[Jan-2024] IFSE Institute CIFC Official Cert Guide PDF
Exam CIFC: Canadian Investment Funds Course Exam - TopExamCollection
NEW QUESTION # 114
As a measurement of risk, which of the following statements about beta is TRUE?
- A. It corresponds to a stock's riskiness in relation to the frequency of dividend payments over a certain period of time.
- B. A larger beta for a stock means it will outperform the market at any point in the business cycle.
- C. It is a ratio that compares a company's current rate of return to its average rate of return overtime.
- D. It is a relative measure that compares how an investment reacts to movements in a specific index.
Answer: D
NEW QUESTION # 115
Danica is looking for a mutual fund to hold in her non-registered account that provides a regular stream of income with potential for capital growth. She is having difficulty distinguishing between bond funds and dividend funds. Which of the following statements is TRUE?
- A. Bond fund distributions receive more favorable tax treatment than that of dividend funds.
- B. The return of dividend funds relies only on interest rates; whereas with bond funds, the return also depends on the general direction of stock markets.
- C. When interest rates rise, the net asset value per unit (NAVPU) of bond funds decreases; whereas with dividend funds it rises.
- D. Bond funds receive fixed interest payments from most of their investments.
Answer: D
NEW QUESTION # 116
If an investor was looking for an investment with a risk equal to that of the market, which factor would she want in an investment?
- A. a standard deviation of 0
- B. a beta of 0
- C. a standard deviation of 1
- D. a beta of 1
Answer: D
Explanation:
Explanation
Beta is a measure of the systematic risk of an investment, which is the risk that is related to the movements of the market as a whole. Beta compares the volatility of an investment to the volatility of the market. A beta of 1 means that the investment has the same level of risk as the market, and it tends to move in the same direction and magnitude as the market. A beta of 0 means that the investment has no correlation with the market, and it is unaffected by market fluctuations. A beta greater than 1 means that the investment is more risky than the market, and it tends to amplify the market movements. A beta less than 1 means that the investment is less risky than the market, and it tends to dampen the market movements. Therefore, if an investor was looking for an investment with a risk equal to that of the market, she would want a beta of 1. References:
Canadian Investment Funds Course (CIFC) Study Guide, Chapter 4: Mutual Funds, Section 4.5: Risk and Return of Mutual Funds, page 4-231 Beta Definition - Investopedia2
NEW QUESTION # 117
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 fund performance is not impacted by the MER since rates of return are published net of fees.
- B. Mutual funds are required to calculate the MER on a daily basis.
- C. The MER reflects the percentage of each dollar of fund assets that is used to pay for management services.
- D. Trailer and brokerage fees are charged separately from the MER.
Answer: C
NEW QUESTION # 118
If an investor was looking for an investment with a risk equal to that of the market, which factor would she want in an investment?
- A. a standard deviation of 0
- B. a beta of 0
- C. a standard deviation of 1
- D. a beta of 1
Answer: D
Explanation:
Explanation
Beta is a measure of the systematic risk of an investment, which is the risk that is related to the movements of the market as a whole. Beta compares the volatility of an investment to the volatility of the market. A beta of 1 means that the investment has the same level of risk as the market, and it tends to move in the same direction and magnitude as the market. A beta of 0 means that the investment has no correlation with the market, and it is unaffected by market fluctuations. A beta greater than 1 means that the investment is more risky than the market, and it tends to amplify the market movements. A beta less than 1 means that the investment is less risky than the market, and it tends to dampen the market movements. Therefore, if an investor was looking for an investment with a risk equal to that of the market, she would want a beta of 1. References:
* Canadian Investment Funds Course (CIFC) Study Guide, Chapter 4: Mutual Funds, Section 4.5: Risk and Return of Mutual Funds, page 4-231
* Beta Definition - Investopedia2
NEW QUESTION # 119
Karen's know your client (KYC) profile corresponds to someone who has a long time horizon, is comfortable with risk and volatility, and is primarily interested in growth. She watches the daily movements of the Toronto Stock Exchange (TSX) and wants a mutual fund that will closely match what she sees.
What kind of mutual fund would be BEST for her?
