Test on Investment Securities and Financial Concepts

Question 1: Investors can withdraw their funds from a fixed deposit at any time before the maturity date without penalty.

A. Ano

B. Ne

Explanation: Fixed deposits ensure financial discipline as investors cannot withdraw their funds before the maturity date. The investor cannot withdraw their funds before the maturity date.

Question 2: Which of the following statements accurately describe the impact of RSA Retail Savings Bonds, based on the provided study material?

A. They offer guaranteed returns because the interest rate is fixed for the entire investment period.

B. Investors can easily use them as security to obtain loans from banks.

C. They are a low-risk investment because they are backed by the South African Government.

D. There are usually charges, costs, or commissions payable on this type of investment.

Explanation: RSA Retail Savings Bonds offer guaranteed returns as the interest rate is fixed for the whole investment period. They are also considered a low-risk/safe investment because they are invested with the South African Government, which cannot be liquidated. However, retail bonds cannot be ceded to banks as security for obtaining loans, and there are no charges, costs, or commissions payable on this type of investment.

Question 3: Preference shareholders consistently have voting rights at the Annual General Meeting (AGM), allowing them to influence all major company decisions.

A. Ano

B. Ne

Explanation: Preference shareholders have no voting rights at the Annual General Meeting (AGM), except under particular circumstances/for certain resolutions.

Question 4: Which of the following statements accurately describe characteristics of different types of preference shares, according to the provided study materials?

A. Non-participating preference shareholders receive an amount equal to their initial investment plus accrued and unpaid dividends upon liquidation.

B. Cumulative preference shareholders are compensated for past dividends not paid out when profits were too low.

C. Participating preference shareholders are entitled to a fixed dividend and also share in any surplus company profits.

D. Non-cumulative preference shareholders are compensated for past dividends that were not paid out when profits were low.

Explanation: Non-participating preference shareholders receive an amount equal to the initial investment plus accrued and unpaid dividends upon liquidation. Cumulative preference shareholders are compensated for past dividends that were not paid out. Participating preference shareholders are guaranteed minimum fixed dividends and are entitled to share in any surplus company profits. Non-cumulative preference shareholders are not compensated for past dividends that were not paid out when profits were low, making option 3 incorrect.

Question 5: Are members of stokvels at risk of losing their savings if schemers operate illegal pyramid schemes under the guise of a stokvel?

A. Ano

B. Ne

Explanation: Schemers who claim to be running stokvels may actually be running illegal pyramid schemes, and in such cases, pay-outs may not be possible, leading to members losing their savings.