CIFC Flashcards_Units 6 to 11

Question 1

Why are index funds considered passive investments?

a) Investors purchase them in place of diversified portfolios.

b) They do not require any analysis or specific expertise from the portfolio manager.

c) The portfolio managers do not make any changes in the portfolio.

d) The underlying index does not change from year to year.

Answer 1

b) They do not require any analysis or specific expertise from the portfolio manager.

Question 2

According to the investment objectives of the Chesapeake Fund, the fund manager may vary the asset mix of the portfolio in response to changing market conditions. Although the fund typically holds a combination of fixed income and equity securities, the fund manager is not restricted by any limitations on asset categories. What type of fund is Chesapeake?
a) commodity pool
b) balanced
c) asset allocation
d) index

Answer 2

c) asset allocation

Chesapeake Fund is an asset allocation fund. The fund manager for an asset allocation fund may vary the asset mix of the portfolio in response to changing market conditions. Generally, these funds have no restrictions on the asset mix of the portfolio.

Question 3

The manager of the Venture Fund has invested the portfolio as follows: 5% in cash, 40% in fixed income, 30% in Canadian equities, and 25% in foreign equities. The investment objectives of the fund restrict the manager from holding greater than 40% of the fund in foreign equities. He also has to maintain between 40% and 60% of the portfolio in fixed income. What type of mutual fund is the Venture Fund?
a) equity fund
b) asset allocation fund
c) commodity pool
d) balanced fund

Answer 3

d) balanced fund

Balanced funds invest in a combination of cash, bonds, and stocks. Most balanced funds are required to hold minimum percentages of each type of investment, according to objectives set out in the fund’s prospectus. Usually, there is a range specifying the minimum and maximum limits for each asset category. The Venture Fund would fall under this category.

Question 4

Which of the following is a benefit of investing in open-end mutual funds?
a) guaranteed high returns
b) exchange traded
c) diversification
d) principal guarantee

Answer 4

c) diversification

Mutual funds offer many benefits including professional management, liquidity, low cost, convenience, and diversification. Mutual fund returns are not guaranteed and there is no principal guarantee feature. Open-end mutual funds are not exchange traded, but rather units are bought and redeemed directly through the mutual fund company, also known as the investment fund manager.

Question 5

James owns an investment that can mimic the return of the Toronto Stock Exchange (TSX) index. If he wants to sell his investment, he can do so on the TSX. What type of investment does James own?
a) Canadian index mutual fund
b) exchange traded fund (ETF)
c) principal protected note
d) index futures contract

Answer 5

b) exchange traded fund (ETF)

Exchange-traded funds (ETFs) are open-end investment funds whose units are traded on an exchange. ETFs can be bought and sold at any time when the exchange is open. They are purchased or sold through an investment dealer or broker.

Question 6

Kennedy is looking for an investment that will provide her with long-term capital growth. Since she has invested before, Kennedy has a medium to high risk tolerance and wants to now diversify her holdings to include investments outside of Canada. Furthermore, she does not require an income stream from the investment. Which classification of mutual fund would meet Kennedy’s requirements?
a) mortgage fund
b) global equity fund
c) bond fund
d) balanced fund

Answer 6

b) global equity fund

International and global equity funds are suitable for investors who have a medium, medium to high, or high risk profile. They provide investors with international diversification. Since most international and global equity funds invest in businesses, their objective is long-term capital growth and not income.

Question 7

Diane is a retired widow who wants a monthly income from her mutual fund portfolio. She is concerned about losing money so the ideal investment would be a fairly conservative fund. Which of the following mutual funds can provide a monthly income but is low risk?
a) money market fund
b) mortgage fund
c) balanced fund
d) Canadian dividend fund

Answer 7

a) money market fund

Diane needs a fund that provides her a monthly income and is fairly conservative. A mortgage fund would fulfill her requirements. A money market fund is probably too conservative and will not provide her with sufficient income. A balanced fund or Canadian dividend fund may exceed Diane’s comfort level with risk.

Question 8

From a general risk and return point of view, which of the following ranks the set of mutual funds from lowest risk/return to highest risk/return?
a) money market fund, balanced fund, Canadian equity fund, real property funds
b) money market fund, international equity fund, mortgage fund, Japanese equity fund
c) bond fund, balanced fund, money market fund, Canadian dividend fund
d) asset allocation fund, mortgage fund, commodity pool, global equity fund

Answer 8

a) money market fund, balanced fund, Canadian equity fund, real property funds

In general, mutual funds would rank from lowest risk/return to highest risk/return as follows:
money market funds
fixed income funds (mortgage, bond)
balanced funds (balanced, asset allocation, target date)
equity funds (Canadian, global, international, sector)
specialty funds (labour-sponsored, real property, commodity pools)

Question 9

Your clients, Ravi and Nuzah Patel, both 30 years of age, recently married. They want to purchase a home in the near future and have already started saving for the down payment. They received $12,000 cash from their wedding and are looking for an investment that provides safety of principal, low risk, and some interest income. They do not want their investment to go down in value since they want the money available if they find the perfect home. Which of the following types of mutual funds meets the criteria?
a) money market fund
b) bond fund
c) Canadian equity fund
d) international equity fund

Answer 9

a) money market fund

Since their goal is capital preservation, the Patels require an investment that is safe and secure. The most appropriate investment would be a money market fund that protects their capital while also providing them with interest.

Question 10

What is characteristic of a closed-end mutual fund?
a) The unit price always reflects the fund’s underlying net asset value per unit (NAVPU).
b) They may be listed and sold on a stock exchange.
c) They may suspend redemptions under certain circumstances.
d) They make a continuous offering of shares to the public.

Answer 10

b) They may be listed and sold on a stock exchange.

A closed-end mutual fund may be listed and sold on a stock exchange. These funds issue a set number of shares when the company is organized. Since there are a set number of shares, interested investors can purchase the fund from current shareholders only, through the secondary market. This process does not normally involve the issuing company. The price of the shares may or may not reflect the net asset value per unit (NAVPU). The NAVPU is based on the value of the investments held by the fund, while the price is subject to market conditions.

Question 11

Which of the following products has the potential to provide protection from creditors?

Answer 11

Segregated funds

Segregated funds are the life insurance industry’s equivalent to mutual funds. Since they are life insurance products, segregated funds have the potential to provide protection from creditors.

Question 12

By law money market funds must have a weighted term to maturity of ______________

a) 180 days or less

b) 60 days or less

c) 90 days or less

d) 120 days or less

Answer 12

a) 180 days or less

By law, the average weighted term to maturity of the portfolio must not exceed 180 days which
makes the fund very stable.

Question 13

This type of fund invests in small and medium sized start-up companies.

a) Labour Sponsored Investment fund

b) Dividend fund

c) Sector fund

d) Index fund

Answer 13

a) Labour Sponsored Investment fund

Question 14

___________ funds are less liquid than other mutual funds because they are valued on a monthly or quarterly basis rather than daily.

Answer 14

Real Property

Real property funds are less liquid than other types of mutual funds since investors may not be able to convert their investment into cash when they want.

Question 15

Which of the following statements is NOT true of ETFs?

a) ETFs are passive investments

b) ETFs are purchased at ask prices on the secondary market

c) ETFs are more specialized and have higher MERs than index funds.

d) ETFs sell at prices often less than NAVPU

Answer 15

c) ETFs are more specialized and have higher MERs than index funds.

ETFs are known for their low MERs.

Question 16

Which of the following is NOT a difference between open end mutual funds and closed end funds?

a) Closed end funds have a set # of units while mutual funds do not

b) Closed end funds sell at a price different from their NAVU, open end funds do not.

c) Open end fund values change throughout the day, closed end funds are valued at the end of each day

d) Closed end funds trade on the secondary market, open end funds do not.

Answer 16

c) Open end fund values change throughout the day, closed end funds are valued at the end of each day

It is the reverse of this that is true.

Question 17

Segregated funds provide what amount of protection of principal?

a) up to 100%

b) up to 75%

c) up to 50%

d) None of the above are correct. Segregated funds don’t provide protection of principal.

Answer 17

a) up to 100%

Segregated funds must provide AT LEAST 75% and up to 100% protection of principal.

Question 18

International funds invest only outside of Canada

a) True

b) False

Answer 18

b) False

International funds invest in securities of corporations outside North America (not just Canada)

Question 19

___________funds do not have minimum percentages that must be held in each class while __________ funds do.

Answer 19

Tactical Asset Allocation, Balanced

While balanced funds must stay within a set asset mix, tactical asset allocation funds generally have no
restrictions on the allocation of assets within the portfolio. The portfolio manager has the flexibility to change
the asset allocation of the fund to adjust to changing market conditions and economic forecasts.

Question 20

When interest rates increase, the value of mortgage funds will _______________

a) decrease

b) not be affected

c) increase

Answer 20

a) decrease

Question 21

Which of the following fund types has a risk level that diminishes over time?

a) Commodity Pools

b) Target date funds

c) Mortgage funds

d) Asset Allocation funds

Answer 21

b) Target date funds

Over time the asset mix of a target date fund is adjusted away from equities and towards fixed income thereby reducing risk exposure as the target date approaches

Question 22

Which of the following is NOT considered a source of income from investment funds?

a) dividends

b) interest

c) return of capital

d) None of the above are correct. They are all considered types of income

Answer 22

d) None of the above are correct. They are all considered types of income

Question 23

___________ are debt instruments issued by credit worthy financial institutions that promise to repay the original principal upon maturity and which also has performance linked to an underlying asset.

Answer 23

Principal Protected Notes

Question 24

A fund of funds (FOF) automatically rebalances its assets to a strategic asset mix.

a) True

b) False

Answer 24

a) True

Question 25

This type of fund invests in commercial and residential NHA mortgages.

a) Real Estate fund

b) Commodity Pool

c) Mortgage fund

d) LSIF

Answer 25

c) Mortgage fund

Question 26

Mortgage funds hold _____________

a) CDIC insured mortgages

b) Uninsured mortgages

c) NHA mortgages

d) CIPF insured mortgages

Answer 26

c) NHA mortgages

Question 27

Which of the following describes the returns paid out by real property funds?

a) Rental income and capital gains

b) Capital gains only

c) Interest income and capital gains

d) Rental income only

Answer 27

a) Rental income and capital gains

Question 28

Balanced funds invest in all three asset classes and will allow the asset mix to stray from the strategic mix on a short term basis before re-balancing, when they are using a ______ asset allocation strategy.

Answer 28

Tactical

The two strategies that can be used in a balanced fund are strategic or tactical. Strategic must rebalance back to the target mix when changed to the holding take it out of range. Tactical will allow the fund to stay out of the target allocation range for the short term.

