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QUESTION 39
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.

$37,888

$36,698

$42,861

$35,859

QUESTION 40
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?

retractable

convertible

participating

redeemable

QUESTION 41
Which statement regarding the underwriting process and over-the-counter (OTC) markets is CORRECT?

Corporations must have their shares listed both on an exchange and the OTC market during the underwriting process.

During the underwriting process investment bankers raise investment capital from investors on behalf of corporations and governments issuing securities.

Many new stock issues that are underwritten by securities firms are first listed on a stock exchange before they are sold over-the-counter.

The disclosure standards for stock exchanges are not as stringent as those imposed by the OTC market.

QUESTION 42
Which of the following statements about registered education savings plans (RESPs) is CORRECT?

Contributions to RESPs are tax deductible.

There is a yearly contribution limit per beneficiary.

RESPs must be collapsed by the end of the 31st year of its starting date

Contributed funds grow tax-free within the plan.

QUESTION 43
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)?

Mutual funds are required to calculate the MER on a daily basis.

Trailer and brokerage fees are charged separately from the MER.

The MER reflects the percentage of each dollar of fund assets that is used to pay for management services.

Mutual fund performance is not impacted by the MER since rates of return are published net of fees.

QUESTION 44
When comparing mutual funds, what information would help a Dealing Representative determine a suitable mutual fund for a client?

Comparing historical rates of return between different types of mutual funds.

Assessing historical differences in the rate of return per unit of risk of similar mutual funds.

Referencing the fund code for each mutual fund that is being compared.

The rights a client has if there is a desire to cancel the purchased mutual fund.

QUESTION 45
What information does Fund Facts provide to potential investors?

What the mutual fund is currently investing in.

How to calculate the taxes owed from investment income.

The portfolio management strategy that is used.

The remuneration paid to the Independent Review Committee.

QUESTION 46
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?

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.

When interest rates rise, the net asset value per unit (NAVPU) of bond funds decreases; whereas with dividend funds it rises.

Bond funds receive fixed interest payments from most of their investments.

Bond fund distributions receive more favorable tax treatment than that of dividend funds.

QUESTION 47
What role do investment dealers play in the Canadian and global financial markets?

They are contributors to a company’s profits.

They are contributors to an investor’s earnings.

They assist with the exchange of capital for a financial instrument.

By underwriting financial instruments, they raise capital for investors.

QUESTION 48
Which of the following statements describes a feature of the Home Buyers’ Plan (HBP)?

To qualify- as a first-time home buyer you or your spouse must never have previously owned a home

Once you are required to repay the amounts back to your RRSP. any missed or incomplete payments are subject to tax.

A qualifying home must be purchased by December 31 of the year of withdrawal.

If you have a spouse or common-law partner, each of you can withdraw up to JE50.000 from your registered retirement savings plans (RRSPs).

QUESTION 49
Your clients, Philip and Helen, have a disabled son, Alex, age 22. They want to set up a registered disability savings plan (RDSP) for Alex and have asked you for some information.
Which statement is TRUE?

Philip and Helen’s contributions are refundable to them.

There is no annual or lifetime maximum limit on contributions.

Alex must quality for the disability tax credit.

Philip and Helen’s contributions are tax-deductible.

QUESTION 50
Ai Fen has recently become registered to sell mutual funds with Acadian Eastern Financial, a mutual fund dealer. Ai Fen determined that with her background of being a Chartered Financial Analyst, she can help people understand the nature of investing more easily than others in her field.
Which registration category will need to be prominently noted on Ai Fen’s business card to comply with the
“holding out rule”?

Dealing Representative

Registered Representative

Investment Representative

Chartered Financial Analyst

QUESTION 51
Sheldon is a 25 year old graphic designer. He has just started working and saves regularly. Apart from his regular salary he also earns extra money from freelancing after office hours and during weekends. His earnings from his freelance work are sufficient for meeting his living expenses. He saves the entire amount of his salary. He has heard about lifecycle funds but has come to you for additional information.
Which of the following statement about lifecycle funds is TRUE?

As Sheldon gets older, the life cycle asset allocation changes from more risky to less risky.

All lifecycle funds start with equal allocations to cash, fixed income and equities before being re-balanced.

The asset allocation of a lifecycle fund is set based on the age demographic of its unitholders and remains the same for the time frame of the lifecycle fund.

Investor income is the only basis for changing the asset allocation of a lifecycle mutual fund.

QUESTION 52
Bernadette has a high-paying job and is in the top tax bracket. She recently received a payment of $5 million upon the settlement of her uncle’s estate. Bernadette would like to invest her inheritance in financial products that would not only grow her money but is also income tax friendly.
Which of the following would provide the most favourable tax treatment?

Dividends received from a large foreign corporation.

Coupon payments from Government of Canada bonds.

Capital gains from a large Canadian corporation.

