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NEW QUESTION # 128
Anthony purchased 500 units of XYZ Fund at a price of $12.00 per unit. Near the end of the year, the mutual fund made a distribution of $1.50 per unit. The net asset value per unit (NAVPU) immediately before the distribution was $16.50. Anthony immediately reinvested his distribution at the new NAVPU. How many new units did Anthony purchase when his distribution was reinvested?
- A. 52.60
- B. 45.50
- C. 55.40
- D. 50.00
Answer: D
Explanation:
Explanation
When a mutual fund makes a distribution, its net asset value per unit (NAVPU) decreases by the amount of the distribution. Therefore, the new NAVPU of XYZ Fund after the distribution was $$(16.50 - 1.50 = 15.00)
NEW QUESTION # 129
One of your clients, Rakesh, had a portfolio composed of 60% ABC Equity Fund and 40% ABC Bond Fund.
Since equities were performing much better than fixed income, he had increased his holdings in ABC Equity Fund to 70% and had reduced his holding in ABC Bond Fund to 30% of his portfolio.
After benefitting the growth in his ABC Equity Fund for over 2 years, Rakesh is uncomfortable with this heavy exposure to equity funds and decides to rebalance his portfolio back to 60% of ABC Equity Fund and
40% of ABC Bond Fund.
He instructs you to switch 10% of the portfolio from the ABC Equity Fund to the ABC Bond Fund.
Which of the following statements is CORRECT?
- A. Rakesh will not be subjected to a switch fee if his original units were purchased with a sales charge.
- B. Rakesh will not be subjected to a switch fee if it is outlined in the prospectus.
- C. Rakesh will not be subjected to a switch fee if his equity fund is a low-load fund.
- D. Rakesh will not be subjected to a switch fee if his equity fund is a no-load fund.
Answer: B
NEW QUESTION # 130
Stan, a portfolio manager, is looking at two steel companies as potential investments. Truesteel Inc. has a current ratio of 2:1 while Strongco Ltd. has a current ratio of 0.8:1.
What could this information indicate?
- A. Truesteel is better able to meet its short-term financial obligations than Strongco.
- B. Stronqco is reiving less on debt financing than Truesteel.
- C. It appears that Truesteel is more profitable than Strongco.
- D. The stock market is more optimistic about the prospects for Truesteel than Strongco.
Answer: A
Explanation:
Explanation
The current ratio is a liquidity ratio that measures a company's ability to pay its short-term obligations with its current assets. A higher current ratio indicates that the company has more current assets than current liabilities, which means it can meet its short-term obligations more easily. A lower current ratio indicates that the company has less current assets than current liabilities, which means it may face liquidity problems or default risk. Therefore, the information given in the question indicates that Truesteel is better able to meet its short-term financial obligations than Strongco. The current ratio does not necessarily reflect the profitability, market outlook, or debt financing of the companies. References: Current Ratio Explained With Formula and Examples, Current Ratio Formula, Current ratio
NEW QUESTION # 131
Sujay contributes 3% of his $60,000 salary to his employer's defined contribution pension plan. His employer contributes the same amount to the plan. How will this affect his registered retirement savings plan (RRSP) contribution room for the year?
- A. It will reduce Suiay's contribution room by $3,600.
- B. It will reduce Suiay's contribution room by 51,800.
- C. It will have no effect. RRSP contribution room is based on earned income only.
- D. It will reduce Suiay's contribution room by
Answer: A
Explanation:
Explanation
D is correct because Sujay's registered retirement savings plan (RRSP) contribution room for the year will be reduced by $3,600. This is because his employer's defined contribution pension plan is considered a registered pension plan (RPP), which affects his RRSP contribution room through a pension adjustment (PA). The PA is calculated as 18% of his earned income in the previous year minus his RPP contributions in the current year.
In this case, Sujay's PA for the current year is $3,600, which is 18% of his $60,000 salary minus his 3% contribution ($1,800) and his employer's 3% contribution ($1,800). The PA reduces his RRSP contribution room for the next year by the same amount. It will have an effect on his RRSP contribution room (A), as it is not based on earned income only, but also on RPP contributions. It will not reduce his contribution room by
$51,800 (B), as this is more than his earned income. It will not reduce his contribution room by $10,800 , as this is 18% of his earned income without subtracting his RPP contributions. References: Canadian Investment Funds Course (CIFC) | IFSE Institute
NEW QUESTION # 132
Ken is a member of his employer's Defined Benefit Pension Plan (DBPP). Which of the following statements about Ken's plan is CORRECT?