- A. Canadian bond fund
- B. Canadian dividend fund
- C. Canadian equity index fund
- D. Canadian small capitalization equity fund
Answer: C
NEW QUESTION # 120
Sylvia decided to use the savings from her bank account to purchase a 5-year bond. The face value of the bond is $10,000, the market price is $9,230 and the coupon rate is 7%.
What is the current yield on the bond? Round to 2 decimal places.
- A. 7.00%
- B. 7.75%
- C. 7.25%
- D. 7.58%
Answer: D
Explanation:
Explanation
The current yield on a bond is the annual interest payment divided by the current market price of the bond. In this case, the annual interest payment is 7% of the face value, which is $700. The current market price of the bond is $9,230. Therefore, the current yield is:
9230700×100%=7.58%
The current yield is different from the coupon rate, which is the annual interest payment divided by the face value of the bond. The coupon rate does not change over the life of the bond, but the current yield changes as the market price of the bond fluctuates. References:
Canadian Investment Funds Course (CIFC) Study Guide, Chapter 5: Fixed-Income Securities, Section
5.2: Bond Pricing and Yield, page 5-61
Current Yield Definition - Investopedia2
NEW QUESTION # 121
Which of the following statement about Exchange Traded Funds (ETFs) is TRUE?
- A. All ETFs are actively managed.
- B. ETFs have lower MERs compared to mutual funds.
- C. Investors may sell their ETFs in the stock market or redeem them through the Fund at the NAVPU of the day.
- D. Usually the market price of an ETF is the net asset value per unit (NAVPU) of the Fund on that day.
Answer: B
Explanation:
Explanation
An exchange-traded fund (ETF) is a type of pooled investment security that operates much like a mutual fund.
Typically, ETFs will track a particular index, sector, commodity, or other assets, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can. ETFs have lower management expense ratios (MERs) compared to mutual funds because they are passively managed and do not incur high costs for research, analysis, and portfolio rebalancing. Therefore, this statement is true about ETFs.
References: Exchange-Traded Fund (ETF) Explanation With Pros and Cons - Investopedia, The Best ETFs - Exchange Traded Funds Rankings | US News Investing
NEW QUESTION # 122
Which of the following statements is TRUE about inflation?
- A. Inflation results in a redistribution of income from borrowers to lenders.
- B. Purchasing power rises as inflation rises.
- C. An increase in the inflation rate could mean investors have less money to invest.
- D. Generally inflation will benefit those who are living on investment income.
Answer: C
Explanation:
Explanation
Inflation is the general increase in the prices of goods and services over time. Inflation reduces the purchasing power of money, meaning that a dollar can buy less than it used to. Inflation also erodes the real value of investment income, such as interest, dividends, and capital gains. Therefore, an increase in the inflation rate could mean that investors have less money to invest, as their income and savings lose value.
References = Canadian Investment Funds Course, Unit 5: Types of Investments, Lesson 1: Economic Factors and Financial Markets, Section 5.1.2: Inflation1; CIFC prepkit, Chapter 5: Types of Investments, Question
5.1.2 2
NEW QUESTION # 123
On January 3, John invests $500 in the Blue Sky U.S. Equity Fund. On July 1 of the same year, he invests another $500 into the same mutual fund. Information about the net asset value per unit (NAVPU) at the time of each transaction is provided below. Given this information, what will be the value of John's investment on December 31 of this year (please ignore transaction costs and distributions)?
- A. $1,216
- B. $1,332
- C. $1,198
- D. $1,256
Answer: D
Explanation:
Explanation
The value of John's investment on December 31 of this year can be calculated by multiplying the number of units he holds by the net asset value per unit (NAVPU) on that date. Since John invested $500 on January 3 and $500 on July 1, he holds a total of 125.6 units (62.8 units from the first investment and 62.8 units from the second investment). Therefore, the value of his investment on December 31 will be 125.6 units x $9.55 NAVPU = $1,256.
References: Canadian Investment Funds Course, Chapter 2: Mutual Funds1
NEW QUESTION # 124
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
Answer: A
Explanation:
Explanation
A yield curve is a graphical representation of the relationship between the interest rates (or yields) and the term to maturity of different fixed income securities, such as bonds or debentures. A normal yield curve is upward sloping, meaning that the interest rates increase as the term to maturity increases. This is because investors typically demand higher compensation for lending their money for longer periods of time, as they face more uncertainty and risk. Therefore, a normal yield curve implies that short term rates are lower than long term rates.
