Investment Planning

Question 1

Creditor Protection of Seg Funds

Answer 1

The trust structure of Seg funds and the naming of a beneficiary provide protection of the assets from creditors

Question 2

The Reason for issuing Convertible Bonds

Answer 2

• permit the bondholder to exchange the bond for common shares. Provides an advantage to the bondholder because they enjoy the safety associated with bonds and the potential for growth with equities.
• from the issuer’s point of view, the addition of a conversion privilege makes a bond more saleable, tends to lower the cost of the money borrowed (lower coupon rate), and may enable the company to raise equity capital indirectly on terms more favorable than through the sale of common shares.

Question 3

Interest Rates and Yields

Answer 3

• There is very little difference between the two as each represents a rate of return on investment.
• As interest rates rise so do the yields on competing investments.

Question 4

Bonds

Answer 4

• Longer-term Bonds are more volatile
• Bonds with lower coupons are more volatile
• Lower coupon bonds drop more than higher coupon bonds
• interest rises bonds price drops
• Bonds are more volatile when interest rates are low

Question 5

SEG fund held outside RRSP

Answer 5

• The account owner of the contract must be the person whose life is insured by the contract.
• Creditor protection associated with Seg Funds is always present no matter what type of account.

Question 6

Open End Funds or Mutual Funds

Answer 6

• continually issue shares to investors
• redeem these shares on demand at the current NAVPS of the fund’s investment portfolio
• Closed-end funds - have a fixed number of units that trade on the stock exchange.

Question 7

Bonds

Answer 7

• Duration is a measure of interest rate risk for fixed term investments
• duration is expressed in terms of years
• longer duration means higher exposure to interest rate risk and shorter duration means less exposure to interest rate risk.

Question 8

When is comes to options…

What can you do with RRSPs

Answer 8

CAN

1. Write Covered Calls
2. Buy Call options

Question 9

When is comes to options…

What can you NOT do with RRSPs

Answer 9

CANNOT

1. Sell Put options
2. Write uncovered or NAKED call options

Question 10

What are some rules around taking care of a capital loss

Answer 10

1. can carry back 3 yrs and deduct off a capital gain
2. Can carry forward indefinitiely
3. in the yr of death and the preceding year you can reduce all income