Question 29

Which of the following funds has the highest risk level?

a) Bond funds

b) Balanced funds

c) Dividend funds

d) Mortgage funds

Answer 29

c) Dividend funds

Question 30

Mutual funds distribute dividends, interest, and capital losses to unit holders

a) True

b) False

Answer 30

b) False

They don’t distribute losses. Only seg funds can do this.

Question 31

When mutual funds pay out more in distribution than they have earned in income, this is considered a _______________

a) Dividend restructure

b) Capital redistribution

c) Return of capital

d) Extra dividend

Answer 31

c) Return of capital

Question 32

Which of the following funds does NOT require a prospectus for sale to qualified clients?

a) ETF

b) Pooled Funds

c) Principal Protected Note

d) Segregated Funds

Answer 32

b) Pooled Funds

Pooled funds are discussed on page 227. This is listed as one of their characteristics.

(Note: Hedge funds are another fund that doesn’t require a prospectus)

Question 33

Which of the following arrangements of mutual funds is correct if listing them from lowest risk to highest?

a) International, Global, Sector, Commodity Pool

b) Dividend, Bond, International, Sector

c) Mortgage, Bond, Global, International

d) Global, International, Real Property, Sector

Answer 33

c) Mortgage, Bond, Global, International

Question 34

Where does the income paid to real estate fund investors come from? (2 places)

Answer 34

1. rental income from properties held
2. Capital gains from property value appreciation

Question 35

Why are Asset Allocation funds considered higher risk than balanced funds?

Answer 35

Because asset allocation funds can take a more aggressive approach investing in only one asset class if they wish.

Question 36

A type of fund that can make increased use of derivatives is :

Answer 36

a commodity pool

Question 37

If interest rates were to move up rapidly, the prices of which of the following would be least affected?

a)	Commodity Pools
b)	Bond funds
c)	Mortgage funds
d)	Equity funds

Answer 37

c) Mortgage funds

Question 38

Why is an index fund considered passive?

Answer 38

Because the fund manager doesn’t have to make any investment decisions, they need only buy what is in the index.

Question 39

Why does the NAVPU of a money market fund stay the same?

Answer 39

Because all income is distributed monthly.

Question 40

Investment returns on dividend funds are entirely dependent on market performance

a)	True
b)	False

Answer 40

b) False

Dividend funds invest in dividend paying stock. The fortunes of the companies invested in depend not only on the how the stock market does but how the companies themselves do. Just because the market is up, does not mean all companies stocks are up

Question 41

How do global funds differ from international funds?

Answer 41

Global funds invest in Canadian and US securities, International funds don’t

Question 42

What type of income do balanced funds pay?

Answer 42

-Interest from money market securities and bonds held
-Dividends from stocks held
-Capital gains from stocks held and maybe from bonds

Question 43

If an investor’s investment objectives were protection of capital, cash flows, and the possibility of capital gains, the investor would probably choose:

a)	a money market fund
b)	a bond fund
c)	an equity fund
d)	a sector fund

Answer 43

b) a bond fund

Question 44

The number of valuation dates for real estate funds is usually ___________ the number of valuation dates for an equity fund.

a)	higher than
b)	lower than
c)	the same as

Answer 44

b) lower than

Question 45

Equity funds have more risk than bond funds, but not all equity funds have the same amount of risk.

a)	True
b)	False

Answer 45

a) True

Question 46

Which of the following statements regarding balanced funds is /are correct?

I) Expected returns on a balanced fund should be higher than returns on money market funds

II) When interest rates fall, balanced funds should outperform equity funds

III) When interest rates fall balanced funds should underperform equity funds

IV) Balanced funds are equally balanced between bonds, preferred shares and equity.

Answer 46

I) Expected returns on a balanced fund should be higher than returns on money market funds

II) When interest rates fall, balanced funds should outperform equity funds

Question 47

Why is a Sector Fund considered high risk?

Answer 47

Because it lacks diversification

Question 48

Why is the risk on a mortgage fund lower than the risk on a bond fund?

Answer 48

Because mortgages have shorter maturities than bonds and Mortgage funds invest only in NHA insured mortgages lessening default risk.

Question 49

One would expect the volatility of a sector fund to be ____________ the volatility of a growth fund.

a) higher than
b) lower than
c) The same as

Answer 49

a) higher than

Question 50

Fixed Income funds would have ____________risk as/ than a balanced fund.

a)	Higher
b)	Lower
c)	the same

Answer 50

b) Lower

Question 51

Which of the following fund types in NOT considered a growth-oriented fund?

a)	Sector Fund
b)	Index Fund
c)	Rea Property Fund
d)	Commodity Pool

Answer 51

b) Index Fund

Question 52

Which is more risky?

a)	Global Equity Fund
b)	Canadian Equity Fund

Answer 52

a) Global Equity Fund

Global Equity Funds are more risky as they have more exposure to additional risk from foreign exchange rates, political instability, and economic risk.

Question 53

What is the maximum possible tax credit available on LSIF investments?

Answer 53

30% on maximum of $5000 investment (15% from Federal (up to 2017), 15% possible form Provincial)

Question 54

How often are Global Funds valued?

Answer 54

Daily

Question 55

What type of fund has a tracking error?

Answer 55

Index Funds

Question 56

List three ways ETFs are different from Index Funds

Answer 56

Any Three of:

• ETFs sell on secondary mkt
• ETF price is usually lower than NAVPU
• ETF prices change throughout the day
• ETF sales have commission charges
• ETFS are sold/ bought at bid/ask

Question 57

Why do pooled funds and hedge funds NOT require a prospectus?

Answer 57

They have investment restrictions that limit purchasers to “accredited investors” with high minimum investment.

Question 58

What is “Absolute Performance”?

Answer 58

It is the requirement on a hedge fund to perform with positive returns in ANY market.

Question 59

Segregated Funds guarantee at least ________% of the amount invested

Answer 59

75%

Question 60

In order to receive the guarantee, segregated funds must be held for at least ________ years

Answer 60

10

Question 61

What does CIFSC stand for?

Answer 61

Canadian Investment Funds Standards Committee

Question 62

Which of the following is NOT a conservative mutual fund?

a)	Bond fund
b)	Money Market Fund
c)	Target date fund
d)	Canadian Dividend fund

Answer 62

d) Canadian Dividend fund

Question 63

Money Market funds must by law have an average maturity of their assets no greater than _________

Answer 63

180 days

Question 64

What is the difference between Strategic asset allocation and Tactical asset allocation?

Answer 64

Strategic allocation continuously rebalances back to the strategic mix. Tactical will allow the mix to stay out of alignment for the short term then will rebalance back to the strategic mix.

Question 65

Which of the following statements about passively managed funds is TRUE?

a) They attempt to outperform the market.

b) They rely on the manager’s superior stock-picking abilities.

c) They will outperform their benchmark in market downturns.

d) They provide poor returns during market downturns.

Answer 65

d) They provide poor returns during market downturns.

Question 66

Which of the following statements about actively managed funds is TRUE?

a) They will always outperform the market.

b) They rely on the manager’s stock-picking abilities.

c) They will always outperform their benchmark in market.

d) Their portfolios match their benchmark.

Answer 66

b) They rely on the manager’s stock-picking abilities.

Question 67

Which ratio is negatively affected by rising expenses, increasing competition and poor pricing policies?

a) current ratio

b) debt to assets ratio

c) gross profit margin ratio

d) price earnings ratio

Answer 67

c) gross profit margin ratio

Question 68

If a fund has a beta of 2, what is the expected outcome for the fund?

a) It should outperform the market by 100%.
b) It should match the performance of the market.
c) It should underperform the market by 50%.
d) It should outperform the market by 50%.

Answer 68

a) It should outperform the market by 100%.

The market or index to which a fund is compared is given a beta equal to 1. If a fund has a beta of 2, its price is expected to rise or fall by twice as much as the overall market. In other words, it should outperform (or underperform) the market by 100%.

Question 69

What effect will a mutual fund distribution have on its price?
a) The price per unit will decrease in value equivalent to the distribution.
b) The price per unit will increase in value equivalent to the distribution.
c) The price per unit will increase in value based only on reinvested distributions.
d) Price per unit will decrease in value based only on reinvested distributions.

Answer 69

a) The price per unit will decrease in value equivalent to the distribution.

When a mutual fund distributes its earnings out to unitholders, it lowers its net asset value. This in turn, lowers its net asset value per unit (or price). In essence, the price will decrease in value equivalent to the distribution.

Question 70

What type of analysis looks for insight into a company from their financial statements?
a) fundamental
b) value
c) growth
d) technical

Answer 70

a) fundamental

Fundamental analysis focuses on looking at the fundamentals of a company such as revenues, assets, profits, and competitive position. Fundamental analysts use a company’s financial statements as a major source of information. However, they may also speak with its management, customers and suppliers to get a better picture of a company’s situation. They also consider macroeconomic factors such as the economy, inflation and interest rates and how those factors could impact a company’s earning potential.

Question 71

Heath, an equity analyst, is reviewing a company’s financial statements to determine its profitability. Which statement would show a company’s net profit or loss?
a) balance sheet
b) income statement
c) retained earnings statement
d) cash flow statement

Answer 71

b) income statement

A company’s net profit or loss is shown on its income statement. The purpose of the income statement is to show the revenue and expenses of a company for the fiscal year. If revenues exceed expenses, there will be a net profit. If revenues are less than expenses, the company will show a loss.

Question 72

On January 3, Connie Lynne purchases 100 units of Cornerstone Canadian Equity Fund with a net asset value per unit (NAVPU) of $10. Later that year, on December 15, the mutual fund’s NAVPU moves to $11 and it makes a distribution of $1 per unit. Connie’s distribution is automatically reinvested at a NAVPU of $10. What is the market value of Connie’s investment on December 15 after the distribution and reinvestment?
a) $1,000
b) $1,100
c) $1,200
d) $1,111

Answer 72

b) $1,100

Connie’s original investment is $1,000, calculated as (100 units x $10 NAVPU). The total distribution is $100, calculated as (100 units x $1 per unit). When the distribution is reinvested Connie receives 10 additional units, calculated as ($100 ÷ $10 NAVPU). Therefore, she has a total market value of $1,100, calculated as [(100 units + 10 units) x $10 NAVPU on December 15].

Question 73

Dana, a portfolio manager for a Canadian small capitalization fund, is analyzing the price-to-earnings ratio (P/E) for two mining companies. Richtree has a P/E ratio of 20 while Drake Gold’s ratio is 10.85. What can Dana infer from the information?

a) Drake Gold shares trading at $10.85 are a better buy as they are cheaper than Richtree at $20.
b) Investors are willing to pay $20 for every $1 of earnings of current income of Richtree.
c) P/E ratio is a ratio that measures the profitability of a company.
d) When comparing inter-company ratios Dana should only consider current income and not expected future income.