References: Canadian Investment Funds Course, Unit 5, Section 5.2
NEW QUESTION # 125
Which statement regarding the underwriting process and over-the-counter (OTC) markets is CORRECT?
- A. Many new stock issues that are underwritten by securities firms are first listed on a stock exchange before they are sold over-the-counter.
- B. Corporations must have their shares listed both on an exchange and the OTC market during the underwriting process.
- C. The disclosure standards for stock exchanges are not as stringent as those imposed by the OTC market.
- D. During the underwriting process investment bankers raise investment capital from investors on behalf of corporations and governments issuing securities.
Answer: D
Explanation:
Explanation
Underwriting is the process through which an individual or institution takes on financial risk for a fee. This risk most typically involves loans, insurance, or investments. In the case of securities, underwriting involves conducting research and assessing the degree of risk each applicant or entity brings to the table before assuming that risk. During the underwriting process, investment bankers raise investment capital from investors on behalf of corporations and governments issuing securities. They also help determine the company's underlying value compared to the risk of funding its IPO. References: Underwriting: Definition and How the Various Types Work - Investopedia, The future of insurance underwriting | Deloitte Insights
NEW QUESTION # 126
Hamid, the portfolio manager of the Trabant Canadian Equity Fund is deciding on some new investments. He has identified a retirement residence company as well as a discount clothing retailer that both seem to have good prospects and appear undervalued. What investment approach is Hamid using?
- A. growth at a reasonable price
- B. bottom-up
- C. technical investing
- D. top-down
Answer: B
Explanation:
Explanation
Hamid is using a bottom-up investment approach, which focuses on the analysis of individual stocks rather than the overall market or industry trends. Hamid is looking for companies that have strong fundamentals and are undervalued by the market, regardless of their sector or macroeconomic factors. References: Investment Strategies to Learn Before Trading
NEW QUESTION # 127
Which among the following plans includes a provision that places a maximum limit on the amount that can be withdrawn during a calendar year?
- A. Life Income Fund (LIF)
- B. Registered Retirement Savings Plan (RRSP)
- C. Deferred Profit Sharing Plan (DPSP)
- D. Registered Retirement Income Fund (RRIF)
Answer: A
Explanation:
Explanation
A LIF is a type of registered retirement income fund that is used to hold and pay out locked-in pension funds.
A LIF has both a minimum and a maximum withdrawal limit for each calendar year, which are determined by the federal or provincial pension legislation, the age of the annuitant, and the value of the fund. The minimum withdrawal limit is similar to that of a RRIF, but the maximum withdrawal limit is intended to ensure that the LIF provides income for the lifetime of the annuitant123 References = Canadian Investment Funds Course (CIFC) - Module 3: Registered Plans - Section 3.4: Life Income Fund (LIF)4 and web search results from search_web(query="maximum withdrawal limit for LIF RRSP RRIF DPSP")123
4: https://www.ifse.ca/wp-content/uploads/2021/08/CIFC-Module-3.pdf
NEW QUESTION # 128
Frederic recently sold his units in a US dollar (USD) denominated mutual fund. He wants to convert the proceeds back to Canadian dollars (CAD). If he received proceeds of $1,200 USD from the sale and the exchange rate is $1 CAD for $0.99 USD, how much will Frederic receive in Canadian dollars?
- A. $1,320.00
- B. $1-188.00
- C. $1, 12.12
- D. $1,200.00
Answer: C
Explanation:
Explanation
To convert the proceeds from USD to CAD, Frederic needs to divide the amount in USD by the exchange rate.
The exchange rate is $1 CAD for $0.99 USD, which means that $0.99 USD is equivalent to $1 CAD.
Therefore, Frederic will receive
CAD in Canadian dollars. References: Canadian Investment Funds Course (CIFC) | IFSE Institute, Unit 8, Lesson 2
NEW QUESTION # 129
What purpose does it serve for non-money market mutual funds to hold money market instruments?
