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IFSE Institute Canadian Investment Funds Course Sample Questions:
1. 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 equity fund is a no-load fund.
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 original units were purchased with a sales charge.
D) Rakesh will not be subjected to a switch fee if his equity fund is a low-load fund.
2. Your client has very limited investment knowledge and is confused about what is meant by "marginal tax rate". What do you tell him?
A) It is the tax rate used in calculating taxable capital gains.
B) It is an amount resulting from dividing your total tax liability by your taxable income for the year.
C) It is the number used to gross-up Canadian dividend income.
D) It is the tax rate applied to the next dollar earned.
3. Every February, Reginald, a Dealing Representative, feels pressured by his Manager to generate new registered retirement savings plans (RRSP) and contributions to assist the branch in meeting broader business targets. Reginald is nearing the end of February, and he has a meeting with a new client, Orel. Orel wants to open a tax-free savings account (TFSA) to develop emergency savings because he does not want to worry about his withdrawals being taxed. Reginald suggests that if Orel were to contribute to an RRSP first, then the resulting tax savings could be used to fund a new emergency account.
In relation to account suitability, what can be said about Reginald's advice?
A) By convincing Orel to contribute an RRSP, instead of a TFSA, Reginald has put his client's interest first.
B) Recommending an investment solution that addresses two needs is putting Reginald's client's interest first
C) Based on Orel's stated need, recommending an RRSP contribution is unsuitable.
D) Reginald is putting the client's interest first by informing Orel why he should change his purpose for investing.
4. Which information is typically included in the Letter of Engagement?
A) Investment Objective
B) Process for complaints
C) Client's responsibilities
D) Payee for deposits
5. Which statement CORRECTLY describes index mutual funds and traditional exchange-traded funds (ETFs)?
A) The market price of an ETF must match its net asset value (NAV), whereas there can be discrepancy in the pricing of index funds.
B) Both types of funds are closed-end investments that are required to hold the same securities as the index at all times.
C) Index funds use an active investment management style, whereas ETFs use a passive investment management style.
D) Both types of funds attempt to replicate the return of a specific market index, but their returns may not perfectly match the index.
Solutions:
Question # 1 Answer: B | Question # 2 Answer: D | Question # 3 Answer: C | Question # 4 Answer: C | Question # 5 Answer: C |
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