ifse cifc practice test

When you buy a put option, which of the following is TRUE?

• A. You have the right to sell a set number of shares at a set price.
• B. You have the right to purchase a set number of shares at a set price.
• C. You have the obligation to sell a set number of shares at a set price.
• D. You have the obligation to buy a set number of shares at a set price.

David had $10,000 in his investment account with Dynamic Investments, a mutual funds dealer. On
June 28, David wants to buy 500 units in ABC Canadian Dividend Fund that has a Net Asset Value Per
Unit (NAVPU) of $14.10. His friend Robert suggests that he may get a better price if he used the
strategy of dollar-cost averaging. David then instructs his Dealing Representative to place a purchase
order for 100 units on the first of every month starting July 1st for the next 5 months.
The orders are executed at the following NAVPUs.
July 01, $14.00
Aug. 01, $14.50
Sep. 01, $15.00
Oct. 01, $14.25
Nov. 01, $16.50
Did David get a better purchase price following the dollar-cost averaging strategy compared to
making a lump-sum purchase of 500 shares on Jun 28, 20xx?

• A. David got his 500 units at the same price as the lump sum price he would have paid.
• B. David got his 500 units at a lower price than the lump sum price he would have paid.
• C. David realizes that Dollar cost averaging is the best strategy for getting lower prices.
• D. David got his 500 units at a higher price than the lump sum price he would have paid

Your client, Helen, just received her non-registered account statement which states that one of her
mutual funds made an interest income distribution during the year. She asks you how she will be
taxed on the distribution. What do you tell Helen?

• A. She will pay taxes on 50% of the distribution.
• B. She will pay taxes at her top marginal tax rate.
• C. She will pay taxes on the grossed-up amount of the income.
• D. She will pay taxes at her average tax rate.

Quinton, a Dealing Representative, meets with his client Banji. Banji’s Know Your Client (KYC)
indicates that her risk profile is “medium’’. Banji currently has $35,000 in her account which is
invested 50% in the Middleton Balanced Fund and 50% in the Hector Growth Fund. She tells Quinton
that she would like to contribute an additional $10,000 to purchase the Prospect Labour-Sponsored
Fund. Which of the following statements about Banji’s proposed transaction is CORRECT?

• A. Quinton can proceed with the purchase of the Prospect Labour-Sponsored Fund because it is suitable for Banji based on her current KYC.
• B. Quinton should update Banji's risk profile to "high" so that he can proceed with the purchase of the Prospect Labour-Sponsored Fund.
• C. Quinton should not proceed with the purchase of the Prospect Labour-Sponsored Fund because it is not suitable for Banji based on her current KYC.
• D. Quinton must provide Banji with full disclosure about the risks so that he can proceed with the purchase of the Prospect Labour-Sponsored Fund.

What type of mutual fund can invest in specified derivatives and forward contracts for grains, meats,
metals, energy products, and coffee?

• A. global equity fund
• B. commodity pool
• C. labour-sponsored investment fund
• D. specialty fund

When comparing mutual funds, what information would help a Dealing Representative determine a
suitable mutual fund for a client?

• A. Comparing historical rates of return between different types of mutual funds.
• B. Assessing historical differences in the rate of return per unit of risk of similar mutual funds.
• C. Referencing the fund code for each mutual fund that is being compared.
• D. The rights a client has if there is a desire to cancel the purchased mutual fund.

Francis wants to redeem his US Asset Allocation Fund as he needs the money for a down payment for
a home purchase. The current proceeds from the redemption are USD $27,859, and the current
CAD/USD exchange rate is 0.7353.
How much will Francis receive in Canadian dollars when he redeems the Funds? Please round your
answer to the nearest dollar.

• A. $37,888
• B. $36,698
• C. $42,861
• D. $35,859

The owners of Underground Airways Ltd. want to take their privately owned corporation public
through an initial public offering (IPO). They are speaking to a specialist from an investment dealer to
determine whether it would be advisable to become listed on a stock exchange or the over-the-
counter (OTC) market.
In comparing the two options, which of the following considerations is TRUE?

• A. A stock exchange listing would provide Underground with greater market exposure and public confidence than listing on the OTC market.
• B. Underground would still be directly involved in the trading of their shares on either market.
• C. Underground would be subject to less stringent listing requirements if they chose the stock exchange as compared to the OTC market.
• D. If Underground chose to list on the OTC market, there would be no secondary market available for investors.

Sven owns preferred shares that give him the option to sell his holdings back to the issuing company
at a predetermined price and within a specified time. What type of preferred shares does Sven own?

• A. retractable
• B. participating
• C. convertible
• D. redeemable

Which of the following characteristics about mortgage mutual funds is CORRECT?

• A. typically monthly distributions of interest
• B. if interest rates fall, the mutual fund's net asset value per unit (NAVPU) will decline
• C. suitable only for high risk investors
• D. risk-free where the mortgages are National Housing Act (NHA) insured