SA7 FAQs (updated November 2024)
This thread contains some of the the Subject SA7 questions most frequently asked by students, with answers written by ActEd's tutors. This thread was last updated in May 2025.
Question
What material from other subjects will I need to know to pass SA7?
Answer
The subjects that contain useful information are: CB1, CP1 and most importantly SP5.
Analysing this in more detail, the relevant areas and topic from these earlier subjects (using the older naming convention) are as follows:
CB1: long-term finance, derivatives, analysing accounts, capital structure and cost of capital, and dividend policy
CP1: money markets, property markets, macro economics and the impact on investment markets, investment strategy (for both institutions and individuals)
SP5: Everything!
A list of numerical techniques that COULD be examined in SA7, or have been examined in the past, is as follows:
Performance measurement and attribution (SP5)
Risk-adjusted performance measures (SP5)
Valuing derivatives including options, swaptions, futures and swaps (SP5)
VaR analysis (SP5)
Subject SA5 would sometimes examine more general ‘corporate finance’ concepts using numbers, and these could include:
forecasting the cashflow or profits from a business proposal
analysing a set of accounts for credit risk
calculating WACC or analysing the impact of a company's beta
So far, there have been relatively few numerical questions on material that was previously in SA5, however, there have been quite a few that have required simple present value techniques, such as valuing an annuity, or the cashflows on a project. But very few on WACC or corporate finance concepts.
There have been a few instances where SA7 has asked questions that are designed around something that is actually going on in the real financial markets, ie a 'topical issue'. Questions are worded so that students that are not aware of the global event can still make a good attempt at the question, however it is sometimes easier if you are aware of the event and the global response to it. So, keeping up to date with global financial markets in the lead up to the exam can do no harm.
It is worth noting that Subject SP6 is not required for Subject SA7.
Bookwork recall questions have appeared occasionally in Subject SA7 even after the switch to an online environment, but the vast majority of SA7 questions have always been about application of knowledge to a specific situation. Bookwork from SA7 may become a bit more common if the exams move to closed book, but it is unlikely to be a major source of marks.
Question:
How do I know which of the past paper questions from Subject SA5 and SA6 are relevant for my study for Subject SA7?
Answer:
I have produced a list of past questions from these exams indicating where I believe that questions are still relevant and where they are no longer relevant. This is attached to a separate thread in this forum.
Question:
What topical issues are relevant for the coming sitting?
Answer
It is impossible to say for certain. There are many such topics, and it is difficult to second-guess what the examiners may select.
The combination of financing various world conflicts, and the hangover from the pandemic, has left most western governments with a massive pile of debt. This is combined with an ongoing annual deficit problem, which makes the debt pile grow. Managing this with government policies, and the impact of this on markets, is quite topical.
The end of QE, and the desire of central banks to get their bond portfolios reduced in size (QT) has led to a step change in long bond yields. How this is managed, in coordination with rises in short-term interest rates, is important in financial markets, and therefore important in SA7.
Inflation has come under control again, after the events in Ukraine and the expansion of money supply since 2010 (but particularly in more recent years around 2020 to 2022). The markets are influenced by estimates of how central banks will react, how long they will keep short-term rates high, how quickly they will try to reduce their pile of government bonds, and what may be round the corner.
The extreme nervousness in the UK government bond markets following the proposed unfunded tax cuts in 2022, and the liquidity impact on pension schemes that use leverage is an issue that could well be tested in the forthcoming exams. How to measure leverage, which instruments cause leverage, what assets count as 'liquid' enough for collateral are important topics. And of course the impact on asset markets if pension schemes begin to de-leverage and buy more straight-forward bonds using proceeds from sales of other assets.
The large rise in long-term interest rates that we have seen since 2022, and the (very positive) impact on pension scheme solvency levels. This has led many schemes to consider buyout. It has also led to some issues for banks that have large portfolios of long term bonds and are nursing unrealised losses.
Ideas from governments to combine smaller pensions schemes into larger entities "for efficiency" or to get some additional investment for equity-style or infrastructure investment. Linked to this, the possibility of forcing certain pension schemes to invest a minimum amount in private markets. Finally any economic strategies that may emerge in the US following the election, their effect on inflation, and on international trade may be the source of a question.
These are only some suggestions, and are not in any way based on knowledge of how the Examiners are thinking. The exam will likely be written around the end of the year so the US election results are known.
