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IFSE Institute Canadian Investment Funds Course Sample Questions:
1. Winter is a Dealing Representative with Top Tier Investing, a mutual fund dealer and member of the Mutual Fund Dealers Association of Canada (MFDA). Which of the following statements about Winter's suitability obligation is CORRECT?
Winter is required to make a suitability determination every time:
i) she makes a recommendation to a client
ii) a client's investment returns decline.
iii) she opens a new client account
iv) the markets fluctuate.
A) iii and iv
B) ii and iii
C) i and iii
D) i and ii
2. Which of the following form part of the disclosure documents relating to mutual funds?
A) balance sheet, income and cash flow statements of the portfolio management company
B) new account information form, quarterly financial statements, and security certification
C) statement of net assets, annual information form, management reports of fund performance
D) annual proxy voting record, audited financial statements, and proof of registration
3. Your client Jerry's asset mix is deviating from the original target asset mix because the stock market has had strong performance. Equities are now over-weighted in Jerry's account. The original target asset mix is still valid since Jerry's situation has not changed. He is invested in several bond and equity mutual funds. What should you do?
A) advise him to change his know your client (KYC) form to reflect more growth
B) advise him to sell a portion of assets invested in equity funds and reinvest the proceeds into bond funds
C) advise him to sell a portion of assets invested in bond funds and reinvest the proceeds into equity funds
D) advise him to do nothing since equities could outperform bonds in the next year
4. Your client, Rinaldo, wants to know more about the fees associated with his mutual funds. What can you tell him about a mutual fund's management expense ratio (MER)?
A) Mutual funds are required to calculate the MER on a daily basis.
B) Mutual fund performance is not impacted by the MER since rates of return are published net of fees.
C) Trailer and brokerage fees are charged separately from the MER.
D) The MER reflects the percentage of each dollar of fund assets that is used to pay for management services.
5. What statement CORRECTLY describes a key difference between bonds and debentures?
A) Debentures have higher priority than bondholders for the company's assets in the event that the company goes bankrupt.
B) Debentures are considered high risk because they are not backed by the reputation or credit worthiness of the issuer.
C) Regular secured bonds offer a higher level of income than debentures.
D) Bonds are secured by the specific assets of a company whereas debentures are not secured by real assets or collateral.
Solutions:
Question # 1 Answer: C | Question # 2 Answer: C | Question # 3 Answer: B | Question # 4 Answer: D | Question # 5 Answer: D |