Eligible dividends from a publicly-listed Canadian corporation

QUESTION 53
One of your clients, Rakesh, had a portfolio composed of 60% ABC Equity Fund and 40% ABC Bond Fund.
Since equities were performing much better than fixed income, he had increased his holdings in ABC Equity Fund to 70% and had reduced his holding in ABC Bond Fund to 30% of his portfolio.
After benefitting the growth in his ABC Equity Fund for over 2 years, Rakesh is uncomfortable with this heavy exposure to equity funds and decides to rebalance his portfolio back to 60% of ABC Equity Fund and
40% of ABC Bond Fund.
He instructs you to switch 10% of the portfolio from the ABC Equity Fund to the ABC Bond Fund.
Which of the following statements is CORRECT?

Rakesh will not be subjected to a switch fee if it is outlined in the prospectus.

Rakesh will not be subjected to a switch fee if his equity fund is a no-load fund.

Rakesh will not be subjected to a switch fee if his original units were purchased with a sales charge.

Rakesh will not be subjected to a switch fee if his equity fund is a low-load fund.

QUESTION 54
Sarah and Kyle are a married couple. They are both 34 years of age and work as teachers. Their combined annual income is $130,000. They are able to save $800 each month. They own a home worth $340,000 with a
$120,000 mortgage. Since they work for the same employer, they have the same defined benefit pension plan.
Other than a tax-free savings account (TFSA) in Kyle’s name with $5,000, they do not have any other assets.
They are avid sailors and want to save towards a purchase of a sailboat. For the type of sailboat they want, they estimate it should cost around $65,000. They want you to recommend an investment for their monthly savings to help them achieve their goal faster.
What question should you ask them next?

How would you feel if you lost part of your money in the short-term?

What is your investment objective for these savings?

What is your net worth?

How much do you make individually each year?

QUESTION 55
Maxine is a portfolio manager who 15 years ago, purchased 100 shares of Never2Tacky, a social media corporation for Aspirations Global Technology Fund. She purchased the stock when it was trading at $10. Last year, the peak market price was $120. Presently, it is trading at $99. News agencies are now reporting that additional regulations regarding social media companies are about to be agreed upon by G7 countries. Maxine is concerned the market value of Never2Tacky is going to drop. She buys a put option with an exercise price of $95 with an expiry of 9 months.
What type of strategy is Maxine using?

Speculating

Modern portfolio theory

Passively managing

Hedging

QUESTION 56
Faruq is a Dealing Representative with Smart Planning Group, a mutual fund dealer. Faruq meets with his new client, Taline, and learns that she lives on a low, fixed income.
Taline tells Faruq that she wants to maximize her investment returns as high as possible to make up the difference. Taline also indicates that she cannot afford large investment losses because her income is low.
Which of the following CORRECTLY describes how Faruq should assess Taline’s risk profile?

Taline’s risk profile should be “hiqh”” because she is willingto accept risk in order to maximize her investment returns.

Faruq should override the risk that Taline is able to accept because her return expectations cannot otherwise be met.

Faruq should assess Taline’s risk profilebased on the higher of her: (1) risk tolerance and (2) risk capacity

Taline’s risk profile should be”low” because her risk capacityis low and she cannot afford lame investment losses.

QUESTION 57
One of your clients, Harry, has heard that he can defer paying tax on capital gains. He wants to know if what he has heard is correct and if so, how to defer paying taxes on capital gains.
What would you tell Harry?

He should hold profitable investments as long as possible.

He should invest in mutual funds just before the dividend paying date to pick up the dividend.

Harry should buy and sell investments actively.

He should hold unprofitable investments as long as possible.

QUESTION 58
Eleanora receives a $500 eligible Canadian dividend from her mutual fund. Her federal marginal tax rate for the year is 29%. Assuming the enhanced gross-up of 38% and a federal dividend tax credit of 15.02%, how much federal tax will she pay on her dividend?

$69.90

$189.16

$96.46

$115.40

QUESTION 59
When you buy a put option, which of the following is TRUE?

You have the right to sell a set number of shares at a set price.

You have the right to purchase a set number of shares at a set price.

You have the obligation to sell a set number of shares at a set price.

You have the obligation to buy a set number of shares at a set price.

QUESTION 60
Which of the following characteristics about mortgage mutual funds is CORRECT?

typically monthly distributions of interest

if interest rates fall, the mutual fund’s net asset value per unit (NAVPU) will decline

suitable only for high risk investors

risk-free where the mortgages are National Housing Act (NHA) insured

QUESTION 61
Saheed is a retiree who is considering splitting his pension income with his wife, Minu.
Which of the following outcomes may occur if he shares his pension benefits?

Whether the couple saves on income taxwill be dependent on Minu’s marginal tax rate.

Minu will be exposed to a pension adjustment (PA) if she receives income from his pension.

This is a form of tax evasion and is therefore considered illegal based on income tax legislation.

Regardless of how much income each person reports, the total amount of income taxes will not change.