Accredited Investor Exemption and Investment Concentration Quiz

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What feature of ETFs makes them attractive to investors?

Perfect tracking to the indexes they follow

Fixed coupon rates

High management expense ratios (MERs)

Low trading commissions (correct)

How are ETF trades executed?

By setting the bid and ask prices (correct)

Through an auction process

Through a direct negotiation with the fund manager

Via fixed pricing determined by the issuer

What differentiates Principal Protected Notes (PPNs) from traditional fixed-income securities?

They offer performance linked to an underlying asset (correct)

Issuer obligation to repay the principal at maturity

Fixed coupon rates

They are not issued by financial institutions

Why may the return of ETFs not be perfectly identical to the indexes they track?

Securities differences from the index at certain times Signup and view all the answers

In what way do Principal Protected Notes (PPNs) vary from regular debt instruments?

They are linked to an underlying asset's performance Signup and view all the answers

What is the term used to describe the discrepancy between an index fund's return and that of the specific market index?

Tracking difference Signup and view all the answers

In which mutual fund category would an index fund tracking the DEX Universe Federal Bond Index be classified?

Fixed income fund Signup and view all the answers

What determines the risk classification of an index fund?

The underlying securities of the fund Signup and view all the answers

Why does an index fund's return tend to lag behind that of the specific market index it tracks?

Costs associated with managing the index fund Signup and view all the answers

What is a key reason why an index fund may not perfectly match the return of the market index it tracks?

Costs related to managing the fund Signup and view all the answers

What is required for individual investors to qualify for the accredited investor exemption?

Meeting specific financial thresholds Signup and view all the answers

Why might a dealer restrict an investor's concentration of investment to 5% of their overall holdings?

To encourage diversification Signup and view all the answers

How do Exchange-Traded Funds (ETFs) differ from mutual funds?

ETFs are traded on a stock exchange and can be bought and sold throughout the day Signup and view all the answers

Why are ETFs considered passive investments?

Because ETFs traditionally copy the performance of a specific index Signup and view all the answers

What allows ETFs to be bought and sold throughout the day?

Being traded on a stock exchange Signup and view all the answers

What is the primary investment focus of equity funds?

Long-term capital growth through common shares of corporations Signup and view all the answers

How are index funds and fund of funds classified in the mutual fund categories?

According to their underlying investments Signup and view all the answers

What does market capitalization refer to?

The total market value of a corporation's outstanding shares Signup and view all the answers

Which type of companies are typically included in the small market capitalization (small cap) group?

Start-up companies with high growth potential Signup and view all the answers

In which securities do equity funds primarily invest?

Common shares of corporations Signup and view all the answers

What is a distinguishing characteristic of products exempt from the prospectus requirement?

They lack the same level of transparency as mutual funds Signup and view all the answers

What risk factor is associated with investment products exempt from the prospectus requirement?

Reduced regulatory scrutiny Signup and view all the answers

Under what circumstances may clients need to qualify for an exemption to invest in certain products?

When investing in exempt products Signup and view all the answers

What additional requirements or restrictions may be imposed on certain investment products?

Added qualification criteria Signup and view all the answers

Why might it be challenging for investors to access reliable information about exempt products?

Reduced transparency levels Signup and view all the answers

What is the main difference between Global equity funds and Sector funds?

Global equity funds typically invest in domestic corporations, while Sector funds concentrate on a particular industry or sector. Signup and view all the answers

How do Sector funds differ from other types of mutual funds?

Sector funds have a narrow investment focus compared to other mutual funds. Signup and view all the answers

Why are Sector funds considered suitable for investors with a high risk profile?

Sector funds' fortunes are tied to the prospects of specific industries or sectors. Signup and view all the answers

What type of income can investors expect from Sector funds?

Capital gains, dividends, and other income Signup and view all the answers

Why should investors in Sector funds have a long time horizon?

To weather the volatile nature of sector funds Signup and view all the answers

What is the main objective of income trusts?

Distributing cash flow to investors Signup and view all the answers

Which of the following statements about income trusts is FALSE?

Income trusts are not traded on the stock exchange. Signup and view all the answers

What was the reason for the popularity of income trusts before 2006?

Favorable tax treatment Signup and view all the answers

What is a segregated fund's equivalent in the life insurance industry?

Variable annuities Signup and view all the answers

Which term is used for a segregated fund as per the text?

Individual Variable Insurance Contract (IVIC) Signup and view all the answers

What is a key distinction between segregated funds and mutual funds?

Investors own the units of the underlying fund in segregated funds. Signup and view all the answers

Why do life insurers hedge their investment risk in segregated funds?

To reduce investment risk Signup and view all the answers

What is required for income trusts since the changes made in 2006 by the Federal government?

To pay corporate tax before any distributions are made Signup and view all the answers

What type of agents can sell segregated funds?

Licensed life agents Signup and view all the answers