- A. The amount Ken receives in retirement depends on the performance of the investments he has selected within the plan.
- B. Contributions to the plan do not result in a Pension Adjustment (PA) for Ken.
- C. The amount that Ken will receive at retirement is not guaranteed.
- D. Income received from the plan is eligible for pension income splitting even if Ken retires before 65.
Answer: D
Explanation:
Explanation
The statement that is correct about Ken's plan is option D. A defined benefit pension plan (DBPP) is a type of employer-sponsored retirement plan that promises to pay a specified amount of income to the plan member upon retirement. The amount of income is based on a formula that considers factors such as years of service, salary, and age. Income received from a DBPP is eligible for pension income splitting even if Ken retires before 65, meaning that he can transfer up to 50% of his eligible pension income to his spouse or common-law partner for tax purposes. This can reduce the overall tax payable by the couple if they are in different tax brackets. Therefore, option D is correct about Ken's plan. The other statements are not correct about Ken's plan. Option A is false because contributions to the plan do result in a Pension Adjustment (PA) for Ken, which is an amount that reduces his RRSP contribution room for the following year. Option B is false because the amount Ken receives in retirement does not depend on the performance of the investments he has selected within the plan; rather, it depends on the formula that determines his pension benefit. Option C is false because the amount that Ken will receive at retirement is guaranteed by the plan sponsor, unless the plan sponsor becomes insolvent or terminates the plan. References: [Defined Benefit Pension Plans | GetSmarterAboutMoney.ca], [Pension Income Splitting | GetSmarterAboutMoney.ca], [Pension Adjustment (PA) | GetSmarterAboutMoney.ca]
NEW QUESTION # 133
You are collecting know your client (KYC) information for your new client, Yael. She has recently accepted an early retirement package from her employer and has $100,000 to invest. She is looking for an investment that will provide income to help pay her ongoing monthly expenses. Without this extra income, she would have trouble paying her bills. From your discussions, Yael understands that markets fluctuate and says she is comfortable with high risk. Which of the following would be a suitable investment?
- A. Canadian equity index fund
- B. global equity fund
- C. money market fund
- D. mortgage fund
Answer: D
NEW QUESTION # 134
Xerxes, 45 years old, is a successful architect, having an annual income of $185,000. He has around $10,000 in his non-registered account, which he is looking to invest in a tax-efficient manner.
From the following options, which would be the most tax-efficient?
- A. Canadian equity index fund
- B. bond fund
- C. target date fund
- D. asset allocation fund
Answer: A
Explanation:
Explanation
A Canadian equity index fund is a type of mutual fund that invests in a basket of Canadian stocks that track the performance of a market index, such as the S&P/TSX Composite Index. A Canadian equity index fund can be a tax-efficient option for a non-registered account, because it can generate capital gains and eligible dividends, which are taxed at lower rates than interest income or foreign dividends. A bond fund, on the other hand, would produce mostly interest income, which is fully taxed at the marginal rate. An asset allocation fund or a target date fund would have a mix of different asset classes, such as bonds, stocks, and cash, and may not be as tax-efficient as a pure equity fund123 References = web search results from search_web(query="tax-efficient investment options in Canada")123 and Canadian Investment Funds Course (CIFC) - Module 2: Investment Products - Section 2.2: Mutual Funds4
4: https://www.ifse.ca/wp-content/uploads/2021/08/CIFC-Module-2.pdf
NEW QUESTION # 135
Solomon is a Dealing Representative who is excited about a new equity fund his dealer recently approved. He thinks investors will be attracted to the fund's historical performance. He has a prospective new client, Madira, who is 25 years old. Madira has invested in mutual funds before, but not with Solomon's dealer. She has made an appointment to open a new RRSP with Solomon's firm.
What does Solomon need to do to make this a suitable recommendation?
- A. Show from past fund performance, that mutual fund costs are not important if there are high returns.
- B. Match the past rates of return of the mutual fund with what is the anticipated rate of return.
- C. Identify how the proposed investment is in alignment with the investor's profile and holdings.
- D. Rely on the risk rating of the mutual fund when offering an investment solution.
