Part 3: Investment Assets

Paper V — Investment-linked Long Term Insurance · Part 3: Investment Assets

Q1 Free

Which of the following statements about Money Market Instruments are correct? I. Certificate of Deposit II. Ordinary shares III. Convertible bonds

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Correct Answer: B

Money market instruments are short-term debt instruments, typically with maturity of less than one year.
A Certificate of Deposit (CD) is a short-term deposit instrument issued by banks and is a money market instrument.
The other options are capital market instruments (equities, long-term bonds, real estate).

Q2 Free

What does the coupon rate of a bond refer to?

A. The market price of the bond
B. The return of the bond at maturity
C. The fixed annual interest rate paid to the holder based on the face value of the bond
D. The credit rating of the bond

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Correct Answer: C

The coupon rate is the fixed annual interest rate set at bond issuance, calculated based on the bond's face value.
For example, a bond with face value $1,000 and coupon rate 5% pays $50 interest per year.
The coupon rate differs from market interest rates; changes in market rates affect the bond's market price.

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