Answer 73

b) Investors are willing to pay $20 for every $1 of earnings of current income of Richtree.

P/E ratio is an important valuation ratio. A higher P/E ratio exhibits investor confidence in the company. It measures the investment value of a security in comparison to its share price. Profitability ratios are important to help determine whether a company is making money or not. However, these ratios do not relate back to the share price. Portfolio Managers examine the current as well as future expected profit data when analyzing ratios for investment purposes.

Question 74

Which investment management strategy relies on the belief that over time it is very hard to outperform the market?
a) passive management
b) active management
c) value investing
d) growth investing

Answer 74

a) passive management

With a passive investment strategy, the portfolio manager is relying less on his or her stock-picking skills and more on the ability to track the underlying benchmark closely. The rationale behind this is the belief that over the long term, it is very difficult for individual portfolio managers to outperform the market as a whole.

Question 75

Derek, 20 years old, is a keen investor. He has attended several seminars on investing and is eager to undertake investing as full-time activity. He is not clear about systematic risk and systemic risk.
Which of the following statements best describe systematic risk?

a) It can be minimized through diversification.
b) It only impacts certain companies in the market.
c) Unanticipated inflation is an example of systematic risk.
d) It arises from a single, catastrophic event.

Answer 75

c) Unanticipated inflation is an example of systematic risk.

Systematic risk is also referred to as market risk. It affects everyone and cannot be avoided. Systematic risks include interest rate changes, unanticipated inflation, recession and wars. Systematic risk can be compared to the risk of bad weather. In the event of an earthquake, everyone is vulnerable to it and there is no way it can be stopped.

Question 76

What type of analysis is also known as charting?
a) fundamental
b) value
c) growth
d) technical

Answer 76

d) technical

Technical analysis is also known as charting. Technical analysts rely heavily on charts to identify patterns or indicators to predict future price movements.

Question 77

What type of approach is Selene taking if she analyzes the macroeconomic environment, then the industry, then the individual companies?
a) bottom-up
b) top-down
c) macroeconomic centric
d) technical

Answer 77

b) top-down

The top-down approach begins with looking at the overall economy and current market trends to determine the industries, markets and/or countries that are expected to perform well. Then the portfolio manager narrows it down further to pick individual companies that they believe will outperform its competitors.

Question 78

Which of the following statements is the best description of Shareholder’s Equity?

a) It is the value of all series of common shares at market value

b) It is the value of owner’s investment in the company plus retained earnings

c) It is the value of all common and preferred shares at issue price.

d) It is the value of owner’s investment in the company

Answer 78

b) It is the value of owner’s investment in the company plus retained earnings

Question 79

_____________ is a measurement of the total risk of a common share in a company.

a) Current Yield

b) Beta

c) Duration

d) Standard deviation

Answer 79

d) Standard deviation

Question 80

Sylvia has invested in the Royal Value Dividend fund. ON March 1, 20XX she owns 500 units valued at $14.50 per unit. On March 2nd the fund pays out distributions of $1.45 per unit. Which of the following statements is true of Sylvia’s position after distribution?

a) Regardless of whether Sylvia chooses to reinvest her distributions or take cash, her portfolio value will remain unchanged.

b) Sylvia will now own units worth $1.45 less per unit. Her portfolio value would have decreased by $725.00

c) Sylvia can choose to reinvest her distributions, if she does her portfolio value will be the same as it was before, but if she takes cash, her portfolio value will drop by $725.00

d) Sylvia now owns more units in the fund after the distribution so her portfolio value will have increased by $725.00

Answer 80

a) Regardless of whether Sylvia chooses to reinvest her distributions or take cash, her portfolio value will remain unchanged.

Question 81

On which of the following statements would you find intangible assets?

a) Balance sheet

b) Retained earnings statement

c) Cash flow statement

d) Income statement

Answer 81

a) Balance sheet

Question 82

Which of the following is a Liquidity ratio?

a) Current ratio

b) P/E ratio

c) Debt / Equity

d) Gross Profit Margin

Answer 82

a) Current ratio

Question 83

The objectives of a mutual fund are found in the (2 words) ____________ for the fund.

Answer 83

simplified prospectus

Question 84

Quick Copy has engaged in the following activities during the fiscal year:

issued bonds $45,000,000
paid dividends $700,000
Sold a building for $5,000,000
received dividends on shares held in XYZ co $500,000
Bought an industrial 3d printer $6,500,000
What will the total cash flow from financing activities be on the cash flow statement?

a) +$44,800,000

b) +44,300,000

c) +$43,300,000

d) -$1,000,000

Answer 84

b) +44,300,000

issued bonds $45,000,000 Financing
paid dividends $700,000 Financing
Sold a building for $5,000,000 Investing
received dividends on shares held in XYZ co $500,000 Investing
Bought an industrial 3d printer $6,500,000 Investing
Total Cash flow from FINANCING activities:

$45,000,000 -$700,000 = $44,300,000

Question 85

Which of the following appears last on the income statement?

a) Pre-Tax Profit

b) Net Profit

c) Gross Profit

d) Interest Expense

Answer 85

b) Net Profit

Question 86

Which of the following statements is the best description of dividends paid?

a) This item is found in the retained earnings statement and reflects all cash outflows to common and preferred shareholders in the form of dividends.

b) This item is not accounted for in any of the above statements

c) This item is found in the income statement and reflects all cash outflows to common and preferred shareholders in the form of dividends.

d) This item is found on the balance sheet and reflects all cash outflows to common and preferred shareholders in the form of dividends.

Answer 86

a) This item is found in the retained earnings statement and reflects all cash outflows to common and preferred shareholders in the form of dividends.

Question 87

A _________________management strategy starts with selecting good investments and can end up with a larger weighting in an asset class or industry than intended.

a) bottom up

b) top down

Answer 87

a) bottom up

Question 88

If a portfolio sits below the efficient frontier, taking higher risk results in _________________ returns.

a) the same or lower

b) the same or higher

Answer 88

a) the same or lower

Question 89

the Cash flow statement explains the change in _______________ from one year to the next.

a) cash

b) profit

c) income

d) liquid assets

Answer 89

a) cash

Question 90

Which of the following statements is the best description of depreciation / amortization?

a) This entry appears on the balance sheet under current assets and represents the total of all usage of a fixed asset

b) This entry appears on the balance sheet to offset the value of assets intended for long term use. It appears in the fixed assets section

c) This entry appears on the income statement in the operating expenses section to reflect the cash outlay related to the expensing of the cost of an asset each year.

d) This entry appears on the income statement to reflect the total cost over time of writing off fixed assets

Answer 90

b) This entry appears on the balance sheet to offset the value of assets intended for long term use. It appears in the fixed assets section

Question 91

Which of the following is NOT deducted from revenue to arrive at the gross revenue figure?

a) discounts

b) allowance for bad debts

c) returns

d) uncollected income

Answer 91

d) uncollected income

Question 92

On which of the following statements would you find Short term bank Loans outstanding?

a) Cash flow statement

b) Retained earnings statement

c) Balance sheet

d) Income statement

Answer 92

c) Balance sheet

Question 93

Companies A and B have been characterized as follows:

Company A Standard Dev 12 Beta 1.2
Company B Standard Dev 10 Beta .7
Which of the following statements is correct?

a) Company A is less risky than Company B overall and exhibits less market volatility.

b) Company A is riskier than Company B overall but Company B exhibits more market volatility.

c) Company A is less risky than Company B overall but exhibits more market volatility

d) Company A is more risky than Company B overall and exhibits more market volatility

Answer 93

d) Company A is more risky than Company B overall and exhibits more market volatility

Standard deviation measures total risk (unique plus market) while Beta measures market risk only.

Question 94

To produce an after tax income of $3,000,000 a company in a 35% tax bracket would need before tax income of $_________. (round your answer to 2 decimal places and remember to put the commas in your answer - No dollar sign needed

Answer 94

4,615,384.62

Income before tax - Income before tax x tax rate = After tax amount

X- X(.35)= $3,000,000

.65X = $3,000,000

X = 3,000,000 / .65

X = $4,615,384. 615

Question 95

Which of the four types of ratios tells us how heavily a company relies on borrowed funds to conduct their business.

a) Profitability

b) Market

c) Debt / Equity

d) Liquidity

Answer 95

c) Debt / Equity

Question 96

Nan is afraid that the company whose bonds she has invested in might not be able to pay her the interest payments on the bond. Nan is afraid of the _____________ risk associated with the bond.

a) Interest rate

b) Market

c) Business

d) Inflation

Answer 96

c) Business

Question 97

Which of the following listings correctly represents the sections of the cash flow statement?

a) operating, non operating, and financing

b) Earnings, interest, and taxes

c) operating, financing, and investing

d) Operating income, operating expenses, and operating profit

Answer 97

c) operating, financing, and investing

Question 98

In 2001 Enron filed for bankruptcy after irregularities were uncovered in how they accounted for certain assets. For their part, as auditors for Enron, Arthur Anderson also ceased their auditing business. If the government had not stepped in to make changes to audit practices, the entire industry may have collapsed. This is an example of:

a) unsystematic risk

b) systematic risk

c) systemic risk

Answer 98

c) systemic risk

The risk that a single event, such as a failure of an institution, can trigger a domino effect.

Question 99

Which of the following statements is true?

a) Technical uses only financial statement analysis to value a stock

b) Technical analysis uses past trends, market activity, and balance sheet analysis to predict the future movement of a stock.

c) Technical analysis is interested only in past trends and market activity for a stock

d) Technical analysis is the most popular approach for stock analysis

Answer 99

c) Technical analysis is interested only in past trends and market activity for a stock

Question 100

The ________________ profit margin ratio is the ratio that represents the percentage of revenue remaining after the company pays cost of goods sold

a) Non- Operating

b) Operating

c) Net

d) Gross

Answer 100

d) Gross

Question 101

The _______________investment style is interested in undervalued securities foremost and does better in a bear market than other investment styles.

a) Bottom up

b) Growth

c) Value

d) Top down

Answer 101

c) Value

Question 102

Katherine has been reading the financial pages of the paper and has noticed that the NBCC Growth fund is reporting a 3.4% 1 year return.

a) This represents the current yield for the fund

b) This represents the simple one year return without taking into consideration reinvestment of distributions

c) This is the annual compound return that would have been earned if you had invested in the fund last year and reinvested any of your earnings.

d) This represents the effective yield for the fund

Answer 102

c) This is the annual compound return that would have been earned if you had invested in the fund last year and reinvested any of your earnings.