Answer: C
Explanation:
Explanation
To make a suitable recommendation, Solomon needs to identify how the proposed investment is in alignment with the investor's profile and holdings. A suitable recommendation is one that meets the investor's needs, goals, risk tolerance, time horizon, and personal circumstances. It also considers the investor's existing portfolio and how the new investment would affect its diversification, performance, and risk. Therefore, option C is correct regarding what Solomon needs to do to make a suitable recommendation. The other options are not correct or sufficient to make a suitable recommendation. Option A is false because mutual fund costs are important regardless of the past fund performance, as they reduce the net returns and compound over time.
Option B is false because relying on the risk rating of the mutual fund is not enough to offer an investment solution, as it does not reflect the investor's return expectations, liquidity needs, tax situation, or personal preferences. Option D is false because matching the past rates of return of the mutual fund with what is the anticipated rate of return is not a reliable way to make a recommendation, as past performance does not guarantee future results and may not be consistent with the investor's risk tolerance or time horizon.
References: [Suitability | GetSmarterAboutMoney.ca], [Mutual Fund Fees | GetSmarterAboutMoney.ca], [Risk Rating | GetSmarterAboutMoney.ca]
NEW QUESTION # 136
Quintin has been a Dealing Representative for Global Maximum Financial for 5 years. Today, he opened an account for his new client, Reginald. In addition to opening a new account, Reginald agreed to accept Quintin's investment recommendation and placed a purchase order to buy units of the Global Maximum Value Equity fund.
Quintin informed his Branch Manager Lupita about this new account on the same day the purchase order was received. Lupita told Quintin that she would complete her review of the New Client Application Form (NCAF) by no later than tomorrow.
Which statement regarding this new account opening is CORRECT?
- A. Lupita has two business days from the date of opening the new account to approve the NCAF completed by Quintin.
- B. Unless Quintin is presently under probation, he does not need Lupita's approval regarding the NCAF.
- C. Quintin and Lupita are both following proper procedure regarding new account openings and purchase orders.
- D. Quintin cannot accept purchase orders from a client until Lupita completes her review of the NCAF.
Answer: D
Explanation:
Explanation
According to the MFDA Rules, a Dealing Representative must not accept any purchase orders from a client until the Branch Manager or other designated person has reviewed and approved the New Client Application Form (NCAF) for the client. This is to ensure that the Dealing Representative has obtained and verified all the necessary information about the client, such as identity, investment objectives, risk tolerance, financial situation, and suitability of investments. The review and approval of the NCAF must be completed before any trades are executed for the client, unless there are exceptional circumstances that justify a delay. In this case, Quintin should have waited for Lupita's approval of the NCAF before placing the purchase order for Reginald.
References: 1: MFDA Rules as at December 31, 2021 - MFDA 2 (Rule 2.2.4)
NEW QUESTION # 137
Your client, Cosmo, recently inherited $50,000 from his uncle. He wants to use this money towards his retirement savings. Cosmo is a 50-year old, self-employed carpenter and he earns on average $65,000 per year. He has a registered retirement savings plan (RRSP) with the bank worth $425,000 and a tax-free savings account (TFSA) worth $46,000. He started saving when he was 25 years old and has always made his own investment decisions. His money is mostly invested in balanced funds. He feels most comfortable with these types of mutual funds since they offer potential investment growth but without being too aggressive. Cosmo has no other assets.
What additional information do you need about Cosmo to fulfill your know your client obligation?
- A. risk tolerance
- B. time horizon
- C. investment objectives
- D. income and net worth
Answer: A
Explanation:
Explanation
To fulfill the know your client (KYC) obligation, an advisor must collect and document information about the client's personal and financial situation, investment objectives, risk tolerance, and investment knowledge. The KYC rule is a regulatory requirement that ensures that the advisor understands the client's needs and goals, and provides suitable recommendations that match the client's profile. In this case, Cosmo has provided some information about his personal and financial situation, such as his age, occupation, income, assets, and inheritance. He has also given some indication of his investment objectives, such as saving for retirement, and his investment knowledge, such as making his own investment decisions and preferring balanced funds.
However, he has not disclosed his risk tolerance, which is his willingness and ability to accept fluctuations in the value of his investments. Risk tolerance is an important factor that affects the choice of investment strategies and products. Therefore, to complete the KYC process, the advisor needs to obtain additional information about Cosmo's risk tolerance. References:
Canadian Investment Funds Course (CIFC) Study Guide, Chapter 1: The Investment Funds Industry, Section 1.4: The Know Your Client (KYC) Rule, page 1-111 Know Your Client (KYC) Definition - Investopedia2
NEW QUESTION # 138
Xian-Li believes she is a sophisticated investor. She has constructed her own portfolio and has had some success. She does not believe in studying a company's details such as earnings, expenses, or assets. She is more concerned with patterns in a company's stock price over time. She believes patterns form and can be used to predict future movements in the market.