This thread contains some of the the Subject SA7 questions most frequently asked by students, with answers written by ActEd's tutors. This thread was last updated in May 2025.
Question
What material from other subjects will I need to know to pass SA7?
Answer
The subjects that contain useful information are: CB1, CP1 and most importantly SP5.
Analysing this in more detail, the relevant areas and topic from these earlier subjects (using the older naming convention) are as follows:
CB1: long-term finance, derivatives, analysing accounts, capital structure and cost of capital, and dividend policy
CP1: money markets, property markets, macro economics and the impact on investment markets, investment strategy (for both institutions and individuals)
SP5: Everything!
A list of numerical techniques that COULD be examined in SA7, or have been examined in the past, is as follows:
Performance measurement and attribution (SP5)
Risk-adjusted performance measures (SP5)
Valuing derivatives including options, swaptions, futures and swaps (SP5)
VaR analysis (SP5)
Subject SA5 would sometimes examine more general ‘corporate finance’ concepts using numbers, and these could include:
forecasting the cashflow or profits from a business proposal
analysing a set of accounts for credit risk
calculating WACC or analysing the impact of a company's beta
So far, there have been relatively few numerical questions on material that was previously in SA5, however, there have been quite a few that have required simple present value techniques, such as valuing an annuity, or the cashflows on a project. But very few on WACC or corporate finance concepts.
There have been a few instances where SA7 has asked questions that are designed around something that is actually going on in the real financial markets, ie a 'topical issue'. Questions are worded so that students that are not aware of the global event can still make a good attempt at the question, however it is sometimes easier if you are aware of the event and the global response to it. So, keeping up to date with global financial markets in the lead up to the exam can do no harm.
It is worth noting that Subject SP6 is not required for Subject SA7.
Bookwork recall questions have appeared occasionally in Subject SA7 even after the switch to an online environment, but the vast majority of SA7 questions have always been about application of knowledge to a specific situation. Bookwork from SA7 may become a bit more common if the exams move to closed book, but it is unlikely to be a major source of marks.
Question:
How do I know which of the past paper questions from Subject SA5 and SA6 are relevant for my study for Subject SA7?
Answer:
I have produced a list of past questions from these exams indicating where I believe that questions are still relevant and where they are no longer relevant. This is attached to a separate thread in this forum.
Question:
What topical issues are relevant for the coming sitting?
Answer
It is impossible to say for certain. There are many such topics, and it is difficult to second-guess what the examiners may select.
The combination of financing various world conflicts, and the hangover from the pandemic, has left most western governments with a massive pile of debt. This is combined with an ongoing annual deficit problem, which makes the debt pile grow. Managing this with government policies, and the impact of this on markets, is quite topical.
The end of QE, and the desire of central banks to get their bond portfolios reduced in size (QT) has led to a step change in long bond yields. How this is managed, in coordination with rises in short-term interest rates, is important in financial markets, and therefore important in SA7.
Inflation has come under control again, after the events in Ukraine and the expansion of money supply since 2010 (but particularly in more recent years around 2020 to 2022). The markets are influenced by estimates of how central banks will react, how long they will keep short-term rates high, how quickly they will try to reduce their pile of government bonds, and what may be round the corner.
The extreme nervousness in the UK government bond markets following the proposed unfunded tax cuts in 2022, and the liquidity impact on pension schemes that use leverage is an issue that could well be tested in the forthcoming exams. How to measure leverage, which instruments cause leverage, what assets count as 'liquid' enough for collateral are important topics. And of course the impact on asset markets if pension schemes begin to de-leverage and buy more straight-forward bonds using proceeds from sales of other assets.
The large rise in long-term interest rates that we have seen since 2022, and the (very positive) impact on pension scheme solvency levels. This has led many schemes to consider buyout. It has also led to some issues for banks that have large portfolios of long term bonds and are nursing unrealised losses.
Ideas from governments to combine smaller pensions schemes into larger entities "for efficiency" or to get some additional investment for equity-style or infrastructure investment. Linked to this, the possibility of forcing certain pension schemes to invest a minimum amount in private markets. Finally any economic strategies that may emerge in the US following the election, their effect on inflation, and on international trade may be the source of a question.
These are only some suggestions, and are not in any way based on knowledge of how the Examiners are thinking. The exam will likely be written around the end of the year so the US election results are known.
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