Question 103

ABC Corp decided in 200X to purchase manufacturing equipment for $500,000. Which statement below would best describe the treatment of this transaction on the cash flow statement?

a) This would appear in the investing section of the statement as a subtraction

b) This would appear in the investing section of the statement as an addition

c) This would appear in the financing section of the statement as a subtraction

d) This would appear in the financing section of the statement as an addition.

Answer 103

a) This would appear in the investing section of the statement as a subtraction

Question 104

Which risk listed below is described as the risk that the investor will encounter a loss due to a general dip in the overall economy.

a) Interest rate risk

b) Market risk

c) Business risk

d) Liquidity risk

Answer 104

b) Market risk

Question 105

Money Market standard performance data does not reflect reinvestment of earnings.

a) True
b) False

Answer 105

b) False

Question 106

A company’s total assets are equal to the sum of the company’s liabilities plus _______________

Answer 106

Shareholder’s Equity

Question 107

A Portfolio manager using a growth management style will invest in stocks with ____________ EPS.

a)	high
b)	low

Answer 107

a) high

Question 108

A portfolio manager using a value investment strategy will choose stocks that have a ____________________P/E ratio.

a)	high
b)	low

Answer 108

b) low

Question 109

Aaron is looking at the holdings in the LMN growth fund to determine if he should change the holdings at all. To do this, Aaron considers the revenue, profit and competitive position of the companies whose stock he holds.

Aaron is using __________________ analysis

Answer 109

fundamental

Question 110

This type of ratio tells us how the company is performing and how efficiently it is being run.

Answer 110

profitability

Question 111

Which of the following statements about the Statement of Financial Position (Balance Sheet) is / are correct?

a)	This statement traces the cash flows through a company over a defined period of time
b)	This statement shows what a company owns and owes as of a certain date
c)	This statement must always balance or there is a mistake
d)	This statement is divided into two equal parts; assets and liabilities

Answer 111

b) This statement shows what a company owns and owes as of a certain date
c) This statement must always balance or there is a mistake

Question 112

The share capital shown on a company’s Statement of Financial Position represents the market price of the common shares as of the date on the statement.

a)	True
b)	False

Answer 112

b) False

Question 113

Bad debt expense is usually involved in which of the following headings on the income statement?

a)	Operating profit
b)	Net profit
c)	Operating Income
d)	Operating Expenses

Answer 113

c) Operating Income

Question 114

Inventories are valued at __________________

Answer 114

cost or current market value whichever is lower

Question 115

What figure is added to last year’s retained earnings balance on the retained earnings statement?

Answer 115

net income

Question 116

Any legal action pending against the company would be indicated where on the statements?

Answer 116

in the notes to the statements

Question 117

The standard performance data for money market funds is:

Answer 117

Current yield (simple interest)

And

Effective yield (compound interest)

Question 118

The standard performance data for non-money market funds is:

Answer 118

The Total Rate of Return assuming any distributions paid were reinvested in the fund.

Question 119

In order to know if a ratio calculation for a company is good or bad, what must be considered?

Answer 119

Comparison to past years’ results

And

Comparison to the industry average

Question 120

A company has received a bill for $1000 owing on its income taxes. If it has not paid this bill, under which heading would it be found on the balance sheet?

a)	current assets
b)	current liabilities
c)	long term debt
d)	fixed assets

Answer 120

b) current liabilities

Question 121

Which of the following would NOT be found in current assets?

a)	marketable securities at the lower of cost or market value
b)	receivables less an allowance for doubtful accounts
c)	retained earnings
d)	a pre-paid fire insurance contract

Answer 121

c) retained earnings

Question 122

Ivan is a portfolio manager who is choosing investments for his ISX growth fund. He has noticed that XXO Corp and IY Ltd are both companies that he feels are good investments. Ivan has started with these two companies and is now looking for more. Ivan is using a ____________________ investment style.

Answer 122

Bottom up

Question 123

Anderson S. is considering the purchase of common shares of a US company that pays dividends in $US, to make up part of the foreign content in his portfolio. Which of the following types of risk is / are these common shares exposed to?

a)	market risk
b)	interest rate risk
c)	Liquidity risk
d)	currency risk

Answer 123

market risk, interest rate risk, and currency risk

Question 124

What are the three sections of a cash flow statement?

Answer 124

Operating

Financing

Investing

Question 125

What type of item would be included in “other income” on a company’s balance sheet

Answer 125

Income from something other than normal operations such as sale of property or interest income from investments

Question 126

The four types of ratios are:

Answer 126

Liquidity

Profitability

Debt and Equity

Valuation

Question 127

When mutual funds make a distribution to unit holders, what happens to the NAVPU of the fund?

Answer 127

It drops by the amount of the distribution

Question 128

If a mutual fund has an average return of 8% and a standard deviation of 10%, what are the minimum and maximum expected returns for the fund?

Answer 128

-2% to 18%

Question 129

With net, gross, and operating profit margin a _____________ number is better

a)	higher
b)	lower

Answer 129

a) higher

Question 130

A stock that moves in step with the index would have a beta _______________ one.

a)	higher than
b)	lower than
c)	equal to

Answer 130

c) equal to

Question 131

The volatility of a fixed income investment is measured by ________________

Answer 131

duration

Question 132

The bond with the ______________ duration is most volatile

a)	longest
b)	shortest

Answer 132

a) longest

Question 133

Name an example of a valuation ratio?

Answer 133

P/E ratio

Question 134

Which of the following ratios takes into account the fewest expenses?

a)	operating profit margin
b)	gross profit margin
c)	net profit margin

Answer 134

b) gross profit margin

Question 135

ABC Co pays dividends on its common shares. Which area of the cash flow statement would this appear on?

a)	Operating activities
b)	Investing activities
c)	Financing activities

Answer 135

c) Financing activities

Question 136

Currency risk is considered to be ___________________ risk

a)	Systemic
b)	Systematic
c)	Unsystematic

Answer 136

c) Unsystematic

Question 137

What is GARP

Answer 137

Growth At A Reasonable Price

Combines Value and Growth strategies

Question 138

What is the role of the auditor in terms of a mutual fund’s financial reporting requirements?
a) The auditor motivates the mutual fund’s accounting department, helping them avoid delays.
b) The auditor is required to confirm annually that proper valuation techniques were employed.
c) The auditor can create his or her own financial statements for the mutual fund, to use for comparison purposes.
d) The auditor’s independence guarantees that no fraud can be committed.

Answer 138

b) The auditor is required to confirm annually that proper valuation techniques were employed.

The auditor is meant to preserve the integrity of the financial reports and eliminate any real or perceived imbalances in the reporting. Mutual funds, like public corporations, must be audited by an independent auditor and comply with International Financial Reporting Standards (IFRS).

Question 139

Aileen Grogan is considering investing in mutual funds but has some concerns since she recently read about an investment house going bankrupt. She wants to know how her mutual fund investment would be protected should her investment fund manager declare bankruptcy. Which of the following statements is CORRECT?
a) Aileen’s mutual fund dealer protects her assets by holding them in their trust accounts.
b) Aileen could approach the Ombudsman for Banking Services and Investments (OBSI) to compensate her for any losses.
c) Any mutual fund investment she makes would be held by a custodian, separate and apart from the investment fund manager.
d) A mutual fund’s independent review committee is responsible for ensuring the mutual fund is financially viable.

Answer 139

c) Any mutual fund investment she makes would be held by a custodian, separate and apart from the investment fund manager.

By law, the investment fund manager cannot commingle (mix) fund assets with any other assets that they own or administer. To ensure this, the mutual fund assets are held by a third party or custodian. An independent auditor must regularly review the operations of a mutual fund and its manager. As described above, there is also no commingling of mutual fund assets with the mutual fund dealer. OBSI only resolves disputes between clients and their firms. The independent review committee’s role is to oversee potential conflict of interest decisions involving the manager of an investment fund.

Question 140

What are the delivery requirements for mutual fund disclosure documents?
a) All investors must receive the simplified prospectus within two days of a mutual fund purchase.
b) All investors must receive the annual information form within a week of a mutual fund purchase.
c) All investors must receive the fund facts document before placing a mutual fund order.
d) There are no delivery requirements. All documents are available upon client request.

Answer 140

c) All investors must receive the fund facts document before placing a mutual fund order.

The main disclosure documents prepared by a mutual fund are:
a Fund Facts document for every class or series of a mutual fund
the simplified prospectus
the annual information form
annual and interim financial statements
annual and interim management reports of fund performance
An investor must receive the Fund Facts document within two days of buying a mutual fund. All other documents are available to clients upon request.

Question 141

On January 23, two years ago, Janet invested $6,000 in a fund that has the following schedule of deferred sales charges:
Time Charges
in the 1st year 6%
2nd year 5%
3rd year 4%
4th year 3%
5th year 2%
6th year 1%
7th year 0%
On January 23, of this year Janet redeems her entire investment worth $8,800. According to the prospectus, charges are calculated on the original purchase amount. How much did Janet pay in fees?

a) $180
b) $240
c) $300
d) $360

Answer 141

b) $240

Janet redeemed her mutual fund in the 3rd year. The first year ran from January 23, Year 1 to January 22, Year 2. The second year also ran from January 23, Year 2 to January 22, Year 3. Janet redeemed her units on January 23, Year 3 so she was into her third year, therefore, she paid $240 in fees, calculated as (original value x % DSC) or ($6,000 x 4%). Note that in this case the DSC was based on the original purchase price. In other cases, it could be based on the proceeds at redemption.

Question 142

Phuong has a $1,500 tax refund and would like to invest it in the LACROIX Capital Fund. It currently has a net asset value per unit (NAVPU) of $5.75 and her dealing representative will sell the fund with a front-end sales charge of 1.5%. If she invests today, how many units would she purchase?
a) 256.9565
b) 260.8109
c) 260.8696
d) 264.7826

Answer 142

a) 256.9565

Phuong’s purchase price for her mutual fund is $5.84, calculated as ($5.75 NAVPU ÷ (1 – 1.5%)). She will receive 256.9565 units, calculated as ($1,500 ÷ $5.84). Note: To receive an accurate calculation, do not clear your calculator. Otherwise, you will incur a rounding error.

