CIFC Books PDF – Prepaway Exam Dumps

NO.41 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?

NO.42 Solomon is a Dealing Representative who is excited about a new equity fund his dealer recently approved. He thinks investors will be attracted to the fund’s historical performance. He has a prospective new client, Madira, who is 25 years old. Madira has invested in mutual funds before, but not with Solomon’s dealer. She has made an appointment to open a new RRSP with Solomon’s firm.
What does Solomon need to do to make this a suitable recommendation?

Show from past fund performance, that mutual fund costs are not important if there are high returns.

Rely on the risk rating of the mutual fund when offering an investment solution.

Identify how the proposed investment is in alignment with the investor’s profile and holdings.

Match the past rates of return of the mutual fund with what is the anticipated rate of return.

NO.43 Maureen is 65 years old and will be retiring soon. She has a modest portfolio of mutual funds that focus on growth. As she approaches retirement, Maureen wants to switch to investments that provide steady income with low to medium risk.
Given Maureen’s wishes, which of the following mutual funds would be suitable for her?

money market funds, mortgage funds, bond funds

money market funds. Canadian dividend funds, sector funds

Canadian dividend funds, global equity index funds, bond funds

money market funds, global equity funds, bond funds

NO.44 Fabiola is an optometrist and an incorporated professional. She has fallen behind schedule regarding saving for retirement. She is considering opening an Individual Pension Plan (IPP).
What provision might encourage her to use an IPP?

When Fabiola files her personal tax return, she will be able to claim contributions as an eligible deduction.

Her pension benefit is not pre-determined because it is based on the returns on investments which she chooses.

Contributions to her IPP can be greater than what applies to contributions for registered retirement savings plans.

Withdrawals will be taxable to the business, not to Fabiola, when she starts receiving her pension income.

NO.45 You are collecting know your client (KYC) information for your new client, Yael. She has recently accepted an early retirement package from her employer and has $100,000 to invest. She is looking for an investment that will provide income to help pay her ongoing monthly expenses. Without this extra income, she would have trouble paying her bills. From your discussions, Yael understands that markets fluctuate and says she is comfortable with high risk. Which of the following would be a suitable investment?

global equity fund

money market fund

mortgage fund

Canadian equity index fund

NO.46 What type of shares offer its shareholders the opportunity to receive additional dividends if the company’s profit exceeds a stated level?

Redeemable preferred shares

Cumulative preferred shares

Convertible preferred shares

Participating preferred shares

NO.47 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.

7.00%

7.25%

7.58%

7.75%

NO.48 Which of the following are obligations on mutual fund dealing representatives imposed by The Proceeds of Crime (Money Laundering) and Terrorist Financing Act?

record-keeping of large transactions, account-related information, and other relevant records

reporting all financial transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

enhancing public awareness of matters related to money laundering and terrorist financing

confirming client identity each time before concluding any transaction

NO.49 What statement CORRECTLY describes a key difference between bonds and debentures?

Regular secured bonds offer a higher level of income than debentures.

Bonds are secured by the specific assets of a company whereas debentures are not secured by real assets or collateral.

Debentures have higher priority than bondholders for the company’s assets in the event that the company goes bankrupt.

Debentures are considered high risk because they are not backed by the reputation or credit worthiness of the issuer.

NO.50 Which of the following money market securities have the highest degree of risk for the investor?

Bankers’ Acceptances

Commercial Paper

Treasury Bills

Municipal Short-Term Paper

Explanation
Commercial paper is a type of money market security that is issued by corporations and financial institutions to raise short-term funds. Commercial paper has a maturity of less than one year, typically between 30 and 90 days. Commercial paper is unsecured, meaning that it is not backed by any collateral or guarantee. Therefore, commercial paper has the highest degree of risk for the investor among the four types of money market securities listed, as it depends on the creditworthiness and liquidity of the issuer. If the issuer defaults or faces financial difficulties, the investor may lose part or all of their principal. Commercial paper also has a higher interest rate than other money market securities to compensate for the higher risk.
The other types of money market securities are:
Bankers’ acceptances: These are negotiable instruments that are issued by a bank on behalf of a client who needs to finance international trade transactions. Bankers’ acceptances have a maturity of less than one year, usually between 30 and 180 days. Bankers’ acceptances are secured by the bank’s guarantee and the underlying goods or services that are being traded. Therefore, bankers’ acceptances have a lower degree of risk for the investor than commercial paper, as they are backed by the bank’s creditworthiness and the value of the trade transaction.
Treasury bills: These are short-term debt obligations that are issued by the federal government to finance its operations and programs. Treasury bills have a maturity of less than one year, usually between 3 and
12 months. Treasury bills are considered risk-free investments, as they are backed by the full faith and credit of the government. Therefore, treasury bills have the lowest degree of risk for the investor among the four types of money market securities listed, as they have virtually no default risk or liquidity risk.
Treasury bills also have the lowest interest rate among the four types of money market securities, as they reflect the risk-free rate of return.
Municipal short-term paper: These are short-term debt instruments that are issued by municipalities or other local governments to finance their capital projects or operating expenses. Municipal short-term paper has a maturity of less than one year, usually between 30 and 270 days. Municipal short-term paper is secured by the taxing power and revenue sources of the issuing municipality or government.
Therefore, municipal short-term paper has a lower degree of risk for the investor than commercial paper, as it is backed by the ability and willingness of the issuer to levy taxes and collect revenues.
References:
Canadian Investment Funds Course (CIFC) Study Guide, Chapter 5: Fixed-Income Securities, Section
5.1: Money Market Securities, page 5-21
Money Market Definition – Investopedia2
Commercial Paper Definition – Investopedia3
Bankers’ Acceptance (BA) Definition – Investopedia4
Treasury Bill (T-Bill) Definition – Investopedia
Municipal Bond Definition – Investopedia

NO.51 Which of the following statements about pension adjustments (PA) is TRUE?

