Free Canadian Investment Funds Course Exam CIFC Exam Practice Test

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?

• Recommending an investment solution that addresses two needs is putting Reginald's client's interest first
• Based on Orel's stated need, recommending an RRSP contribution is unsuitable.
• Reginald is putting the client's interest first by informing Orel why he should change his purpose for investing.
• By convincing Orel to contribute an RRSP, instead of a TFSA, Reginald has put his client's interest first.

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?

• It appears that Truesteel is more profitable than Strongco.
• Truesteel is better able to meet its short-term financial obligations than Strongco.
• The stock market is more optimistic about the prospects for Truesteel than Strongco.
• Stronqco is reiving less on debt financing than Truesteel.

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?

• 45.50
• 50.00
• 52.60
• 55.40

Pierre wants to discuss the merits of a specific mutual fund with his Dealing Representative, Simone. There are no trailer fees associated with this fund. Simone is familiar with the mutual fund that Pierre is referring to, which is not offered by her dealer. They schedule an appointment to further discuss his investment portfolio.Which behaviour from Simone is ethical?

• Simone's ability to keep her knowledge current on competitors' investment offerings shows that she is putting her client's interest first.
• Knowing Pierre does not like that her dealer's funds have trailer fees, she chooses not to discuss the relationship between trailer fees and MER while making comparisons.
• When comparing her dealer's own mutual funds to the one Pierre discovered, Simone emphasizes the importance of similar net rates of return and minimizes the significance of management expense ratios (MERs).
• While comparing Fund Facts of the different mutual funds, Simone points out that not only are the fund management expenses different but so are the investor profiles for each fund.

Faruq is a Dealing Representative with Smart Planning Group, a mutual fund dealer. Faruq meets with his new client, Taline, and learns that she lives on a low, fixed income.Taline tells Faruq that she wants to maximize her investment returns as high as possible to make up the difference. Taline also indicates that she cannot afford large investment losses because her income is low. Which of the following CORRECTLY describes how Faruq should assess Taline’s risk profile?

• Taline's risk profile should be "high"" because she is willing to accept risk in order to maximize her investment returns.
• Faruq should override the risk that Taline is able to accept because her return expectations cannot otherwise be met.
• Faruq should assess Taline's risk profile based on the higher of her: (1) risk tolerance and (2) risk capacity
• Taline's risk profile should be "low" because her risk capacity is low and she cannot afford lame investment losses.

For what reason do different entities have securities created and sold?

• Government debt is reduced due to the capital that is received from investors when their securities are purchased.
• When common shares are initially sold, the capital raised will increase the issuing corporation's retained earnings.
• Governments can address financial needs and support initiatives when securities are first sold.
• The issuance of securities is a method used by corporations to redistribute their wealth to investors to lower taxes.

What information does Fund Facts provide to potential investors?

• What the mutual fund is currently investing in.
• How to calculate the taxes owed from investment income.
• The portfolio management strategy that is used.
• The remuneration paid to the Independent Review Committee.

Which of the following statements about standard deviation is CORRECT?

• Indicates how much an investment's performance fluctuates around its average historical return.
• A standard deviation greater than one indicates a higher level of volatility than the market.
• Measures the systematic risk of an investment relative to a benchmark index.
• Standard deviation is also referred to as beta.

Ellen and her only son Jeff live on the family farm with her father George. Jeff is five years old and Ellen has decided that it is time to start saving for Jeff’s post-secondary education. She has called you to ask about registered education savings plans (RESPs).Which of the following statements is TRUE?

• If Jeff qualifies for additional CESG. his CESG lifetime maximum increases to $10,000.
• If Jeff decides not to pursue a post-secondary education, he can keep all the CESG but it then becomes taxable.
• George may open an RESP for Jeff but it will not quality to receive Canada Savings Education Grants (CESGs).
• If Ellen receives the National Child Benefit Supplement (NCBS), Jeff may be eligible for the Canada Learning Bond

Sachin owns units of a long-term bond fund. He has heard that the Bank of Canada is likely to make it more expensive to borrow money. He is worried that the value of his investment is going to drop.What sort of investing risk is Sachin experiencing?

• inflation risk
• interest rate risk
• market risk
• liquidity risk