Question 143

What is the main role of a mutual fund’s Independent Review Committee (IRC)?
a) to retain the external auditor for the investment fund manager and oversee its mandate
b) to conduct reviews of the investment fund manager’s corporate governance and provide its opinion
c) to review any and all conflict of interest matters and proposed actions that it receives from the investment fund manager
d) to ensure independence in reporting of the investment fund’s financial statements

Answer 143

c) to review any and all conflict of interest matters and proposed actions that it receives from the investment fund manager

The role of the IRC is to review any and all conflict of interest matters and proposed actions that it receives from the investment fund manager. Conflicts of interest are defined in principles-based terms in National Instrument 81-107 Independent Review Committee for Investment Funds.

Question 144

What statement regarding registered education savings plans (RESPs) is CORRECT?
a) If the designated beneficiary does not pursue post-secondary education, the subscriber will forfeit principal contributions to the plan.
b) Although there is a lifetime maximum contribution limit of $50,000 per beneficiary, there is no annual limit.
c) RESP contributions are tax deductible for the subscriber.
d) Canada Education Savings Grants (CESGs) are only available to those with low family incomes.

Answer 144

b) Although there is a lifetime maximum contribution limit of $50,000 per beneficiary, there is no annual limit.

As a subscriber, you contribute to an RESP for the benefit of your designated beneficiary(ies). You may contribute a lifetime maximum of $50,000 per beneficiary. There is no annual limit. Your contributions are not tax deductible. If the designated beneficiary does not proceed to a post-secondary institution, contributed principal is returned to the subscriber without any tax implications. CESGs are available to all qualified beneficiaries despite family income; however, low income families may receive a greater amount of CESG.

Question 145

Which of the following statements about net asset value per unit (NAVPU) is TRUE?
a) Most funds calculate NAVPU weekly.
b) NAVPU equals total assets minus total liabilities divided by units outstanding.
c) The price for a mutual fund is based on the NAVPU prevailing on the settlement day.
d) Assets of the fund include redemption amounts owed to investors.

Answer 145

b) NAVPU equals total assets minus total liabilities divided by units outstanding.

The formula for net asset value per unit is total assets minus total liabilities divided by units outstanding. Assets of the fund include the fund’s investment portfolio, cash and near-cash investments as well as accounts receivable from dealers. Liabilities include expenses incurred, dividends paid to investors and redemption amounts.

Question 146

John Smith invested $100,000 in a Canadian equity mutual fund and paid a 4% front-end sales charge. The net asset value per unit (NAVPU) of the fund at the time of purchase was $10. John decides to set up a ratio withdrawal plan under which he receives an annual payment at the end of each year based on 8% of the market value of his investment at the time of the withdrawal.
His first withdrawal is due when the fund is valued at $11.75 per unit.

Approximately what amount does John withdraw this year?

a) $8,000
b) $9,024
c) $9,400
d) $11,280

Answer 146

b) $9,024

John Smith withdraws $9,024 in the first year, calculated as follows: Step 1: Determine the purchase price. Given the 4% front-end sales commission, the purchase price for John’s units is $10.42, calculated as ($10 NAVPU ÷ (1 – 4% front-end sales charge)). Step 2: Determine the number of units purchased net of commission charges. John purchases 9,600 units, calculated as ($100,000 ÷ $10.42). Note: To receive an accurate calculation, do not clear your calculator. Otherwise, you will incur a rounding error. Step 3: Determine the number of units redeemed via 8% ratio withdrawal plan. John will redeem 768 units, calculated as (9,600 x 8%). Step 4: Determine the amount withdrawn. John will receive a total of $9,024, calculated as (768 units x $11.75 NAVPU).

Question 147

Last year, Clarence contributed $5,000 to his tax-free savings account (TFSA). This year, he withdrew the entire $5,000 plus $200 income that had accumulated from his initial contribution. He made no contribution to his TFSA this year. How much may he contribute to his TFSA next year? Assume the maximum contribution amount is $5,000 for all three years.
a) $5,000
b) $10,000
c) $15,000
d) $15,200

Answer 147

d) $15,200

For next year, Clarence’s TFSA contribution room is:
In respect of next year 5,000
In respect of the total withdrawal 5,200
In respect of unused contribution room this year 5,000
Total $15,200

Question 148

To receive today’s NAVPU on my purchase of 100 units of the RBC Canadian Income fund, I must make my purchase before _____ PM Eastern time today

Answer 148

4

Question 149

A switch between mutual funds by a client will result in an early redemption fee if it is completed within ___________ days of purchase

a) 60

b) 10

c) 30

d) 90

Answer 149

d) 90

Question 150

XXX Asset Allocation fund is sold to investors by the fund’s own sales force. What type of distributor is the fund using?

a) Dealing Representative

b) Captive

c) Proprietary

d) Institutional employee

Answer 150

c) Proprietary

Question 151

The minimum purchase generally required for a PAC plan is—-

a) $25 per month

b) $100 per month

c) $10 er month

d) $50 per month

Answer 151

a) $25 per month

Question 152

The ____________________ oversees the fund for potential conflicts of interest involving the fund manager

a) transfer agent

b) independent review committee

c) distributor

d) custodian

Answer 152

b) independent review committee

Question 153

Which of the following statements regarding mutual funds is TRUE?

a) There are times when not all of a distribution paid to MF unit holders is taxable

b) The settlement for mutual fund transactions is T+2 days

c) Switching from a back end load fund to another back end load fund from the same fund company will result in a switching fee

d) Once a client enters into a PAC plan their contribution amount cannot be changed.

Answer 153

a) There are times when not all of a distribution paid to MF unit holders is taxable

Switching will retain the same fee schedule

Question 154

Which of the following entities involved with the running of a mutual fund is best described by the sentence, “ this member of the mutual fund complex has the job of receiving the funds paid by unit holders to purchase units in the fund and to send out cheques for fund redemptions

a) Distributor

b) Transfer Agent

c) Custodian

d) Fund Manager

Answer 154

c) Custodian

Question 155

A ________________ fund is an alternative to a systematic withdrawal plan.

a) DSC

b) MER

c) Series T

d) PAC

Answer 155

c) Series T

Question 156

Which of the following is NOT an acceptable method for valuing the NAVPU of a mutual fund?

a) Using the average price for the trading day for all actively traded securities held

b) Valuing certain assets using the current rates on similar assets

c) Using the closing value of all securities held in the fund each day

d) Using the Bid/ ask quotation for the securities held in the fund

Answer 156

a) Using the average price for the trading day for all actively traded securities held

Question 157

Montreal Trust is the ______________ for XYZ fund. IN this role, they are responsible to keep track of the owners of the fund company’s various funds.

a) custodian

b) transfer agent

c) fund manager

d) independent review committee

Answer 157

b) transfer agent

Question 158

Which of the following could NOT be a custodian for a mutual fund?

a) Canada Trust with S/E (shareholder’s equity) of $135 million

b) RBC Capital Partners (an affiliate of the Royal Bank with S/E of $10 million

c) The accounting firm of KPMG with S/E of $35 million

d) The Bank of Montreal

Answer 158

c) The accounting firm of KPMG with S/E of $35 million

Accounting firms are not listed as acceptable custodians regardless of the size of their S/E. They would only be acceptable if they were an affiliate of a bank or trust company and since this is not stated, you can’t assume it.

Question 159

On Friday of this week at 10:00 pm you purchase 100 units of the ABC Growth fund. you must settle your purchase_____

a) By Monday of next week

b) By Wednesday of next week

c) By Thursday of next week

d) At the time of purchase

Answer 159

c) By Thursday of next week

Purchased @ 10pm so will be processed on Monday when the price is set for Monday.

T+3 = Monday + Three business days so; Thursday

Question 160

Timothy is attending university and wants to use his mutual funds to pay for his education. He knows his education will take 5 years to complete and his biggest concern is that the fund not run out of money before his education is finished. Which of the following will be best for Timothy?

a) Fixed dollar withdrawal plan

b) Fixed term withdrawal plan

c) lump sum withdrawal

d) Ratio withdrawal plan

Answer 160

d) Ratio withdrawal plan

Question 161

Ralphie May has been investing in his AAA growth fund for many years. He’s happy with the returns the fund has been getting so he has asked his advisor to increase his monthly purchases of the fund from $150 to $300. Ralphie is engaging in (3 words required. One per blank) _____________) using this strategy.

Answer 161

voluntary accumulation plan

Question 162

ABC Co. Growth fund has assets totaling $45,000,000, liabilities of $23,000,000, yearly trading expenses of $5,000,000. has issued 5.6 million units and has 4.3 million units outstanding in the hands of investors. What is their NAVPU?

a) $3.03

b) $3.95

c) $5.12

d) $3.92

Answer 162

c) $5.12

($45,000,000 - $23,000,000) / $4,300,000

= $5.11627

= $5.12

Question 163

Which of the following is a difference between mutual funds structured as a corporation vs. mutual funds structured as trusts?

a) MF corporation owners have a vote at the annual fund meeting.

b) MF trust owners have the authority to appoint the body governing the fund

c) MF trusts do not have a board of directors

d) MF trusts have shareholders whereas MF corporations have unit holders

Answer 163

c) MF trusts do not have a board of directors

Question 164

For which of the following clients, is a commission-based model of remuneration most appropriate.

a) Hector who is a very active investor and makes trades often.

b) Haley who is a buy and hold investor who trades very little

Answer 164

b) Haley who is a buy and hold investor who trades very little

Question 165

If Raj miscalculated and over-contributed to his TFSA, what will happen?

a) He will be penalized 1% of the full contribution each month and his contribution limit will be reduced by the over contributed amount the next year unless the over-contributed amount is removed before the end of the year.

b) He will be penalized 1% of the full contribution that year and his contribution limit will be reduced by the over contributed amount the next year

c) He will be penalized 1% of the over contributed amount that year and his contribution limit will be reduced by the over contributed amount the next year

d) He will be penalized 1% of the over contributed amount each month and his contribution limit will be reduced by the over contributed amount the next year unless the over-contributed amount is removed before the end of the year.

Answer 165

d) He will be penalized 1% of the over contributed amount each month and his contribution limit will be reduced by the over contributed amount the next year unless the over-contributed amount is removed before the end of the year.

Question 166

CESG payments will be made on applicable contributions until the beneficiary is ___________ years old

a) 35

b) 17

c) 19

d) 26

Answer 166

b) 17

Question 167

Raj turned 19 in 2012, in a province where 19 is the age of majority. He has never contributed to a TFSA account. In 2014 Raj made his first TFSA contribution. What amount will he be allowed to contribute when he makes this first contribution?

a) $31,000

b) $16,000

c) $5,500

d) $5000

Answer 167

b) $16,000

2012 $5000 max contribution
2013 $5500 max contribution
2014 $5500 max contribution

Since Raj hasn’t made any contributions yet, he can contribute the total of all maximum contribution from the time he turned 19 until the contribution is made.

so a total of $16,000.

