Multiple Choice Questions

Circle the letter next to the most accurate answer.

1. Which one below is not a requirement of Shariah-compliant investment?
a. Avoid all forms of Riba
b. Avoid speculative investments
c. Take no risk
d. Be involved in socially responsible and ethical investing
2. Which one below is not a responsibility of the Islamic fund manager?
a. Select investment instruments that are devoid of Riba, Gharar and Maysir
b. Ensure the investment process does not involve any Shariah-prohibited elements
c. Commit a reasonable return to their clients
d. The contract signed with the client must follow Shariah guidelines
3. The most prominent Islamic indices are:
a. Dow Jones Islamic Market Index
b. FTSC Global Islamic Index
c. S&P Global Investable Shariah Index
d. All of the above
4. The Shariah screening process for stock selection involves:
a. Industry screening
b. Financial screening
c. Income purification
d. All of the above
5. Islamic investment funds can invest in the following instruments:
a. Corporate bonds
b. Treasury bills
c. Certificates of deposit
d. None of the above
6. Which one below cannot be an Islamic investment fund?
a. Ijara fund
b. Derivatives fund
c. Venture capital fund
d. I-REIT
7. Which fund below is formed with private limited companies with a few large individual or
institutional investors?
a. Islamic private equity fund
b. Islamic venture capital fund
c. Islamic debt fund
d. Ijara fund
8. Which characteristic below is common to both a private equity fund and a venture
capital fund?
a. Not traded on exchanges
b. Existing privately owned companies
c. Provide funding to promising new and start-up businesses
d. All of the above
9. Which Islamic product is a certificate of equal value representing undivided ownership shares in
tangible assets, usufructs and services, specific projects or special
investment activity?
a. Ijara funds
b. Sukuk
c. Shariah-screened stocks
d. Waqf funds
10. Common benefits shared by Sukuks and conventional bonds include:
a. Liquidity management
b. Issuer profile enhancement
c. Diversification of funding source
d. All of the above
11. Classifications of Sukuks include:
a. Tradable and non-tradable
b. Short term and long term
c. Debt-based and equity-based
d. a and c
12. Which one below is not a tradable Sukuk?
a. Murabaha Sukuk
b. Ijara Sukuk
c. Mudaraba Sukuk
d. Musharaka Sukuk
13. Which one below is not a type of Ijara Sukuk?
a. Sukuk of ownership in leased assets
b. Sukuk of ownership of usufructs of assets
c. Sukuk of ownership of services
d. Sukuk of ownership of bonds
14. The two most popular classifications of bonds and Sukuks related to investment
quality are:
a. Investment grade bonds and junk bonds
b. Corporate bonds and government bonds
c. Investment grade bonds and sovereign bonds
d. None of the above
ANSWERs
1. c
2. c
3. d
4. d
5. d
6. b
7. a
8. d
9. b
10. d
11. d
12. c
13. d
14. a

T.F
Write T for true and F for false next to the statement with Justification
1. Speculative investment activities may involve both uncertainty or Gharar and gambling or Maysir,
and both are prohibited in Islam.
2. Islamic investing includes conventional insurance and derivatives.
3. Stocks in Halal industries, even if they are using conventional financial products,
are allowed in Islamic investment funds.
4. A stock market index indicates the performance of stocks in a financial market.
5. Islamic fund managers are permitted to speculate but not to undertake any unnecessary risks.
6. Some scholars allow Zakat payment to be part of the purification process to
remove Shariah-non-compliant income in Islamic investments.
7. Sukuks are negotiable instruments that cannot be traded in the secondary market.
8. A major issue Islamic fund managers face is related to liquidity when they want to
sell their instruments quickly.
9. Sukuk holders do not need to have an ownership interest in the underlying asset.
10. Reserves cannot be created for Sukuk payments to even out the profit distribution.
11. The AAOIFI has developed standards and rulings related to various Sukuk issues
and their trading in the secondary markets.
12. The rating agencies rate bonds as well as Sukuks in a range from ‘AAA’ which is
the highest to ‘C’ which is the lowest.
13. Credit rating provides professional judgement to potential investors to make
informed investment decisions.

T - Both Gharar and Maysir are prohibited in Islamic investment as they create unnecessary risk and
uncertainty.
F - Conventional insurance and derivatives are not considered Shariah-compliant investments.
T - Shariah-compliant investment funds may invest in Halal industries, regardless of whether they
use conventional financial products or not.
T - A stock market index is a tool used to measure the performance of stocks in a specific financial
market.
F - Islamic fund managers are not permitted to speculate, as it involves unnecessary risk and is
considered against Shariah principles.
T - Some scholars allow Zakat payment to be included in the purification process of Shariah-non-
compliant income in Islamic investments.
F - Sukuks are negotiable instruments that can be traded in the secondary market.
T - Liquidity is a significant issue for Islamic fund managers, as they may struggle to sell their
instruments quickly.
T - Sukuk holders do not need to have ownership interest in the underlying asset.
F - Reserves can be created to even out the profit distribution in Sukuk payments.
T - AAOIFI has developed standards and rulings related to various Sukuk issues and their trading in
the secondary markets.
T - Rating agencies rate both bonds and Sukuks on a scale from 'AAA' to 'C'.
T - Credit rating provides professional judgement to potential investors, enabling them to make
informed investment decisions.