How does Xian-Li evaluate the companies in her portfolio?
- A. flowchart analysis
- B. value analysis
- C. fundamental analysis
- D. technical analysis
Answer: D
NEW QUESTION # 139
When you buy a put option, which of the following is TRUE?
- A. You have the right to sell a set number of shares at a set price.
- B. You have the obligation to sell a set number of shares at a set price.
- C. You have the obligation to buy a set number of shares at a set price.
- D. You have the right to purchase a set number of shares at a set price.
Answer: A
NEW QUESTION # 140
Sheldon is a 25 year old graphic designer. He has just started working and saves regularly. Apart from his regular salary he also earns extra money from freelancing after office hours and during weekends. His earnings from his freelance work are sufficient for meeting his living expenses. He saves the entire amount of his salary. He has heard about lifecycle funds but has come to you for additional information.
Which of the following statement about lifecycle funds is TRUE?
- A. As Sheldon gets older, the life cycle asset allocation changes from more risky to less risky.
- B. The asset allocation of a lifecycle fund is set based on the age demographic of its unitholders and remains the same for the time frame of the lifecycle fund.
- C. All lifecycle funds start with equal allocations to cash, fixed income and equities before being re-balanced.
- D. Investor income is the only basis for changing the asset allocation of a lifecycle mutual fund.
Answer: A
NEW QUESTION # 141
Sylvia decided to use the savings from her bank account to purchase a 5-year bond. The face value of the bond is $10,000, the market price is $9,230 and the coupon rate is 7%.
What is the current yield on the bond? Round to 2 decimal places.
- A. 7.75%
- B. 7.58%
- C. 7.25%
- D. 7.00%
Answer: B
Explanation:
Explanation
The current yield on a bond is the annual interest payment divided by the current market price of the bond. In this case, the annual interest payment is 7% of the face value, which is $700. The current market price of the bond is $9,230. Therefore, the current yield is:
9230700*100%=7.58%
The current yield is different from the coupon rate, which is the annual interest payment divided by the face value of the bond. The coupon rate does not change over the life of the bond, but the current yield changes as the market price of the bond fluctuates. References:
* Canadian Investment Funds Course (CIFC) Study Guide, Chapter 5: Fixed-Income Securities, Section
5.2: Bond Pricing and Yield, page 5-61
* Current Yield Definition - Investopedia2
NEW QUESTION # 142
Ayan wants to make a registered retirement savings plan (RRSP) contribution and deduct it from his Year 1 income. What is the deadline for this contribution (assume that it is NOT a leap year)?
- A. December 31, Year 1
- B. December 31, Year 2
- C. March 1, Year 2
- D. March 1, Year 1
Answer: C
NEW QUESTION # 143
Lucas is 60 years old and continues to work. He presently is a plan holder of a registered retirement savings plan (RRSP). He is considering changing his RRSP to a registered retirement income fund (RRIF).
Which of the following statements is CORRECT?
- A. Once he changes his RRSP to a RRIF, his unused total RRSP contribution room is lost.
- B. Minimal withdrawals are required to start in the current calendar year his RRIF was established.
- C. There is no minimum age to be an annuitant to a RRIF.
- D. Investments that qualify as an eligible investment for a RRIF are different than for an RRSP.
Answer: A
Explanation:
Explanation
A registered retirement income fund (RRIF) is a type of registered plan that provides a stream of income in retirement. A RRIF can be created by converting an RRSP, but once the conversion is done, the plan holder can no longer make contributions to the RRSP or the RRIF. Therefore, any unused RRSP contribution room is lost after the conversion. The other statements are incorrect because:
A: There is a minimum age to be an annuitant to a RRIF, which is 71 years old. However, a plan holder can convert an RRSP to a RRIF at any age before 71.
C: Minimum withdrawals are required to start in the year following the year the RRIF was established, not in the current calendar year.
D: Investments that qualify as an eligible investment for a RRIF are the same as for an RRSP, such as mutual funds, stocks, bonds, GICs, etc. References:
Canadian Investment Funds Course (CIFC) Study Guide, Chapter 6: Registered Plans, Section 6.2:
Registered Retirement Income Fund (RRIF), page 6-81
Registered Retirement Income Fund (RRIF) - Canada.ca2
NEW QUESTION # 144
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