Question 168

Which of the following expenses is not included in the MER?

a) Brokerage Fees

b) Taxes

c) Management Fee

d) Audit Fees

Answer 168

a) Brokerage Fees

Question 169

The maximum lifetime contribution to the RDSP is $_____________

a) $200,000

b) $50,000

c) $250,000

d) $100,000

Answer 169

a) $200,000

Question 170

______________________ is paid by the portfolio manager to their distributors of the fund to compensate them for servicing clients.

a) Management fee

b) Trailer Fee

c) Management Expense Ratio

d) Commission

Answer 170

b) Trailer Fee

Question 171

An RESP can remain open for a maximum of ___________ years

a) 17

b) 26

c) 36

d) 27

Answer 171

c) 36

Question 172

Equity funds have MERs in the range of:

a) 4%

b) 6% - 7%

c) 2.5%

d) 1% or lower

Answer 172

c) 2.5%

Question 173

Sandra is purchasing some mutual fund units today. She wants to pay the lowest sales charge she can. She has explained to you that she intends to hold the investment for about 4 years until she retires. Which of the following charges would be best for Sandra?

a) Nominee Sales charge

b) Declining Sales Charge

c) Front end load sales charge

d) Low load sales charge

Answer 173

d) Low load sales charge

For a client like Sandra who who is going to hold her investment for a long time, a declining sales fee schedule is best because the DSC reduces over time and if she holds it for over 7 years by the time she takes the money out there will be no fee charged.

However, Sandra wants to take the funds out in 4 years. so the Low Load sales fee is best because its like a DSC but the fee starts lower and the schedule is shorter.

Question 174

As long as the funds are used to purchase units in equivalent front end load funds or other funds offered by the fund company, most funds allow a withdrawal of ____________% of the original purchase value of the investor’s portfolio with no fee charged.

a) 50%

b) 20%

c) 5%

d) 10%

Answer 174

d) 10%

Question 175

If a low-income contributor who receives the National Child Benefit Supplement, opens an RESP, the total federal money the family is entitled to receive on a $1500 contribution is $_____________

a) $400

b) $900

c) $300

d) $925

Answer 175

d) $925

Because the contributor is considered low income and is receiving the child benefit, they qualify for CESG, ACESG and CLB:

CESG = $1500 x .2 = $300

ACESG = $500 x .2 = $100

Total CESG = $400

PLUS Canada Learning Bond = $500 +$25 = $525

Total = $925

Question 176

How often is a trailer fee paid?

a) In years when the client has transactions on their fund holdings

b) When the fund is purchased

c) Every Year that the client holds the fund

d) When the fund is redeemed

Answer 176

c) Every Year that the client holds the fund

Question 177

Which of the following pieces of information is NOT included in the Fund Fact Document?

a) Potential Taxes Payable

b) Risk Rating

c) Top 10 Holdings

d) How the Dealer is Compensated

Answer 177

d) How the Dealer is Compensated

Question 178

Angela invested $14,000 in a mutual fund on June 1, 2016 purchasing 2000 units. On July 1, 2019 Angela withdrew 1000 of these units worth $8000. If Angela’s mutual fund has the following deferred sales charge schedule, how much of a fee will she pay when she withdraws the amount if the sales fee is based on the current market value of the withdrawal

Within the first year 4%

In the second year 3.5%

In the third year 3%

In the fourth year 2.5%

In the fifth year 2%

In the sixth year 1%

After the 6th year 0%

a) $240

b) $200

c) $175

d) $210

Answer 178

b) $200

June 1, 2016 - May 31 2017 - in the first year In the first year
June 1, 2017 - May 31 2018 - in the first year In the 2nd year
June 1, 2018 - May 31 2019 - in the first year In the 3rd year
June 1, 2019 - May 31 2020 - in the first year In the fourth year
The fee according to the schedule for a withdrawal in the fourth year is 2.5%

Fee = $8000 x .025 = $200

Question 179

The maximum CESG that can be paid in the lifetime of an RESP beneficiary is __________________

a) $7500.00

b) $17,300.00

c) $7200.00

d) $15,000.00

Answer 179

c) $7200.00

Question 180

The Annual Information Form must be provided to the investor at the time of the fund purchase.

a) True
b) False

Answer 180

b) False

It isn’t a requirement for it to be supplied but it must be available.

Question 181

Which of the following is a TRUE statement regarding RESP holdings when the beneficiary does not attend school and has no siblings.

a) The contributor is refunded their contributions tax free but must pay tax on the earnings received by the plan at their marginal rate.

b) The beneficiary can keep the CESG/ACESG but they must pay tax on them at the highest marginal rate.

c) The contributor is refunded the contributions and all earnings but must pay tax on all funds received at their marginal rate.

d) The contributor pays tax on the contributions made when they receive them back

Answer 181

a) The contributor is refunded their contributions tax free but must pay tax on the earnings received by the plan at their marginal rate.

Question 182

Adrian holds a large portfolio of mutual funds. He wants to start taking money out of the fund but also wants to be sure to have something to leave his family when he dies. Which type of withdrawal plan best suits Adrian?

a)	Fixed Dollar
b)	Ratio

Answer 182

b) Ratio

Question 183

Jack is purchasing 100 units of the Red & White growth fund on January 23rd at 3:00 pm Eastern time. If the table below indicates the NAVPS info for the Red and White fund as calculated at the end of each day, at what price did Jack buy the fund units?

Jan 22 $10.60

Jan 25 $10.80

Jan 23 $10.55

Jan 26 $11.23

Jan 24 $10.72

Jan 27 $11.60

a)	$10.55
b)	$10.72
c)	$10.80
d)	$11.23

Answer 183

a) $10.55

Question 184

Ann is a newly registered mutual fund advisor with Investor’s Group. Ann is a member of which group of mutual fund participants?

a)	Custodians
b)	Transfer Agents
c)	Distributors
d)	Managers

Answer 184

c) Distributors

Question 185

What is the responsibility of the fund custodian?

Answer 185

Custodians hold all cash and securities for the fund. They accept funds and distribute income for the fund.

Question 186

Which of the following statements is NOT true of a mutual fund corporation?

a)	Mutual fund corporations are governed by a board of directors
b)	Mutual fund corporations sell shares to investors
c)	Mutual fund corporation investors have the authority to elect the board of directors
d)	Mutual fund corporation investments usually sell at less than NAVPS

Answer 186

d) Mutual fund corporation investments usually sell at less than NAVPS

Question 187

Rodrigo is purchasing 100 units of the FFF Growth fund at 4:30pm on Friday March 5th. What will the settlement date be on Rodrigo’s purchase?

a)	Friday March 5th
b)	Monday March 8th
c)	Wednesday March 10th
d)	Thursday March 11th

Answer 187

d) Thursday March 11th

Question 188

An early redemption fee can be charged on switches from one fund to another if the switch happens in the first ________ days

a)	30
b)	45
c)	60
d)	90

Answer 188

d) 90

Question 189

This type of fund is considered an alternative to a Systematic Withdrawal Plan.

Answer 189

Series T Fund

Question 190

What is the role of the Independent Review Committee?

Answer 190

They are responsible to oversee potential conflicts of interest in decisions made by the fund manager.

Question 191

Which of the following in NOT part of the mutual fund complex?

a)	Custodian
b)	MFDA
c)	Transfer Agent
d)	Independent Review Committee

Answer 191

b) MFDA

Question 192

Hamish is a financial advisor working for Port City Planners. As an advisor with Port City he sells the Highstreet Money Market Fund. The fund lists Highstreet as the entity responsible for the management of the fund’s investments. Highstreet is the fund’s ________________

a)	Portfolio Manager
b)	Investment Fund Manager
c)	Custodian
d)	Distributor

Answer 192

b) Investment Fund Manager

Question 193

Where is the identity of the portfolio manager of a fund provided?

Answer 193

In the simplified prospectus

Question 194

Franz was wondering about the safety of his investment in the XXX mutual fund. He spoke to his advisor who told him not to worry because investor’s funds are held separate from XXX’s funds by the fund’s _________________

a)	portfolio manager
b)	transfer agent
c)	custodian
d)	distributor

Answer 194

c) custodian

Question 195

Which is higher, the management fee or the MER?

Answer 195

MER, because it includes the management fee plus other expenses

Question 196

Why are MERs considered limited as a means of comparing the cost of investing in different mutual funds?

Answer 196

Because MER does not include commissions or load charges and redemption fees or fees paid directly to the dealer.

Question 197

What fees are NOT included in the calculation of the MER? (and must be deducted from total expenses)

Answer 197

Brokerage fees or trading fees

Question 198

Who pays the trailer fee?

Answer 198

The fund manager pays the trailer fee to the fund distributors

Question 199

The average MER of an actively managed mutual fund is ___________%

a)	4
b)	2.5
c)	1.5
d)	less than 1

Answer 199

b) 2.5

Question 200

On what two values can redemption fees be based?

Answer 200

The value at redemption

or

The amount originally invested

Question 201

Mutual funds are required to calculate MER by reference to the financial statements for a financial year or an interim period of ____________ months

a)	2
b)	4
c)	6
d)	8

Answer 201

c) 6

Question 202

The maximum lifetime contribution amount for an RESP account per beneficiary is _______________

Answer 202

$50,000

Question 203

The CESG contribution to an RESP is equal to __________% of the first $________ of contribution annually

Answer 203

20%

$2500

Question 204

Which type of fee structure would be best for a client who doesn’t make many changes to their portfolio each year.

a)	fee based model
b)	commission based model

Answer 204

b) commission based model

The fee based model would be expensive for someone who didn’t trade much. They would pay less if they paid per trade

Question 205

Which investor right is only available if there has been a misrepresentation in the fund facts document?

a)	Right of Withdrawal
b)	Right to Cancel the agreement

Answer 205

b) Right to Cancel the agreement

Question 206

The maximum CESG grant per beneficiary over the life of all RESPs is $_____________

Answer 206

$7,200

Question 207

Which of the following disclosure documents is not posted on the fun’s website?

a)	Quarterly Portfolio Disclosures
b)	Material Change Report
c)	Annual Voting Record
d)	Annual Report of the Independent Review Committee

Answer 207

b) Material Change Report

Question 208

What is the A-CESG?

Answer 208

The Additional Canada Education Savings Grant

20% paid to lower income contributors on first $500 contributed per year

10% paid to middle level contributors on first $500 contributed per year

Question 209

What happens to the CESG is the beneficiary does NOT attend school?

