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Question Number Question
1 Describe and Investment Policy Statement (IPS):

An IPS details the organization’s procedures for all client investments

An IPS is created by the Board of Trustees

An IPS is a FINRA required document

An IPS addresses the objectives of the client or pension plan

2 Which of the following are deposit-taking institutions (DTIs)?

Building societies

Insurance companies

Investment trust companies

Retail banks

Pension funds

DTIs are the following:

2 – 4

1 and 4

1 and 2

3 – 5

3 All of the following make an IPS important, EXCEPT:

Helps define all associated parties of their responsibilities

Sets target asset allocations

Will remove all emotions from the investment process

Helps identify potential risks the pool of assets may face

4 Which of the following is the reason why economic sticklers would not consider shares / equities as financial instruments:

Shares represent part-ownership in the company and are not redeemable

Companies can re-purchase their shares

Preferred shares are closer to debt instruments

Companies can have debt and shares, they are substitutes for each other

5 Which of the following are functions of a financial system?

The operation of a payment system

Providing the means of portfolio adjustment

Helping to reduce unemployment

Channelizing funds between lenders and borrowers

Helping speculators to bet on price movements

Functions of a financial system include:

1, 2, and 4

2, 3, and 5

2 – 5

1 and 5

6 Which of the IPS’s factors would change if the client went to another financial professional?

Investment strategies

Amount invested by the client

Responsibility for the risk management

Client objectives

7 Derivatives can be strictly defined as

Financial instruments

Securities with strong economic foundations

Contracts that may lead to profits or losses

Representatives of “claims” of holders on issuers

8 Which one of the following is the definition of an Investment Policy Statement (IPS)s:

A Specific document to govern investing activities

An agreement about services and prices

An engagement letter for investing services

Protects the client from investment losses

9 Constructing and IPS is the responsibility of

Financial professional


Financial professional and investor

Portfolio manager

10 How would you classify an Exchange Traded Fund (ETF)?

Collective investment scheme (CISs)

Alternative investments

Contractual intermediaries

Quasi-financial intermediaries (QFTs)

11 The most important component of an IPS is:

Statement of purpose

Investment objectives and constraints


Signature of the investor

12 A well-defined IPS should include of the following, EXCEPT:

Investment strategy and asset allocations

Definition of duties and objectives

Purpose and scope

How much should be invested

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