Investment Test Questions

1. What is a gilt-edged stock?

2. In what two ways could you invest in gilt-edged stocks?

3. Are you sure of getting your money back when buying gilts?

4. Why are government stocks of identical maturity dates priced at such different levels on the Stock Exchange?

5. How is the flat income yield calculated on a fixed-interest stock?

6. What is meant by 'redemption yield'?

7. What is the main reason for periodic changes in the general level of prices of gilt-edged stocks?

8. What does the term 'coupon rate' signify?

9. What are the main advantages and disadvantages from buying gilts on the National Savings Register as opposed to the normal Bank of England Register?

10. What CGT would be payable on a profit made on the sale of a gilt-edged stock?

11. Why do local authority loans give a better income yield than central government gilts?

12. Can one invest in fixed-interest securities in the company sector?

Costs of Dealing

Unlike money-deposit investments, where there is usually no cost either in depositing or withdrawing, the buying and selling of marketable fixed-interest securities does involve certain costs. For government gilt-edged investments they include the following:

Stamp duty on transfer form Exempt

Contract stamp 10p to 60p on contracts over £100.

Brokerage (commission At the rate of 0.625% of the contract

charged by stockbroker) with a minimum of £4 per trans-

action between £200 and £640. VAT is payable on this.

... see: Costs of Dealing

Personal And Business Finance 2018

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