Chapter 12

Question 1

Fund Wraps

Answer 1

Provides a series of portfolios with multiple mutual funds to reflect pre-selected asset allocation models

• can be funds of funds or portfolio. With a fund of funds the client owns units of a pool of mutual funds

Question 2

What is the main objective of an Equity Growth Fund?

Answer 2

Capital gains!

• seeks our smaller firms that do not have the financial ability to pay dividends. They need all the funds they can obtain in order to grow and if successful their share prices should increase

Question 3

Equity Index Fund

Answer 3

Goal is to replicate the movements of a market index (often S&P/TSX Composite Index) by constructing an investment portfolio that had similar weightings to the index it tried to replicate

• and alternative to index funds are Exchange-Traded Funds (ETF)

Question 4

Difference between a hedger and a speculator?

Answer 4

Hedger uses derivatives as kind of insurance policy against decline of a portfolio

Question 5

What is a Balanced Mutual Fund? What is their objective?

Answer 5

Invests a % of their assets in fixed-income securities and a % in equities

• Have the objective of earning some amount of both current income and capital gains while at the same time preserving capital

Question 6

What is a Target-Date Fund?

Answer 6

Have 2 characteristics that distinguish them from other mutual funds; a maturity date and a glide path

Glide Path: changes in the fund’s asset allocation mix over time which allows the fund to pursue a growth strategy by holding more risky assets in the early years and then gradually reducing the risk as the target date approaches

Question 7

Are foreign-source dividends taxed at the same rate as Canadian interest income?

Answer 7

Yes