They represent how much your pension is reduced due to market conditions.

They increase your registered retirement savings plan (RRSP) room by the amount of the pension adjustment.

They represent how much your pension will increase due to years of service.

You will receive a PA whether you are in a defined contribution or a defined benefit pension plan.

NO.52 Ken is a member of his employer’s Defined Benefit Pension Plan (DBPP). Which of the following statements about Ken’s plan is CORRECT?

Contributions to the plan do not result in a Pension Adjustment (PA) for Ken.

The amount Ken receives in retirement depends on the performance of the investments he has selected within the plan.

The amount that Ken will receive at retirement is not guaranteed.

Income received from the plan is eligible for pension income splitting even if Ken retires before 65.

NO.53 Jasmine purchases a 1-year, $10,000 face value strip bond for $9,600. At maturity, when Jasmine receives
$10,000, which of the following statements is CORRECT?

Jasmine realizes a capital dividend of S400.

Jasmine realizes a taxable dividend of $400.

Jasmine realizes a taxable capital gain of $400.

Jasmine realizes interest income of $400.

NO.54 You have been researching Canadian equity mutual funds for a new client. You come across the following information.

What can you conclude from this information?

Chamberlain Equity Fund has lower volatility since its 5-year annualized return is higher.

Fontaine Equity Fund is a better fund because it has a higher quartile ranking.

Fontaine Equity Fund has a lower risk level since its Sharpe Ratio is lower.

Fontaine Equity Fund’s higher MER contributes to its lower 5-year annualized return.

NO.55 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?

Financial circumstances

Investment experience

Risk profile

Personal circumstances

NO.56 Your clients, Jessica and Ken, want to buy a house next year. You recommend a money market fund. How do you think a money market fund will help Jessica and Ken reach their goal?

Money market funds are safe investments because their net asset value per unit does not usually fluctuate.

Money market funds provide high returns without risking the capital invested.

Money market funds pay income weekly which can be automatically reinvested.

Money market funds provide investors a guaranteed fixed rate of return.

NO.57 Daisy is a Dealing Representative registered in the province of Saskatchewan only. Daisy’s client, Orville, a resident of Lloydminster, Saskatchewan is a retiree who presently has a $1,000,000 with her dealer, Easy Ride Financial. Orville is now planning to move to Vegreville, Alberta next month. Easy Ride Financial is registered in Alberta and Saskatchewan. Neither Easy Ride Financial nor Daisy have any clients who are resident in Alberta.
Which of the following should Daisy do if she wants to continue to service Orville’s account?

Daisy will need to forfeit her registration in Saskatchewan if she wants to be registered in Alberta to keep Orville as a client.

Register with a different mutual fund dealer that is registered in Alberta so she can keep Orville as a client.

Daisy could seek permission from her dealer to request a client mobility exemption with the Alberta Securities Commission.

Request approval from the Mutual Fund Dealers Association of Canada to be eligible to be a registered Dealing Representative in Alberta

NO.58 Which of the following statements about capital gains distributions from mutual fund trusts is correct?

Capital gains from mutual fund distributions are 100% taxable.

Capital gains distributions are not a disposition and are therefore not taxable.

Capital gains from mutual fund trusts are deferred until the investor exits the mutual fund.

Capital gains distributions from a mutual fund trust are reported annually on a T3.

NO.59 Gershon is a Dealing Representative and he opens a new account for his client, Isaac. Gershon collects the necessary information from Isaac in order to designate the Trusted Contact Person (TCP) for Isaac’s account.
Which of the following statements about Isaac’s TCP is CORRECT?

The TCP is an alternative to a Power of Attorney (PQA) and has the authority to make changes to Isaac’s account and direct trading.

The TCP is an alternative authority on Isaac’s account who has the power to place a temporary hold on Isaac’s account to disallow trading.

The TCP is the person who Gershon can speak to if he becomes concerned about Isaac’s mental capacity to make financial decisions.

The TCP is the person who is designated with authority to direct financial dealings for Isaac’s account and make financial decisions.

NO.60 Which of the following is typical for a normal yield curve?

short and long term rates are the same

long term rates are lower than short term rates

yields decline as term to maturity increases

short term rates are lower than long term rates

NO.61 Which statement regarding the Fund Facts document is CORRECT?

Before accepting an order from a client, a Dealing Representative is expected to provide and explain the Fund Facts document.

The Fund Facts document must be delivered to the client, electronically or in writing, within 5 days of the transaction date.

For leveraged accounts, the Fund Facts document is not required if the client has been provided with the Leverage Risk Disclosure document.

The Fund Facts document must not contain performance data.

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