Sample Questions –
The questions below are taken from our mock exams and designed to provide you with an indication
of the nature and level of the IMC exam. For both unit 1 and unit 2, one question is shown from each
topic area.
Unit 1 – Sample questions
1. Which of the following is least likely to be considered a solution to the ‘principal– agency’
problem’?
(a) Shareholder activism
(b) Incentivising managers in the form of shares
(c) Monitoring of managers by the board of directors
(d) Firms operating with dual capacity
Ans: (d)
2. Wilfred is an investment manager for a wealth management firm. He receives research from
analysts at his firm recommending a ‘sell’ for shares in a company called Techy Tech Industries plc.
He then sells his own personal holding of Techy Tech shares before disseminating the
recommendation to his clients. In doing so he has:
(a) Not violated any of the CFA Standards of Professional Conduct
(b) Violated Standard VIB: Priority of transactions
(c) Violated Standard VB: Communication with clients and prospective clients
(d) Violated Standard IIIC: Suitability
Ans: b
3. Which of these factors would allow a company to be treated as a per se professional client in
relation to MiFID business?
(a) Own funds of €2.5 million and a balance sheet total of €21 million
(b) Balance sheet total of €11 million and net turnover of €50 million
(c) Net turnover of €45 million and own funds of €1 million
(d) Net turnover of €25 million and a balance sheet total of €45 million
Answer: a
4. What is the administrator of a bankrupt person's financial affairs called?
(a) Official registrar
(b) Official representative
(c) Official receiver
(d) Official referee
Ans: c
5. Which of the following is least likely to be a reason for a company to close its defined benefit
pension scheme?
(a) An increase in the pension fund deficit
(b) The requirement to disclose the funding position of the fund in the company accounts
(c) An increase in return on assets held by the scheme
(d) An increase in the longevity of the fund members
Ans: c
6. Jack and Wendy had been married for thirty years when Jack died leaving a gift of £75,000 to his
children. At the time of Jack’s death the nil rate band is £300,000. If Wendy subsequently dies when
the nil rate band is £325,000, what is the total nil rate band available on her estate?
Important! You should enter the answer only in numbers strictly using this format: 000,000
Do not include spaces, letters or symbols, but decimal points and commas should be used if
indicated.
Ans: £568,750
Unit 2 – Sample Questions
Unit 2 Sample Questions .
1. What is the present value of £5,000 which will be received in four year's time if the discount rate
is 8% per annum?
(a) £3,402.92
(b) £3,675.15
(c) £3,969.16
(d) £6,802.44
Ans: b
2. A pure monopolist maximises profits where:
(a) Marginal costs are greater than average costs
(b) Marginal revenue just equals marginal cost
(c) Marginal revenue is greater than marginal cost
(d) The average cost curve is upward sloping
Ans: b
3. Which of the following is NOT a leading indicator of economic activity?
(a) Unemployment
(b) Stock market
(c) Money supply
(d) Credit growth
Ans: (a)
4. XYZ Plc has an operating profit of £6m, issued share capital of £20m, long-term debts of £12m and
reserves of £8m. What is XYZ's return on capital employed?
(a) 30%
(b) 23.3%
(c) 18.7%
(d) 15%
Ans: (d)
5. Given an industry average P/E ratio of 12, a company JKL had earnings per share last year of £0.25.
What would be a fair valuation of the JKL based on P/E?
(a) £1.50
(b) £3.00
(c) £4.80
(d) £48.00
Ans: (b)
6. A bond paying an 8% coupon with exactly 2 years to maturity is priced at £96.53 with a face value
of £100. What is the internal rate of return ignoring tax?
(a) 9%
(b) 10%
(c) 11%
(d) 12%
Ans: (b)
7. Which of these ‘Greeks’ is commonly used to denote the sensitivity of option price with respect to
interest rates?
(a) Theta
(b) Gamma
(c) Rho
(d) Vega
Ans: c
8. In a private equity partnership, which of the following terms best describes the investment
managers?
(a) Equal partners
(b) Limited partners
(c) General partners
(d) Senior partners
Ans: c
9. A well diversified portfolio has a CAPM beta of 1.1 and a covariance of return with the market of
250. What is the variance of the return on the market?
(a) 198.8
(b) 206.6
(c) 215.9
(d) 227.3
Ans: (d)
10. Which of the following is considered a hard commodity?
(a) Wheat
(b) Pork Bellies
(c) Aluminium
(d) Coffee
Ans: c
11 . A fund begins Year 1 with a value of £14m. At the beginning of Year 2 a further £6m is deposited
in the fund. No further deposits or withdrawals are made during the two years. If the money-
weighted return on the fund over the entire two years is 12% per annum, what is the value of the
fund at the end of year 2?
(a) £20.00m
(b) £21.68m
(c) £24.28m
(d) £25.08m
Ans: c
