Financial Planning Skills Test, Grade 3 | Financial Asset Management Questions

Return and risk generally correspond, so decisions should not rest on expected return alone.

Compounding folds interest into the principal so that it counts in the next period's interest calculation.

As yields on new bonds rise, existing bonds with lower coupons become relatively less attractive.

Equities offer the prospect of dividends from company profits and gains on sale as prices rise.

An investment trust invests the money it gathers across multiple assets and the like, following its investment policy.

Spreading across assets, regions and time reduces the impact of any one factor.

Fewer yen exchange for one dollar, so all else equal the yen-converted amount falls.

NISA makes investment gains tax-free within conditions covering the account, eligible products and allowances.

Liquidity is how easily something can be traded or turned into cash, which bears on whether it suits what the money is for.

Restoring an allocation that price movements have shifted maintains the intended level of risk.