[Jul-2024] Investments & Banking CIFC Exam Practice Dumps [Q40-Q60]

NO.40 What do Guaranteed Income Supplement (GIS) and Allowance for the Survivor have in common?

ability to defer benefits

benefits start at the age of 65

eligibility depends on income level

benefit amounts depend on individual contribution

NO.41 The portfolio manager of the High Income Fund has 90% of the mutual fund invested in bonds. What is a reason for holding bonds in a mutual fund portfolio?

Bonds provide regular interest income which can be flowed out directly to investors.

Bonds produce regular capital gain payments which result in preferential tax treatment for unitholders.

Coupon payments paid by bonds from large Canadian corporations are eligible for preferential tax treatment.

To increase the dividend yield and credit quality of the mutual fund

NO.42 Yesterday, Mariana purchased mutual funds for the first time from Diablo, who is a Dealing Representative for Horizon Financial. When Mariana mentions to her friend Marcus that she just started to invest, Marcus confides that he experienced losses from mutual fund investing. Her initial feelings of excitement have now changed to worry and regret. She wished she had talked to her friend before investing and wonders if she can change her mind.
Which statement regarding the right of withdrawal applies?

The right of withdrawal is based on the securities act legislation within the jurisdiction the purchase occurred.

Before Mariana can cancel her order, she must wait two business days to pass before she can cancel her order.

How the right of withdrawal can be applied is determined by the Mutual Fund Dealers Association of Canada’s conduct rules.

The Canadian Securities Administrators have instituted national instruments regarding Mariana’s right to cancel her order.

NO.43 What type of mutual fund can invest in specified derivatives and forward contracts for grains, meats, metals, energy products, and coffee?

global equity fund

commodity pool

labour-sponsored investment fund

specialty fund

NO.44 Thomas, a resident of Ontario, is a full-time university student. He does food delivery to supplement his income. During the school year, he works on weekends and works full-time during his summer break.
Thomas’ pensionable earnings were $16,000 for the year. How much must Thomas contribute to CPP when CPP contribution rate is 5.95%?

$0

$743.75

$912.00

$1,425.00

NO.45 While assessing the suitability of an investment recommendation as a Dealing Representative, which statement applies to the “Client’s Interest First” standard?

Presenting a fund’s historical investment performance to anticipate a mutual fund’s future rate of return.

Clarifying for clients the costs and fees associated with mutual funds and how they impact investment performance.

The use of a risk-based approach when determining which mutual fund to recommend to the client.

Accurately document Know Your Client information (KYC) so there is evidence to support a recommendation.

NO.46 Sonya meets with her client Elijah to review different investment approaches that could be offered to help him reach his financial goals. Part of that discussion included Sonya mentioning factors such as inflation, interest rates, and rates of return. Which stage of the Strategic Investment Planning (SIP) process does this describe?

Clarify Client Status, Problems and Opportunities

Identify Strategies and Present the Plan

Implement the Plan

Monitor and Update

NO.47 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?

Investment objective

Shirley’s risk profile.

Expected time horizon.

The tax consequences.

NO.48 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

NO.49 Ayan wants to make a registered retirement savings plan (RRSP) contribution and deduct it from his Year 1 income. What is the deadline for this contribution (assume that it is NOT a leap year)?

March 1, Year 1

March 1, Year 2

December 31, Year 1

December 31, Year 2

NO.50 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?

Canadian small capitalization equity fund

Canadian equity index fund

Canadian dividend fund

Canadian bond fund

NO.51 Megan purchases a treasury bill for $98,200. When it matures for $100,000, how does Megan treat the $1,800 difference?

as interest income

as a capital gain

as a dividend

as return of capital

NO.52 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.

NO.53 Which statement about unused registered retirement savings plan (RRSP) contribution room is CORRECT?

It may not be more than the RRSP contribution limit for the year in which it is carried forward.

It can be carried forward to future years.

It can be carried forward a maximum of seven years.

It may not be carried forward.

NO.54 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?

