including unit trusts, open-ended funds, investment trusts, and their structures, pricing, and taxation.

Topics Covered: Unit trusts, open-ended investment companies, accumulation vs distribution units, bid-offer spreads, trustees, fund managers, and tax treatment of collective investments.

This quiz is specifically designed for investment professionals, financial advisers, and individuals preparing for financial services and investment management examinations.

Collective investments quiz, unit trusts, OEICs, investment funds, bid-offer spread, accumulation units, financial services

Collective Investment Schemes Quiz

1. What is the primary advantage of collective investments for individual investors?

A. Risk free returns on investment.
B. Access to skilled investment managers and diversification.
C. Capital gains paid by the provider.
D. Very high risk and high reward.

2. What is the main characteristic of an open-ended investment fund?

A. It has a fixed number of shares that cannot be increased.
B. It invests exclusively in fixed-income securities.
C. It is only available to institutional investors.
D. It can create or cancel units based on investor demand.

3. What is the primary purpose of a unit trust?

A. To provide loans to small businesses.
B. To offer tax relief on gains.
C. To pool investors' money and invest in a diversified portfolio.
D. To manage offshore investments for UK residents.

4. What is the difference between accumulation units and distribution units in a unit trust?

A. Accumulation units pay income to investors, while distribution units reinvest income.
B. Accumulation units reinvest income, while distribution units pay income to investors.
C. Accumulation units are only available to institutional investors.
D. Distribution units are only available for fixed-income funds.

5. What is the bid-offer spread in the context of unit trusts?

A. The difference between the price at which units are bought and sold.
B. The annual management fee charged by the fund manager.
C. The tax applied to dividend income from unit trusts.
D. The initial charge for purchasing units in a unit trust.

6. What is the role of the trustee in a unit trust?

A. To manage the day-to-day investments of the fund.
B. To ensure the fund manager complies with the trust deed and protects investors.
C. To set the unit prices for buying and selling.
D. To distribute income to unit holders.

7. How are unit trust prices typically determined?

A. By the fund manager based on market conditions.
B. By the trustees based on the trust deed.
C. By the Financial Conduct Authority.
D. By the stock exchange where the units are traded.

8. What is the tax treatment of income from an equity-based unit trust?

A. It is taxed as interest income.
B. It is treated as dividend income and subject to the dividend allowance.
C. It is exempt from income tax.
D. It is taxed at a fixed rate of 20%.

9. What is the primary purpose of a single-price system in unit trusts?

A. To allow units to be traded on the stock exchange.
B. To increase the bid-offer spread.
C. To reduce the annual management charge.
D. To simplify the pricing structure for investors.

10. What is the main responsibility of the unit trust manager?

A. To act as the trustee and protect investors' interests.
B. To issue unit certificates to investors.
C. To manage the fund's investments in line with the trust deed.
D. To collect and distribute income from the trust's assets.

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