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Total 278 Questions | Updated On: Nov 18, 2024

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Question 1

H Ltdis a company providing postal and courier services to small businesses. Customers pay a monthly or annual subscription fee to use the service, plusaverysmall fee for each item delivered.

A year ago, H employed a newsalesteam. Their remuneration is dependent on the number of new customers they sign up. Sales increased dramatically in the first six months, but nowdifficulties are emerging such as new customers dropping their subscription once the initial period has expired; subscriber direct debits being returned unpaid; subscribers going out of business and other similar issues.

Which of the following would be appropriate to help resolve these problems?

A : Alter the pricing structure in order to increase the price for sending each item but decrease the subscription element of the fee.

B : Ensure that a credit check is carried outbefore a subscriber is accepted.

C : Reduce the rate of commission payable to any sales person who fails to sign up at least an agreedminimum number of customers each month.

D : Alter the commission arrangements so that commission is payable only when the subscriber signs up for a second year.

E : Preparing a monthly report for sales persons detailing the performance of each new customer they have signed up over the previous year.

Answer: A,B,D

Question 2

Zia is an accountant and wishes to take out a Forward Rate Agreement (FRA)as a hedging instrument. The company treasurer has advised that a short-term interest rate (STIR)future would be better.

Which of the following is true of an STIR?

A : A STIR can be tailored to the exact needs of the company.

B : A STIR is flexible and the position can be closed quickly and easily.

C : A STIR must be kept for the whole duration of the contract.

D : If interest rates have gone down the price of the future will have fallen.

Answer: B

Question 3

An electricity company owns and operates a nuclear power station located ten miles from a large city. A recent and very extensive engineering examination of the power station concludes with the estimate that the probability of a major nuclear disaster within the next 20 years is 0.2%.

Which of the following best explains the relevance of quantifying the risk in that way?

A : There is no acceptable level of risk for a major nuclear accident and so the probability has little information value in itself.

B : The probability is so low as to be ignored.

C : The directors will be able to argue that they were not negligent in the event of a major disaster within the 20 year period.

D : The calculation of a precise probability demonstrates that the engineers who conducted the inspection are experts in their field.

Answer: A

Question 4

Which method of quantifying risk exposure can be used to calculate the maximum loss on a portfolio occurring within a period of time with a given probability?

A : Value at Risk

B : Regression analysis

C : Simulation

D : Expected value

Answer: D

Question 5

KLtdisan on-line travel agency specialising in budget package holidays to a small number of popular locations. The holidays that it sells are made up of a 'package' of flights, hotel accommodation and food. K Ltd's Finance Director is concerned that the company'sscope of operation is too narrow and wishesto diversify.

IdentifyTWOactions that K Ltdshould take immediately.

A : Set up a number of activity holidays; adventure, sports and trekking for example.

B : Bulk book cruise accommodation and create a special package deal for retired couples.

C : Expand the number of locations it currently serves.

D : Re-image the locations it currently serves to make them more exotic and family friendly.

E : Review the customer base looking at feedback, repeat sales and single visit statistics.

F : Engage market researchers to look at future trends in holiday requirements.

Answer: A

Page: 1 / 56

Total 278 Questions | Updated On: Nov 18, 2024

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