David got his 500 units at the same price as the lump sum price he would have paid.

David got his 500 units at a lower price than the lump sum price he would have paid.

David realizes that Dollar cost averaging is the best strategy for getting lower prices.

David got his 500 units at a higher price than the lump sum price he would have paid

NO.55 Throughout the year, the Redwood Global Equity Fund generated the following outcomes:
. $1.00 per unit of interest income from Canadian treasury bills
. $2.50 per unit of dividend income from foreign corporations
. $7.75 per unit of capital gains from the sale of Canadian corporations
. $6.50 per unit of capital gains from the sale of foreign corporations
. $2.00 per unit of capital losses from the sale of foreign corporations Given that the Redwood Global Equity Fund is structured as a mutual fund trust, which of the following statements is true?

Redwood can flow the foreign dividends to unitholders, who can then take advantage of the dividend gross-up and tax credit mechanism.

Unitholders will receive $12.25 per unit of net capital gains from Redwood, of which only 50% is subject to tax.

Redwood can distribute the $2.00 per unit of capital losses to unitholders, who can then use them to offset their capital gains.

Since Redwood pays the tax on foreign income, it does not distribute dividend or capital gains income from foreign sources to unitholders.

Explanation
This statement is true because a mutual fund trust can distribute its net income and net realized capital gains to its unitholders, and avoid paying tax at the fund level. The unitholders then report their share of the fund’s income and capital gains on their tax returns, and pay tax according to their marginal tax rates. In this case, Redwood has generated $14.25 per unit of capital gains from the sale of Canadian and foreign corporations, and $2.00 per unit of capital losses from the sale of foreign corporations. Therefore, its net capital gains are
$12.25 per unit ($14.25 – $2.00), which it can distribute to its unitholders. The unitholders will only include
50% of the net capital gains in their taxable income, as per the inclusion rate for capital gains in Canada1. The other 50% is tax-free.
The other statements are false because:
* A. Redwood cannot flow the foreign dividends to unitholders, who can then take advantage of the dividend gross-up and tax credit mechanism. This mechanism only applies to dividends received from Canadian corporations that are eligible for the enhanced dividend tax credit or the ordinary dividend tax credit2. Foreign dividends are treated as foreign income, and are subject to withholding tax by the source country and income tax by Canada3.
* C. Redwood cannot distribute the $2.00 per unit of capital losses to unitholders, who can then use them to offset their capital gains. A mutual fund trust can only distribute its net income and net realized capital gains, not its capital losses4. However, a mutual fund trust can carry forward its capital losses indefinitely and use them to reduce its taxable capital gains in future years5.
* D. Redwood does not pay the tax on foreign income, and it does distribute dividend or capital gains income from foreign sources to unitholders. A mutual fund trust pays tax on its foreign income only if it does not distribute it to its unitholders in the same year it is earned. However, most mutual fund trusts distribute all or most of their foreign income to their unitholders, as they want to avoid paying tax at the fund level and maintain their status as a mutual fund trust.
References:
* Canadian Investment Funds Course (CIFC) Study Guide, Chapter 7: Taxation, Section 7.3: Taxation of Mutual Funds, page 7-10
* Canadian Investment Funds Course (CIFC) Study Guide, Chapter 7: Taxation, Section 7.2: Taxation of Investment Income, page 7-4
* Foreign Income – Canada.ca
* Mutual Fund Trusts – Canada.ca
* Capital Losses and Deductions – Canada.ca
* Taxation of Foreign Income – IFSE Institute
* Mutual Fund Trusts – IFSE Institute

NO.56 Natasha currently owns 2 mutual funds: a bond fund and a Canadian equity fund. She would like to use one of them as her registered retirement savings plan (RRSP) contribution for the year. From a tax efficiency perspective, which mutual fund should she contribute?

the equity fund

the bond fund

either since it makes no difference

it depends on her marginal tax rate

NO.57 Taylor is chatting with other parents in the park when the conversation turns to registered education savings plans (RESPs).
Taylor thinks that most of what they are saying is incorrect.
Which of the following statements about self-directed RESPs is TRUE?

