Welcome to HKSIYES, your go to resource for clear explanations of HKSI practice questions. In this post we walk through five representative items that touch on stress testing, liquidity facilities, regulatory powers, equity rights, and interest rate risk. By dissecting why the correct choices are right, you will see how these ideas play out in real markets and how exam takers think about them.
Question 1: Stress testing is Options: A. A test conducted on a securities investment portfolio B. A commonly used method to consolidate calculations and measure institutional risk C. Measures the sensitivity of a security to yield changes by looking at maturity and coupon cash flows D. Measures how a security value changes after a 1 basis point move in yield Answer: A Explanation: Stress testing targets a securities investment portfolio and observes how it performs under extreme market moves or special events. It is a risk assessment tool used to understand portfolio resilience in adverse scenarios. In HKSI practice this concept links to risk management and capital planning rather than a small yield sensitivity measure.
Question 2: The purpose of the discount window Options: A. To provide short term funds to banks B. To provide short term funds to the Monetary Authority C. To provide exchange guarantees to foreign banks D. To provide exchange guarantees to local banks Answer: A Explanation: The discount window is a central bank facility that allows authorized banks to borrow overnight liquidity at a discount rate, typically via repo arrangements, to plug liquidity gaps. This mechanism supports liquidity management and stability in the banking system.
Question 3: Which statement is not correct Options: A. The SFC can apply to the original court for an open ended fund company wind up order B. The SFC can apply to a licensed representative for a bankruptcy order (to the court) C. The SFC can issue a compulsory order to prevent anyone from violating the relevant provisions D. The SFC has established an Appeal Tribunal chaired by the deputy chairman to hear appeals against SFC decisions Answer: D Explanation: The Appeal Tribunal is independent of the SFC and is typically chaired by a judge or an independent decision maker. Therefore option D is not correct as stated.
Question 4: Mr. Du holds ordinary shares in a listed company. Which statements are correct (1) He can participate in current profits but not necessarily in accumulated profits (2) His claims rank behind ordinary shareholders and debt holders (3) Generally, after liquidation, ordinary shareholders do not receive funds (4) There can be cases where ordinary shareholders face high risk but also high potential return Options: A. 1 and 2 B. 1 and 3 C. 2 and 4 D. 1, 2, 3 and 4 Answer: C Explanation: Statement 1 is not precise because current profits are part of accumulated profits and distributable profits, so the phrasing is misleading. Statement 3 is generally not true in ordinary liquidation scenarios, as ordinary shareholders are last in line for any liquidation proceeds. Statements 2 and 4 are correct: ordinary shareholders are behind debt and preferred claims, and equities can carry high risk with high upside potential.
Question 5: Who benefits from rising interest rates Options: A. Stockholders B. Lenders in the lending business C. Bond holders D. Borrowers Answer: B Explanation: An increase in interest rates tends to widen the interest margins for lenders, improving the income from loans and related lending activities. This makes the lending side the primary beneficiary of rate rises, all else equal.
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