CISI Updated ICWIM Exam Questions and Answers by daria

Mutual funds often have different share classes with varying fee structures to suit different investor needs.

Why is Option C Correct?

Class C shares avoid front-end loads (initial sales charges).

Instead, they charge higher ongoing fees (expense ratios) and may have a short-term exit fee if sold within a year.

Why Not Other Options?

A (Class A) → Typically front-end loaded, meaning investors pay a fee when buying the fund.

B (Class B) → Usually back-end loaded, meaning fees apply when selling the fund.

D (Class D) → Less common, but often low-cost institutional shares.

???? Reference: SEC Mutual Fund Share Classes, CISI Wealth & Investment Management.

An increase in earnings per share (EPS) indicates improved profitability on a per-share basis. This enhances the company’s ability to distribute dividends to shareholders, assuming a consistent payout ratio.

Widened share base (A): This would typically dilute EPS, not increase it.

Market share (C): Market share is unrelated to EPS; it is about the company’s competitive position.

P/E ratio (D): While EPS affects valuation, a rise in EPS does not guarantee a P/E increase.

The balance of payments is a framework that records a country’s economic transactions with the rest of the world over a period. It is organised into two main components. The first is the current account, which captures trade in goods and services, primary income such as investment income and compensation of employees, and secondary income such as transfers. The second component records cross-border capital flows and changes in financial claims and liabilities. In modern descriptions, this is split into the capital account and the financial account, with the financial account typically being the larger and more significant. Many exam questions simplify this by referring to the current account and the financial and capital account together as the two accounts used to measure the balance of payments. The key idea is that current transactions and capital and financial flows must reconcile through accounting identities, with any imbalance reflected in financing flows. Options that describe services alone or domestic categories do not represent the recognised balance of payments structure.

In microeconomics, the short run is defined as a time period in which at least one factor of production is fixed, typically capital such as premises, heavy machinery, or long term infrastructure. Within that same period, firms can usually adjust other inputs to respond to changes in output. Labour hours can be increased or reduced through overtime, shift patterns, or temporary staff, and raw material usage typically rises or falls directly with production volume. Costs that change with the level of output are variable costs. This is why labour and raw materials are generally treated as variable in the short run. Fixed costs, such as rent or certain salaried overheads, do not vary with output in the short run. Average costs are a per unit measure rather than a cost type, and marginal cost refers to the cost of producing one additional unit, which is influenced by variable inputs but is not itself the classification asked for here. The most appropriate answer is variable costs.