Personal Financial Planning and Investment : Practice Questions

Maintaining a good personal credit record is important primarily because it:

Which of the following statements about the Main Board and the GEM (Growth Enterprise Market) of the Hong Kong Stock Exchange is CORRECT?

Ms. Lee, a 30-year-old professional, has a long investment horizon and is comfortable with moderate to high risk. She invests a substantial portion of her portfolio in a diversified selection of growth stocks, expecting higher returns over the long term. Mr. Chan, a 60-year-old retiree, has a short investment horizon and prioritises capital preservation. He invests mainly in government bonds and fixed deposits. Which of the following statements BEST reflects the relationship between risk, return, and investment horizon as demonstrated by their choices?

Compared to investing in common stocks, which of the following statements about investing in corporate bonds (debentures) is generally true?

A savings account offers a nominal annual interest rate of \(6\%\), compounded quarterly. What is the effective annual interest rate for this account, rounded to two decimal places?

\( \text{Effective annual rate} = (1 + \text{Nominal rate} / \text{Number of compounding periods})^{\text{Number of compounding periods}} - 1 \)

Identify one key characteristic of a bond investment that generally contributes to it being considered less risky than investing in ordinary shares.

For an individual in the early career stage (e.g., 20s-30s), explain a primary financial planning goal beyond immediate savings, and why it is important at this stage.

For a local investor in Hong Kong, explain the primary importance of monitoring the Hang Seng Index (HSI) when making investment decisions, particularly concerning local equities.

Ms. Chan invested HK$20,000 in a savings account that offers an annual interest rate of 5% compounded annually. If she makes no further deposits or withdrawals, what will be the balance in her account after 3 years?

A bank offers a savings account with a nominal interest rate of 4.8% per annum, compounded monthly. Mr. Wong wishes to have HK$50,000 in his savings account at the end of 3 years.

(a) Calculate the effective annual interest rate (EAR) for this account. (Show your working to two decimal places.) (3 points)

(b) If Mr. Wong instead found an investment that offered an annual interest rate of 5%, compounded annually, how much should he deposit today to reach his target of HK$50,000 in 3 years? (Show your working to the nearest dollar.) (3 points)