The government contributes an additional grant for low income families who qualify.

Only one beneficiary may be named per RESP.

Educational Assistance Payments (EAPs) may only be used for tuition for a post-secondary program.

Educational Assistance Payments (EAPs) withdrawn from the plan are not taxable.

NO.58 Nelson is a Dealing Representative with True Wealth Advisors Inc., a mutual fund dealer. Nelson follows proper procedures related to his firm’s Relationship Disclosure Information (RDI). Which of the following CORRECTLY describes how Nelson is permitted to evidence that he satisfied his RDI obligation?

Nelson may retain a copy of the RDI in the client file with detailed notes to confirm that he provided and explained the RDI to the client.

Nelson may deliver the RDI to clients who request it and keep detailed notes of the clients who were provided with the RDI.

Nelson can formalize his relationship under the RDI using a Letter of Engagement that specifies duties, responsibilities, and level of service.

Nelson can record detailed notes which confirm that he provided and explained the Fund Facts to the client within 2 days of the RDI.

NO.59 Dakota is a Dealing Representative with Harvest Wealth Inc., a mutual fund dealer. Dakota starts a marketing campaign to contact prospective new clients and increase sales with existing clients. Which of the following CORRECTLY describes activities that Dakota can engage in under her marketing campaign?

Dakota can make telemarketing calls to clients who are listed on the National Do Not Call List

Dakota can send promotional emails to clients who have opted into Harvest Wealth’s Do Not Call List

Dakota can send promotional emails to clients who have opted in to receive commercial electronic messages (CEMs).

Dakota can make telemarketing calls to clients who have opted in to receive commercial electronic messages (CEMs).

Explanation
Dakota can send promotional emails to clients who have opted in to receive commercial electronic messages (CEMs). A CEM is any electronic message that encourages participation in a commercial activity, such as an email, a text message, or a social media message. Under Canada’s anti-spam legislation (CASL), Dakota must obtain consent from the recipients before sending CEMs, either explicitly (e.g., by asking them to sign up for a newsletter) or implicitly (e.g., by having an existing business relationship with them). Dakota must also identify himself and his dealer, provide contact information, and include an unsubscribe mechanism in every CEM. The other statements are incorrect. Dakota cannot make telemarketing calls to clients who are listed on the National Do Not Call List (DNCL). The DNCL is a list of telephone numbers of consumers who do not want to receive unsolicited telemarketing calls. Under the Telecommunications Act, Dakota must register with the National DNCL operator, subscribe to the National DNCL, and avoid calling any number on the list, unless he has express consent from the consumer or an exemption applies. Dakota cannot send promotional emails to clients who have opted into Harvest Wealth’s Do Not Call List. A Do Not Call List is a list of telephone numbers of consumers who do not want to receive telemarketing calls from a specific organization.
Under the Telecommunications Act, Dakota must maintain an internal Do Not Call List for his dealer and respect the requests of consumers who ask not to be called by his dealer. However, this does not mean that he can send promotional emails to those consumers, as that would violate CASL. Dakota cannot make telemarketing calls to clients who have opted in to receive commercial electronic messages (CEMs). Opting in to receive CEMs does not imply consent to receive telemarketing calls, as they are different forms of communication governed by different laws . Dakota must obtain separate consent from the clients before making telemarketing calls to them, either explicitly or implicitly. References: [Canada’s anti-spam legislation], [National Do Not Call List]

NO.60 Your client Gerard is 30 years old and plans to retire at age 65. He has a mutual fund portfolio of $40,000 in which he invests $1,500 monthly. Gerard’s objective is to use these funds to meet the 20% down payment requirement to buy a house for $650,000.
What is Gerard’s investment time horizon not considering market fluctuations?

5 years

15 years

25 years

35 years

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[Jul-2024] Investments & Banking CIFC Exam Practice Dumps [Q40-Q60]

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