Investment Risk Rating Quiz

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Which type of investments are typically included under the medium risk rating?

Investments in Canadian small cap equities

Investments in specific market sectors

Investments in U.S. equity only

Investments in blue chip and mid cap equities (correct)

What type of investors are categorized under the high risk rating?

Growth-oriented investors willing to accept significant short-term fluctuations (correct)

Conservative investors looking for stable returns

Investors seeking long-term growth

Investors seeking moderate growth over a longer period of time

What is a characteristic of investments under the medium-high risk rating?

Investments in fixed income securities

Balanced investment funds

Low to medium volatility

Investments in smaller companies like Canadian small cap equities (correct)

What type of risk are investors under the low-medium risk rating generally willing to accept?

Low to medium volatility with some fluctuations Signup and view all the answers

Which type of investments are typically included under the high risk rating?

Investments in smaller companies and specific market sectors Signup and view all the answers

What is the primary objective of Growth Investors?

Achieving capital appreciation Signup and view all the answers

Which type of investor is willing to take on a high level of risk for maximum returns?

Speculation Investor Signup and view all the answers

What type of investments are commonly associated with Speculation Investors?

Emerging markets investments Signup and view all the answers

What instruments are commonly used by hedge funds as part of their trading strategies?

Laboursponsored venture capital funds Signup and view all the answers

Why is it important for dealers to identify the relative importance of each investment objective within a client's account?

To better tailor investment strategies to client goals Signup and view all the answers

What are some examples of investments under the high risk rating mentioned in the text?

Emerging markets and science & technology Signup and view all the answers

Which of the following strategies are mentioned as part of speculative trading strategies in the text?

Day trading Signup and view all the answers

What is the main concern highlighted in the text about the relationship between risk and return?

Clients expect high returns without considering the associated risks Signup and view all the answers

What is the recommended approach when a client's desire for returns does not align with their risk profile, as per the text?

Follow prescribed steps to protect the client from assuming too much risk Signup and view all the answers

In what way can higher expected returns be associated with higher risk according to the text?

Higher expected returns inherently come with higher risk Signup and view all the answers

What is the primary obligation of a Dealing Representative towards a client wishing to invest in high-risk speculative investments?

Discourage the client from selecting investments that may negatively impact their financial situation. Signup and view all the answers

What critical factor should a Dealing Representative consider when assessing a client's financial circumstances?

The client's liquidity needs. Signup and view all the answers

Why is it important for a Dealing Representative to collect and compute additional financial information about a client when considering leverage?

To assess the client's ability to meet debt obligations. Signup and view all the answers

In the context of leverage, what does TDSR stand for?

Total Debt Service Ratio Signup and view all the answers

Why should a Dealing Representative assess a client's ability to meet debt obligations before considering leveraged investing?

To prevent financial difficulties for the client. Signup and view all the answers

What is one of the tools commonly used to assess a client's risk profile?

Questionnaires Signup and view all the answers

In terms of risk profile, what does the 'low' rating imply about an investor?

They are willing to accept lower returns. Signup and view all the answers

How many levels of risk profiles do some mutual fund dealers typically have?

5: Low, Low-Medium, Medium, Medium-High, and High Signup and view all the answers

What type of investments are typically associated with a 'low' risk profile?

Cash and equivalents, GICs, money market investments Signup and view all the answers

Why is it important for dealers to establish definitions related to risk profiles?

To have clarity in assessing investors' risk tolerance Signup and view all the answers

For clients with low income, why is it generally not suitable to expose them to potential losses from higher risk securities?

To preserve their principal Signup and view all the answers

Why might clients with significant life events, like losing a job or buying a house, need to depend on their investments?

To maintain liquidity Signup and view all the answers

What is a critical factor in assessing a client's financial condition according to the text?

Net worth Signup and view all the answers

Why would a leveraging strategy be generally unsuitable for a client with low income?

To preserve principal Signup and view all the answers

How can knowing a client's net worth help determine investment choices?

By assessing risk profiles Signup and view all the answers

What is the main criteria for assessing whether an investment or investment strategy is suitable for a client?

Client's investment needs and objectives Signup and view all the answers

Investors seeking safety aim to:

Preserve their principal investment Signup and view all the answers

Which type of investments are suitable for investors seeking income?

Fixed income and money market investments Signup and view all the answers