::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

Which of the following statements about the value of a call option at expiration is FALSE?


A		A short position in call option will result in a loss if the stock price exceeds the exercise price.

B		The value of a long position equals zero or the stock price minus the exercise price, whichever is higher.

C		The value of a long position equals zero or the exercise price minus the stock price, whichever is higher.

D		A short position in a call option has a zero value for all stock prices equal to or less than the exercise price.

Mr. Au Yeung let out his property to Miss Lee on 1 June 2005 with the following terms:

1. Lease period: 1 June 2005 to 31 May 2007
2. Monthly rental: HK$20,000 payable in advance
3. Premium: HK$480,000
4. Mr. Au Yeung is liable to pay rates and the amount of rates paid for the period 1 June 2005 to 31 March 2006 was HK$8,000

The amount of net assessable value for Mr. Au Yeung for the year of assessment 2005/06 is:


A		HK$105,600

B		HK$313,600

C		HK$324,000

D		None of the above

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.

In a case that the insured has passed away, if the insurer finally discover the insured or policy holder has violated the principle of utmost good faith. The insurer then can take some actions against the insured except :


A		Refuse to pay the sum insured

B		fine them a large penalty

C		Withdraw the life policy

D		Keep the life policy remained inforceable

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

Which of the following statement about the preparation before meeting a client is correct?


A		Inform the client documents to be used in the meeting, such as insurance policies and tax receipts

B		Do not draft discussion topics for the meeting so that the client may speak freely

C		The client's office should be the best venue for the meeting

D		A relaxing outdoor atmosphere should be the best venue for the meeting

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

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

Q10

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.