Answer 209

It must be repaid to the government

Question 210

Samara enjoys her work very much and has no plans to retire at age 65. Which of the following statements about Canada Pension Plan (CPP) is CORRECT?

a) She can start receiving her pension anytime between ages 65 and 70 even if she continues to work.
b) If she postpones her pension until after age 65, she will receive no additional benefit because of the delay.
c) If she postpones her pension until after age 65, her benefits may be subject to a clawback if her income is above a certain level.
d) She must apply for pension benefits at age 65 or risk losing them altogether.

Answer 210

a) She can start receiving her pension anytime between ages 65 and 70 even if she continues to work.

She can apply for her pension anytime between ages 60 and 70. There is no requirement to stop working in order to receive the benefits. If she waits until after age 65 to collect her pension the benefit amount rises by 0.7% per month for each month past her 65th birthday. CPP benefits are not subject to any clawback of benefits.

Question 211

What characteristic about a defined benefit pension plan is TRUE?
a) Contributions are made by the employee and the employer, or solely by the employer.
b) Employees assume the investment risk for their pension funds.
c) Retirement benefits are received tax-free by the employee.
d) Benefit amounts are always based on best five years.

Answer 211

a) Contributions are made by the employee and the employer, or solely by the employer.

Defined benefit plans may be financed solely by the employer, or through contributions made by both employee and employer. Since the employer guarantees a defined benefit at retirement, the employer assumes the investment risk. Benefit amounts may be calculated based on a flat rate, best or last years, or average career methods. Retirement benefits are taxable.

Question 212

What is the major advantage of a group registered retirement savings plan (RRSP) over an individual RRSP?
a) It is mandatory for employers to contribute to group RRSP plans.
b) Group RRSP contributions via payroll deductions result in immediate tax savings.
c) Group RRSPs offer more investment alternatives.
d) The employer accepts all the investment risk in a group RRSP.

Answer 212

b) Group RRSP contributions via payroll deductions result in immediate tax savings.

If you contribute to an individual RRSP, you can claim a tax deduction for the contribution and then receive a tax refund after filing a tax return for the year. If you contribute the same amount to a group RRSP, contributions are made via payroll deductions. Based on your marginal tax rate (MTR), your employer withholds less tax each month from your pay. Instead of waiting for your tax refund, you receive immediate tax savings. Effectively, by waiting for your tax refund, you have given an interest-free loan to the government. Employer contributions are optional. All contributions to group RRSPs impact an individual’s RRSP contribution room. The amount of investment alternatives depends on the plan, but typically, group RRSPs have fewer investment alternatives. The employee accepts all the risk in either a group or individual RRSP.

Question 213

Robert withdraws $25,000 from his registered retirement savings plan (RRSP) under the Home Buyer’s Plan (HBP) on Jan 31, Year 1.
a) He must acquire his home by Oct 1, Year 2.
b) He must repay a minimum of $1,666.66 plus interest at a rate prescribed by CRA each year for 15 years.
c) His first HBP repayment must be made for the Year 1 calendar year any time before Mar 1, Year 2.
d) If Robert has a spouse, she cannot take advantage of the plan because the maximum withdrawal per family is $25,000.

Answer 213

a) He must acquire his home by Oct 1, Year 2.

Robert must complete the transaction by October 1st of the year after the withdrawal. He will be required to repay the amount in 15 equal instalments. No interest is required to be paid on the withdrawal. His first HBP repayment must be made at the latest on Mar 1, Year 4. If Robert is married, his spouse can also withdraw up to $25,000 from his or her RRSP.

Question 214

Ellie is leaving her employer and wants to transfer out her vested pension funds to a locked-in retirement account (LIRA). Which of the following statements about Ellie’s LIRA is CORRECT?
a) Ellie can make contributions to her LIRA.
b) Ellie controls the investments within her LIRA.
c) Ellie can withdraw from her LIRA at any time.
d) Ellie can convert her LIRA to a RRIF at retirement.

Answer 214

b) Ellie controls the investments within her LIRA.

Like an RRSP, Ellie controls the investments within her LIRA. Unlike an RRSP, she cannot make any contributions to the plan, withdraw from it, or convert it to a RRIF. Generally, she may not access these funds until retirement She may convert her LIRA to a life income fund (LIF) or locked-in retirement income fund (LRIF) to provide a life income.

Question 215

Paulette is 62 years of age. She was born in Austria but immigrated to Canada when she was 40 years old. She has resided in Canada ever since and even became a Canadian citizen at the age of 45. She wants to know if she qualifies to receive Old Age Security (OAS) benefits. What can you tell her?
a) Since she was not born in Canada, she does not qualify for any OAS benefits.
b) Although she does not qualify for full benefits, Paulette will receive partial OAS benefits.
c) Paulette cannot receive any OAS benefits because she is not 65 years of age.
d) Paulette qualifies for full OAS benefits since she has lived in Canada since age 40

Answer 215

c) Paulette cannot receive any OAS benefits because she is not 65 years of age.

Paulette must be 65 years of age before she can qualify for OAS benefits. She will not receive the full benefit since she has not lived in Canada for 40 years since being 18 years of age but will qualify for partial benefits.

Question 216

Your client, Rakesh, works for a manufacturing company. His employer has a defined contribution pension plan for its employees. Rakesh is curious about whether he should join the plan. What can you tell him about defined contribution pension plans?
a) The pension adjustment is based on the amount of employer and employee contributions for the year.
b) Only employer contributions are permitted for these plans.
c) The retirement benefit is known and guaranteed for the employee.
d) Contribution levels are based on the profitability of the company.

Answer 216

a) The pension adjustment is based on the amount of employer and employee contributions for the year.

A defined contribution pension plan defines the contribution that an individual and his or her employer will make each year before the employee’s retirement. The pension adjustment is based on these contributions. Employer contributions are not dependent on the profitability of the company but rather the pension guidelines specified by the plan. The employee is not guaranteed a particular benefit at retirement. The amount available for retirement is instead dependent on how well the investments are managed.

Question 217

Simone will turn 71 years of age on July 1st of this year. With respect to her RRSP maturity options, she intends to open a RRIF. What statement is correct?
a) There is a maximum limit on how much Simone may withdraw from her RRIF.
b) Simone must withdraw a minimum payment from her RRIF beginning next year.
c) If Simone has earned income this year, she will be allowed to make a contribution to her RRIF.
d) Simone must withdraw a minimum payment from her RRIF before the end of this year.

Answer 217

b) Simone must withdraw a minimum payment from her RRIF beginning next year.

In the initial year of her RRIF, Simone is not required to withdraw a payment. She may delay the withdrawal until the following year. There is no maximum withdrawal limit, she is free to withdraw any amount she wishes. Contributions to a RRIF are prohibited.

Question 218

As part of his tax planning strategy, Ian Elston wants to establish a self-directed spousal registered retirement savings plan (RRSP) for his wife, Debra.
What is the last date on which Ian and Debra can contribute to their RRSPs and deduct the contribution from their current year’s tax return? Assume it is not a leap year.

a) December 31 of the current year
b) March 1 of the following year
c) March 31 of the following year
d) December 31 of the following year

Answer 218

b) March 1 of the following year

If you want to deduct your contribution in the current taxation year, you must make the contribution within 60 days of the end of the year. The last day that Ian can contribute to the spousal RRSP and use the deduction for his the current year’s tax return is March 1, of the following year, calculated as 31 days in January + 28 days in February + 1 day in March.

Question 219

Which statement applies to self-directed registered retirement savings plans (RRSPs)?
a) They typically hold a single type of investment.
b) They are managed by a trustee.
c) They are managed by the investor.
d) They guarantee a rate of return.

Answer 219

c) They are managed by the investor.

Self-directed RRSPs offer investors a wide variety of investment options. The investor is able to choose any combination of investments to meet his or her needs. The self-directed RRSP does not provide a guaranteed return. Instead it is dependent upon how the underlying investments perform. A trustee, such as a trust company, bank, or investment company administers the plan.

Question 220

Who contributes to the DPSP?

a) employee only

b) Can be employer only or employer and employee

c) employer and employee contribute equal amounts

d) employer only

Answer 220

d) employer only

Question 221

An individual who opts to collect their CPP retirement pension at age 70 would receive:

a) a reduction of .7% per month above age 65

b) an addition of .7% per month above age 65

c) an addition of .7% per year above age 65

d) a reduction of benefits of .7% per year above age 65

Answer 221

b) an addition of .7% per month above age 65

Question 222

CPP contributions are a tax deduction for employers and a tax credit for employees

a) True
b) False

Answer 222

a) True

Question 223

A retiree qualifies for full CPP benefits. Calculate the amount of CPP pension they would receive at age 60 if the full CPP pension payment was $9000 per year at age 65.

a) $5760

b) $11,700

c) $5220

d) $6300

Answer 223

a) $5760

$9000 - ($9000 x .36) —-. reduction is 36% at age 60

= $9000 - $3240

= $5760

Question 224

60-year old Thomas has been in management with Bruncor for his full 30 year work life to date. His defined benefit pension is based on his average final 3 years at an accrual rate of 1.8%. Based on the salary projections below for Thomas, calculate the company pension he will be entitled to when he retires in 5 years at the age of 65. Place the annual pension figure in the box that follows. (Input your answer to 0 decimal places)

Years before Retirement Annual Salary
5 years 71,500
4 years 72,000
3 years 72,000
2 years 73,500
1 year 75,000

$___________

Answer 224

$46,305

Thomas has worked for 30 years to date. in 5 years when he retires, he will have 35 years of service.

His average final 3 years salary is: (72,000 + $73500 + $75000) /3 = $73500

Based on a 1.8% accrual rate, his pension will be: ($73500 x .018 x 35) = $46,305/year

Question 225

Which of the following types of income can be split with your spouse or common law partner when you reach the age of 65?

(I) CPP income

(II) OAS income

(III) RPP income

(IV) RRIF income

a) III and IV only

b) II and III only

c) I, II, and III only

d) I only

Answer 225

a) III and IV only

Question 226

Which of the following is NOT an advantage of an IPP?

a) Contribution limits are higher

b) Contributions can be made based on past service retroactive to 1991

c) Contributions are made with after tax dollars but earnings grow tax free in the plan.

d) Pension benefits are creditor proof

Answer 226

c) Contributions are made with after tax dollars but earnings grow tax free in the plan.

The text states that contributions are tax deductible which means they are made with before tax dollars since they receive a tax rebate on their contribution.

