Introduction
Preparing for HKSI exams can feel daunting if you jump straight into solving questions. A steady, concept-based approach helps you recognize the patterns you’ll see in the real exam: clear definitions, regulatory context, and logical elimination. In this post, we walk through five representative HKSI-style MCQs. We’ll focus on the underlying ideas first, then reveal the answers and provide compact explanations. Use these as a blueprint for your own practice notes.
Question 1: Long-term bonds
Question: Long-term bond refers to maturity exceeding how many years?
Options:
- A. 1 year
- B. 2 years
- C. 5 years
- D. 10 years
Think about the standard financial definition: a bond is typically labeled long-term when its maturity exceeds 1 year. This helps prevent misclassifying instruments when questions blend term lengths.
Answer: A
Explanation: Long-term bonds are defined as having maturities greater than 1 year. This definition is a common anchor in finance and HKSI study materials.
Takeaway: When encountering questions about maturities, anchor yourself with the >1 year criterion to avoid mislabeling short- vs. long-term instruments.
Question 2: Electronic trading platform statements
Question: Which statements about electronic trading platforms are correct? I. We should keep documentation on design and development of trading systems, including upgrades and changes, but testing and review may be omitted. II. Comprehensive system risk management monitoring documentation may be destroyed after the system is decommissioned. III. When an intermediary provides direct-to-market internet trading arrangement services, input errors should be flagged. IV. Regular post-trade surveillance should identify any manipulative or improper trading instructions.
Options:
- A. Only I, II
- B. Only I, IV
- C. Only III, IV
- D. Only I, III
Answer: C
Explanation: Statement 1 is incomplete because testing and review are part of the design/development documentation. Statement 2 is incorrect because such documentation should typically be retained for a period after decommissioning (in this example, 2 years). Statements III and IV reflect appropriate controls around user input errors and post-trade monitoring.
Takeaway: Pay attention to retention periods and the inclusions of testing/verification in system design documentation. Always verify that operational controls (like input error warnings) and surveillance are in place.
Question 3: Futures versus forwards
Question: Which statement does not correctly describe the difference between futures and forwards?
- A. Forwards have more flexibility in terms of contract terms than futures.
- B. The trading channels for forwards are more numerous than for futures.
- C. Forwards have greater liquidity than futures.
- D. Each instrument carries different counterparty risk profiles.
Answer: C
Explanation: Forwards are over-the-counter (OTC) and typically customized, which generally results in lower liquidity compared to standardized exchange-traded futures.
Takeaway: Remember that liquidity is a key differentiator: futures tend to be more liquid due to standardization and exchange trading, while forwards are tailor-made OTC contracts.
Question 4: Main objectives of the Monetary Authority (HKMA)
Question: Which item is not among the main objectives of the HKMA?
- A. Ensure banking system safety and soundness
- B. Maintain monetary stability
- C. Implement monetary policy
- D. Implement fiscal policy
Answer: D
Explanation: The HKMA’s core duties include maintaining monetary stability, implementing monetary policy, and prudent supervision of the banking system. Fiscal policy falls under the purview of the government, not the HKMA.
Takeaway: When studying regulatory roles, map each entity to its legitimate functions to avoid conflating monetary and fiscal authorities.
Question 5: Inventory turnover calculation
Question: If a company’s cost of sales this year is $3,000,000 and beginning and ending inventories are $1,000,000 and $2,000,000 respectively, the inventory turnover is:
- A. 1.5x
- B. 2x
- C. 3x
- D. Not determinable from the given data
Answer: B
Explanation: Inventory turnover = Cost of sales / Average inventory. Average inventory = (Beginning + Ending) / 2 = (1,000,000 + 2,000,000) / 2 = 1,500,000. Turnover = 3,000,000 / 1,500,000 = 2x.
Takeaway: In practice, always compute average inventory first to ensure your turnover ratio reflects the mid-period level.
Final thoughts
These five questions illustrate common HKSI topics: bond definitions, system governance for electronic platforms, derivatives markets, regulatory roles, and fundamental financial ratios. The key to success is building a solid mental map of these concepts and applying a consistent problem-solving approach during the exam.
If you found this walkthrough helpful, follow HKSIYES for more question explanations and practical tips to strengthen your exam readiness. Stay curious, stay prepared, and we’ll tackle more real-world-style questions together.