::IFPHK-Student Corner::

Disclaimer: The questions provided on this website are NOT intended to constitute sample questions and/or past examination questions and should not be construed as such.

Acknowledgement: Mr. Ricky Chung and Ms. Teresa Fung

Mr. Tai was employed by Trendy Manufacturing Limited as a marketing manager. For the year ended 31 March 2006, he worked in the company’s PRC factory for 150 days. He paid PRC Individual Income Tax of HK$30,000 in respect of Hong Kong income of HK$300,000. He received HK$1,200,000 in total from Trendy Manufacturing Limited. What is the amount of income and/or tax can Mr. Tai exclude from chargeability to Hong Kong salaries tax?


A		Income of HK$300,000

B		Income of HK$1,200,000

C		PRC Individual Income Tax of HK$30,000

D		Income of HK$300,000 and PRC Individual Income Tax of HK$30,000

Which of the following statement is the best description about ethics?


A		Ethics is absolutely an individual issue

B		Ethical standards are defined by law

C		There are a lot of grey areas in ethical standards

D		The law should be the highest requirement of ethical conducts

According to the separation property of James Tobin, the sequence of portfolio decision should be:


A		First optimal risky portfolio choice on efficient frontier, then personal choice on security market line based on personal risk aversion

B		First optimal personal portfolio choice on efficient frontier, then risky portfolio choice on capital allocation line based on personal risk aversion

C		First optimal risky portfolio choice on efficient frontier, then personal choice on capital allocation line based on personal risk aversion

D		First optimal risky portfolio choice on efficient frontier, then personal choice on security characteristic line based on personal risk aversion

Cherry is an accountant of Charisma Limited and is considered as holding an overseas employment. Cindy is a director of the same company and is regarded as office holder of an overseas company. If Cherry and Cindy would like to lodge the “time apportionment” claim in respect of the income they received from Charisma Limited, who would be entitled to the time apportionment basis?


A		Both Cherry and Cindy can lodge the ‘time apportionment’ claim.

B		Both Cherry and Cindy cannot lodge the ‘time apportionment’ claim.

C		Only Cindy can lodge the “time apportionment” claim as she is holding an office of directorship with Charisma Limited.

D		Only Cherry can lodge the ‘time apportionment’ claim as she is under an overseas employment of Charisma Limited.

Consider two bonds, A and B. Both bonds presently are selling at their par value of $1,000. Each pay coupon of $120 annually. Bond A will mature in 5 years while bond B will mature in 6 years. If the yields to maturity on the two bonds change from 12% to 14%, _____ .


A		both bonds will increase in value but bond B will increase more than bond A

B		both bonds will decrease in value but bond B will decrease more than bond A

C		both bonds will increase in value but bond A will increase more than bond B

D		both bonds will decrease in value but bond A will decrease more than bond B

The constant growth dividend discount model (DDM) is valid only when


A		growth rate is less than or equal the required return.

B		growth rate is greater than or equal to the required return.

C		growth rate is less than the required return.

D		growth rate is greater than the required return.

Which of the following receipts is NOT subject to Hong Kong salaries tax if received by an individual residing and having his work base in Xiamen?


A		Director’s fee from a Hong Kong listed company with directors’ meetings held in Hong Kong.

B		Employment income for services rendered during visits in Hong Kong for 65 days in a year of assessment.

C		Rental income from sub-letting of property in Hong Kong.

D		Salaries attributable to Hong Kong service of 190 days derived from a non-Hong Kong employment.

The risk-free rate is 4%. The expected market rate of return is 11%. If you expect stock X with a beta of .8 to offer a rate of return of 12 percent, then you should __________.


A		buy stock X because it is overpriced

B		buy stock X because it is underpriced

C		sell short stock X because it is overpriced

D		sell short stock X because it is underpriced

Which of the following statements related to “Tobin’s q ratio” is correct?


A		Tobin’s q ratio should be equal to 1 in long run

B		Tobin’s q ratio adopts charting analysis on common stock price

C		Tobin’s q ratio uses “expected future cash flows” of the company to find the stock price.

D		Tobin’s q ratio is work with Price-to-Earning ratio to value the common stock price

Q10

Star Manufacturing Company is a toy manufacturer in Hong Kong. Due to insufficient production capacity, the company sub-contracted 20% of its production order to another Guangzhou factory in the PRC and paid a sub-contracting fee of HK$600,000. The finished goods are sold to customers outside Hong Kong. The manufacturing profit associated with this sub-contracting order is HK$1,000,000. What will be the Hong Kong profits tax implication of Star Manufacturing Company?


A		The HK$1,000,000 manufacturing profit will be 100% taxable as no PRC tax would have been paid by Star Manufacturing Company under this sub-contracting arrangement.

B		The HK$1,000,000 manufacturing profit will be 100% taxable as the goods are manufactured by a third party sub-contractor.

C		The HK$1,000,000 manufacturing profit will be 100% non-taxable as the goods are manufactured outside Hong Kong.

D		The HK$1,000,000 manufacturing profit will be 100% non-taxable as the goods are ultimately sold to customers outside Hong Kong.