Question 227

Which of the following DOES NOT form part of the OAS program in Canada?

a) GIS

b) Allowance for Survivor

c) Allowance

d) CPP

Answer 227

d) CPP

Question 228

For every $2.00 earned above _____________ , $1.00 of the GIS is clawed back.

a) the GIS threshold

b) CPP maximum

c) OAS plus GIS

d) OAS

Answer 228

c) OAS plus GIS

Question 229

Which of the following statements is NOT true of Deferred Profit Sharing Plans?

a) Any growth of funds in a DPSP is tax sheltered.

b) The corporation and the employee contribute to the plan

c) Contributions to the DPSP are not an obligation

d) When funds are withdrawn from the plan they are taxed as income

Answer 229

b) The corporation and the employee contribute to the plan

Only the employer may make contributions

Question 230

Which of the following is NOT a public pension benefit?

a) Defined Contribution Pension

b) Old Age Security

c) The Allowance.

d) Guaranteed Income Supplement

Answer 230

a) Defined Contribution Pension

Question 231

Which of the following statements is true of the Old Age security?

a) OAS is indexed for inflation

b) Benefits can begin as early as age 60

c) OAS is not taxable as income to the recipient

d) recipients contribute to the plan

Answer 231

a) OAS is indexed for inflation

Question 232

Susanna had earned income in 2023 of $73,000. Given a YMPE of $53,000, calculate the amount that would have been deducted from Susanna’s pay for her CPP contribution for the year. Input the amount to 2 decimal places in the blank that follows. ________

Answer 232

$2,945.25

You were given the YMPE of $53,000. You are expected to know the YBE of $3500

Susanna’s CPP Contribution = (53,000 - 3500) x .0595 = $2945.25

Question 233

Myrtle is a low income retiree who qualifies for the following pensions: CPP of $13,000, OAS of $10,000, and GIS of $7000. How much total income will Myrtle receive after clawbacks? (input your answer as a full number only with no decimals) ______

Answer 233

$23,500

Income earned above OAS + GIS: $13,000

Clawback = $13,000 /2 = $6500

Myrtle will receive: $13,000 + $10,000 + ($7000 - $6500)= $23,500 per year.

Question 234

Which of the following is NOT a possible calculation basis for a defined pension benefit?

a) % per year of service based on total salary received during all years of employment

b) % per year of service based on an average of salary received during last three to five years of employment

c) % per year of service based on an average of salary received during best five years of employment

d) a flat amount for each year of employment

Answer 234

a) % per year of service based on total salary received during all years of employment

There is no calculation based on total salary over all years.

Question 235

Which of the following is a true statement regarding taxes on retirement income?

a) CPP, OAS, and GIS are all taxed

b) Only OAS and CPP are taxed

c) Only OAS and GIS are taxed

d) Only CPP and GIS are taxed

Answer 235

b) Only OAS and CPP are taxed

GIS is not taxed.

Question 236

Thomas’ annual salary for his final year of employment before retirement is $75,000. His pension is a defined benefit pension with an accrual rate of 1.8%. The amount of pension adjustment that will show on Thomas’ T4 for his last year of work will be (input answer to 0 decimal places) _________

Answer 236

$11,550

The pension adjustment on a defined benefit pension is calculated as: (9 x accrual rate x salary) - 600

For Thomas this calculates out to : (9 x .018 x $75000) - 600 = $11,550

Question 237

Basil has recently retired at the age of 65 from a middle management position with the government. Basil will receive the following pensions in his first year of retirement:

Reg Pension from Employer $40,000
CPP $20,500
OAS $8,000
Based on an annual threshold of $63,000, the amount of OAS that will be clawed back from Basil is (input your answer as a full number only

Answer 237

$825

For every $1.00 over the threshold, the clawback is $0.15.

Amount over the threshold: $68,500 - $63,000 = $5,500

$5500.00 x .15 = $825 clawback.

Question 238

Which of the following statements is/ are true regarding qualifying criteria to receive the OAS benefit?

(I) OAS is available to Canadian Citizens only

(II) OAS is available to Canadian residents who have lived in Canada at least 10 years after age 18

(III) OAS is available to non-residents who have lived in Canada at least 20 years after age 18

(IV) To be eligible for the full OAS benefit, you must have lived in Canada for at least 20 years after age 18

a) II and III only

b) I, II, III, and IV

c) I, II, and III

d) II and IV only

Answer 238

a) II and III only

You must be a Canadian resident, not a Canadian citizen.

To be eligible for the full OAS benefit, you must have lived in Canada for at least 40 years after age 18

Question 239

An IPP is ideally suited to which of the following individuals?

a) Someone earning a modest income regardless of their age?

b) Someone with no employment income

c) Someone in their early 20”s at the beginning of their career

d) Someone over the age of 40 earning $100,000 per year

Answer 239

d) Someone over the age of 40 earning $100,000 per year

Question 240

An individual can have both an RPP and a DPSP

a) True
b) False

Answer 240

a) True

Question 241

Leon opted into his company’s pension when he went to work for the company a year and a half ago. Pension contributions are made by the employer only. Recently Leon left the company to pursue other opportunities. He left before his pension funds were vested. What can Leon do with his pension funds?

a) Take them with him and invest in an LRSP

b) Nothing. They don’t belong to him.

c) Take them as a lump sum and pay tax on them

d) Since they haven’t vested he has to leave them with the company who will pay him a small pension at retirement

Answer 241

b) Nothing. They don’t belong to him

Question 242

Which of the following is NOT an advantage of group RRSPs?

a) Employee can choose the plan provider

b) Tax deduction is received immediately

c) Both employer and employee can contribute.

d) The group plan is easier for the employer to administer

Answer 242

a) Employee can choose the plan provider

Question 243

Maxwell and Patricia have been saving for retirement for some time now. Maxwell has accumulated $85,000 in his RRSP and between his own and Patricia’s spousal plan, Patricia has $70,000. Maxwell earns $70,000 per year and is in a 40% tax bracket. Patricia earns $45,000 per year and is in a 30% bracket. Based on this information Maxwell will be able to contribute a maximum of (input to 0 decimal places) ______ to an RRSP this year, and Patricia will be able to contribute a maximum of (input to 0 decimal places) ______

Answer 243

Maxwell can contribute $70,000 x .18 = $12,600 to RRSPs where he is the contributor. (his RRSP or her spousal RRSP)

Patricia can contribute $45,000 x .18 = $8,100 to RRSPs where she is the contributor (her RRSP or his spousal)

Question 244

RSP home-buyers withdrawals must be paid back within what time frame?

a) 12 years

b) 10 years

c) 4 years

d) 15 years

Answer 244

d) 15 years

Question 245

If Arnold contributed $5000 to his wife Judy’s spousal RRSP during 2019, on what date would Judy be able to withdraw the money with the result that Judy will pay the tax on the withdrawal. (Put your answer in this format yyyy-mm-dd ) ______

Answer 245

2022-01-01

If your
client’s spouse or common-law partner makes a withdrawal from a spousal plan in the year in which they
contribute to that spousal plan, or in the preceding two calendar years (also known as 2+ years), the
withdrawal is taxed in the contributor’s hands.

Question 246

The maximum RRSP withdrawal per person for the home buyer’s plan is (Input answer to 0 decimal places) ______

Answer 246

$35,000

Question 247

Lifelong learning plan withdrawals from an RRSP must be repaid within ______ years to avoid taxation.

Answer 247

10

Question 248

Ahmet has an income of $100,000. He has received a T4 for this year also showing the following:

PA $8000

PSPA $2500

PAR $1000

Calculate Ahmet’s allowable RRSP contribution room if the maximum RRSP contribution limit is $23,000 for the year in question.

a) $8,500

b) $13,500

c) $15,500

d) $6500

Answer 248

a) $8,500

$100,000 x .18 = $18,000 (below the max so allowed all of this)

minus PA of $8000, minus PSPA of $2500 plus PAR of $1000

= $8500.00

Question 249

Sandy Phillips has decided to return to school after 10 years in the workforce. What amount will Sandy be allowed to withdraw to help pay for her education for the next two years?

a) $40,000

b) $20,000

c) $30,000

d) $10,000

Answer 249

b) $20,000

$10,000 maximum per year to a maximum of $20,000

Question 250

Myron Williams, a resident of New Brunswick, has withdrawn $15,000 from his RRSPs to assist his ailing mother. What amount of withholding tax will be taken on this withdrawal?

a) 20%

b) 10%

c) 5%

d) 30%

Answer 250

a) 20%

Question 251

Excess contributions to your RRSP are subject to ______________

a) A 1% per year penalty on any amount over $2000 beyond the allowed contribution amount

b) A 1% per year penalty on any amount over the allowed contribution amount

c) A 1% per month penalty on any amount over the allowed contribution amount

d) A 1% per month penalty on any amount over $2000 beyond the allowed contribution amount

Answer 251

d) A 1% per month penalty on any amount over $2000 beyond the allowed contribution amount

The $2000 overcontribution is allowed over a lifetime. Anything beyond that has to be taken out or you pay the 1% tax penalty on the excess amount each month. (until the next year gives yo room for the excess in your new allowed contribution)

Question 252

Which of the following is available to an investor who has a locked in RRSP to be rolled over at retirement?

a) Guaranteed term annuity

b) Lump sum withdrawal

c) LRIF

d) RRIF

Answer 252

c) LRIF

Yes! Locked in funds have to remain locked in and dispersed over time. They can also be rolled into a LIF, PRIF, or Life Annuity. All of these are locked in a provide income over time.

Question 253

Allison belongs to a DPSP with her employer. This year Allison earned $75,000 and her employer contributed $7000 to her DPSP. If Allison’s maximum RRSP contribution this year based on her income is $13,500.00, how much will she ultimately be able to put in her RRSP?

a) $13,500

b) $3975

c) $6500.00

Answer 253

c) $6500.00

The DPSP contribution is the amount of her Pension adjustment so it will reduce her RRSP contribution limit. $13,5000 - $7,000 = $6,500

Question 254

Mariella Pope has listed the following incomes, expenses, and T4 details for the year:

Employment income $60,000
Rental Income $14,400
Investment Income $3,200
Rental related expenses $1,350
Pension Adjustment $5,400
Past-Service Pension Adjustment $200
RRSP Carry Forward Room $3000
For the year above, calculate total earned income for Mariella and place it in the box that follows. (input your answer to 0 decimal places)

______Assuming a maximum contribution room allowable for all Canadians of $20,000, calculate the maximum amount Mariella can put in her RRSP for the year above. Place the amount in the box that follows. (Input your answer to 0 decimal places) ______

Answer 254

$73,050, $10,549

Employment income = $60,000

Rental income = $14,400- $1,350= $13,050

Total earned income = $73,050

Investment income is not earned income so is not included.

Contribution limit = .18 x 73050 = $13,149 (vs max of $20,000 so can use all)

Minus PA of $5400, minus PSPA of $200 plus carryforward of $$3000

Total contribution allowed = $10,549