Canadian Investment Funds Course Exam - CIFC Exam Practice Test

Question 1

Which of the following money market securities have the highest degree of risk for the investor?

A. Treasury Bills

B. Commercial Paper

C. Bankers' Acceptances

D. Municipal Short-Term Paper

Correct Answer: B

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Question 2

10 years ago, Felipe opened a registered retirement savings plan (RRSP) account and purchased a mutual fund.
The mutual fund purchased included a 7-year deferred sales charge (DSC). At the time of making his investment, him and his Dealing Representative agreed that he had a 25-year growth objective. Since Felipe knew that he was not planning to use his investment until he retired, he was not concerned about the DSC. Although the rate of return did vary from year-to-year, he never noticed his mutual fund having a drop in value. This gave Felipe more confidence in the investment. As a result, he has never made any changes to his investment.
What category of Know Your Client (KYC) information has been given?

A. Risk profile

B. Financial circumstances

C. Personal circumstances

D. Investment experience

Correct Answer: D

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Question 3

Khuyen is a Dealing Representative for Stark Contrast Investments. Her dealer has relationships with 20 different mutual fund families. This gave her the flexibility to sell two different types of funds from two different fund families to her client, Bao. $5,000 was invested in the Blue Moon Global Balanced fund and an additional $5,000 was invested in the Orange Sun Asset Allocation fund. Khuyen has been reviewing the performance of both funds and has determined that Bao would be better off being fully invested in the Blue Moon Global Balance fund. Bao had previously signed a Limited Authorization Form (LAF) for Khuyen, so she goes ahead and does not worry about consulting with Bao before making the change.
What type of activity has Khuyen performed?

A. Discretionary trading

B. Value investing

C. Churning

D. Top-down management

Correct Answer: A

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Question 4

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

A. While comparing Fund Facts of the different mutual funds, Simone points out that not only are the fund management expenses different but so are the investor profiles for each fund.

B. When comparing her dealer's own mutual funds to the one Pierre discovered, Simone emphasizes the importance of similar net rates of return and minimizes the significance of management expense ratios (MERs).

C. Simone's ability to keep her knowledge current on competitors' investment offerings shows that she is putting her client's interest first.

D. Knowing Pierre does not like that her dealer's funds have trailer fees, she chooses not to discuss the relationship between trailer fees and MER while making comparisons.

Correct Answer: A

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Question 5

What is the national self-regulatory organization (SRO) for investment dealers?

A. The National Securities Commission

B. The Mutual Fund Dealers Association of Canada

C. The Canadian Securities Administrators

D. The Investment Industry Regulatory Organization of Canada

Correct Answer: D

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Question 6

On January 2nd of this year Evan purchased 500 preferred shares of Ingram Ltd. The preferred shares have a par value of $25 per share and a quarterly dividend of $0.98 per share. They also give Evan the option to sell the shares back to Ingram at par value any time from now until September 1st two years from now. What type of preferred shares does Evan own?

A. convertible

B. retractable

C. participating

D. redeemable

Correct Answer: B

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Question 7

Which of the following is typical for a normal yield curve?

A. short term rates are lower than long term rates

B. long term rates are lower than short term rates

C. short and long term rates are the same

D. yields decline as term to maturity increases

Correct Answer: A

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Question 8

Greg is a Dealing Representative. As a part of his business building activity, Greg prepares several messages to post on his website and Facebook page. Which statement CORRECTLY describes this situation?

A. Posting a sales communication to a website is prohibited by the Personal Information Protection and Electronic Documents Act (PIPEDA).

B. Greg must not discuss the investment performance, rankings, or ratings of a fund in his communication.

C. Posting messages to Facebook is prohibited by Canada's Anti-Spam Law (CASL).

D. Greg's messages must be approved by his dealer before he can publish or issue the communication.

Correct Answer: D

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Question 9

Which of the following statements about total return for money market funds is TRUE?

A. Performance is displayed with both current yield and effective yield.

B. Current yield incorporates the compounding effect.

C. Current yield reflects the income earned on a money market fund for the most recent 14 day period.

D. Effective yield will always be lower than current yield.

Correct Answer: A

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Question 10

Reginald is a Dealing Representative, who feels pressure from management at the beginning of every calendar year, to open new registered retirement savings plans (RRSPs) and generate RRSP contributions. It is the end of February, and Reginald is close to reaching his personal sales objectives. He just finished an appointment with a prospective new client, Orel. Orel wants to open a tax-free savings account (TFSA) to build emergency savings. However, Reginald recommended to Orel that he should first contribute to an RRSP, and then use the tax savings for a TFSA contribution. With regards to account suitability, what can be said about Reginald's advice?

A. Reginald is putting the client's interest first by informing Orel why he should change his investment strategy.

B. Recommending an investment solution that addresses two needs, is putting Reginald's client's interest first.

C. Based on Orel's stated need, recommending an RRSP contribution is unsuitable.

D. By convincing Orel to contribute to an RRSP, instead of a TFSA, Reginald has put his client's interest first.

Correct Answer: C

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Question 11

Pippa purchased a 15-year bond with a face value of $5,000 and a 7% coupon rate at the time of issuance. The bond is due to mature later this year. The general interest rate climate remained stable for the first 13 years of the bond's term. However, especially over the past 18 months, both inflation and general interest rates have increased more than expected.
What is Pippa likely to experience from her bond?

A. The return of investment capital will have lower purchasing power than prior to investing.

B. With the unanticipated rise in inflation, Pippa will benefit from a higher real rate of return as well.

C. With capital appreciation at 7% annually, Pippa's capital gain will be reduced by inflation at maturity.

D. Due to inflation, Pippa will experience a capital loss once her bond reaches maturity.

Correct Answer: A

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IFSE Institute Canadian Investment Funds Course - CIFC Exam Practice Test

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