- A. They ensure that the fair market value of a mutual fund will not drop below a minimal market value.
- B. Money market instruments primarily generate investment income that provides investors with preferential tax treatment.
- C. If the portfolio manager has an immediate need for cash, money market instruments are relatively easy to liquidate.
- D. They are purchased by non-money market funds to satisfy the regulatory requirement of fund diversification.
Answer: C
NEW QUESTION # 130
Which of the following best describes implied needs of your clients?
- A. They are statements of wants and needs made by clients.
- B. They are statements made by clients expressing the desire for lower commissions.
- C. They are statements made by you showing readiness to solve a client's problem.
- D. They are needs reflected by statements made by clients regarding problems and dissatisfactions.
Answer: D
NEW QUESTION # 131
Sujay contributes 3% of his $60,000 salary to his employer's defined contribution pension plan. His employer contributes the same amount to the plan. How will this affect his registered retirement savings plan (RRSP) contribution room for the year?
- A. It will reduce Suiay's contribution room by $3,600.
- B. It will reduce Suiay's contribution room by 51,800.
- C. It will have no effect. RRSP contribution room is based on earned income only.
- D. It will reduce Suiay's contribution room by $1800
Answer: A
Explanation:
Explanation
D is correct because Sujay's registered retirement savings plan (RRSP) contribution room for the year will be reduced by $3,600. This is because his employer's defined contribution pension plan is considered a registered pension plan (RPP), which affects his RRSP contribution room through a pension adjustment (PA). The PA is calculated as 18% of his earned income in the previous year minus his RPP contributions in the current year.
In this case, Sujay's PA for the current year is $3,600, which is 18% of his $60,000 salary minus his 3% contribution ($1,800) and his employer's 3% contribution ($1,800). The PA reduces his RRSP contribution room for the next year by the same amount. It will have an effect on his RRSP contribution room (A), as it is not based on earned income only, but also on RPP contributions. It will not reduce his contribution room by
$51,800 (B), as this is more than his earned income. It will not reduce his contribution room by $10,800, as this is 18% of his earned income without subtracting his RPP contributions. References: Canadian Investment Funds Course (CIFC) | IFSE Institute
NEW QUESTION # 132
Which among the following BEST describes a company's income statement?
- A. It shows the amount of capital contributed to the company by its shareholders or owners.
- B. It shows the amount of profit that is reinvested in the company in the form of retained earnings.
- C. It provides a snapshot of a company's financial position at a specific point in time
- D. It shows the earnings and expenses of a business over a period of time.
Answer: D
NEW QUESTION # 133
Jonathan is a Dealing Representative who has just finished an appointment with his new client, Shirley.
Jonathan has concluded that Shirley has a low-risk profile but wants to establish additional savings of
$500,000. During their discussion, Shirley emphasizes she wants investments that are also tax efficient.
Jonathan learned that currently Shirley has no registered retirement savings plan (RRSP) and tax-free savings account (TFSA) contribution room due to using those opportunities by investmenting elsewhere.
What variable is a PRIMARY consideration for Jonathan when making an investment recommendation?
- A. The tax consequences.
- B. Shirley's risk profile.
- C. Expected time horizon.
- D. Investment objective
Answer: B
Explanation:
Explanation
Shirley's risk profile is the primary consideration for Jonathan when making an investment recommendation.
Risk profile is a measure of how much risk an investor is willing and able to take on in their portfolio. It is determined by factors such as age, income, net worth, investment objectives, time horizon, and personal preferences. It is essential for a dealing representative to assess the risk profile of their client before recommending any investment products or strategies, as they have a fiduciary duty to act in the best interest of their client and ensure that their recommendations are suitable for their client's needs and goals. The other variables are also important, but they are secondary to the risk profile. References: [Risk Profile], [Know Your Client (KYC)]
NEW QUESTION # 134
......
Free CIFC Exam Dumps to Improve Exam Score: https://www.topexamcollection.com/CIFC-vce-collection.html
2024 Realistic CIFC Dumps Exam Tips Test Pdf Exam Materials: https://drive.google.com/open?id=1CJ57WjPMH_yxTHx6I4sTbWgT2uJDiaWF
