Portfolio Managers in Mutual Funds
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Questions and Answers

What is the minimum purchase requirement for premium funds when making single lump-sum purchases according to the text?

  • $10,000
  • $5,000
  • $500 (correct)
  • $1,000

    • In regular investment plans, what is the minimum amount that additional contributions can often be made for?

  • $50
  • $25 (correct)
  • $100
  • $10

    • What is the frequency at which an investor can usually make contributions under a voluntary accumulation plan?

  • Quarterly
  • Weekly (correct)
  • Bi-weekly
  • Daily

    • What type of plans try to make contributing as easy as possible through preauthorized payments from bank accounts?

    <p>Voluntary Accumulation Plans</p> Signup and view all the answers

    What are acquisition charges deducted at the time of under voluntary accumulation plans commonly known as?

    <p>Pre-authorized Chequing (PAC) Plans</p> Signup and view all the answers

    What is the main difference between single lump-sum purchases and regular investment plans in terms of payment frequency?

    <p>Regular Investment Plans have more frequent payment options.</p> Signup and view all the answers

    When Julie calls the Dealing Representative, what time is it?

    <p>1:00pm Eastern Time</p> Signup and view all the answers

    How many units of the Delta Equity Mutual Fund can Julie purchase with $2,400?

    <p>200 units</p> Signup and view all the answers

    When must Julie have the funds available to pay for the units?

    <p>12:00 AM Thursday</p> Signup and view all the answers

    Why must funds be available before the transaction is processed?

    <p>To allow for cash flow planning</p> Signup and view all the answers

    Where are mutual funds available for purchase?

    <p>Through banks, investment dealers, fund companies, and other sources</p> Signup and view all the answers

    What should the fund prospectus and Fund Facts describe regarding purchasing mutual fund units?

    <p>How units can be purchased and how the fund is valued</p> Signup and view all the answers

    When is the purchase price for mutual funds determined?

    <p>After the purchase order is received</p> Signup and view all the answers

    What is the primary responsibility of a portfolio manager?

    <p>Generating the best rate of return for investors</p> Signup and view all the answers

    What role does the custodian play in relation to a mutual fund?

    <p>Keeping cash and securities safe</p> Signup and view all the answers

    How are portfolio managers guided in their decision-making process?

    <p>By the fund's investment objectives stated in the prospectus</p> Signup and view all the answers

    Why must custodial functions of a mutual fund be kept separate from those of the investment fund management company?

    <p>To protect investors' interests</p> Signup and view all the answers

    What is a key difference between a portfolio manager and a custodian in managing a mutual fund?

    <p>Portfolio managers make investment decisions, while custodians handle safekeeping of assets</p> Signup and view all the answers

    In what document is the name of the portfolio manager for a mutual fund disclosed?

    <p>Prospectus</p> Signup and view all the answers

    Which entity holds the income earned by a mutual fund until it is reinvested or distributed to investors?

    <p>Custodian</p> Signup and view all the answers

    What is the ultimate goal of all portfolio managers regarding a mutual fund's performance?

    <p>Generating the best rate of return for investors</p> Signup and view all the answers

    What percentage of the management expense ratio is typically represented by trailer fees for load paying equity funds?

    <p>40%</p> Signup and view all the answers

    Who are trailer fees designed to incentivize?

    <p>Dealing Representatives and mutual fund dealers</p> Signup and view all the answers

    What is the purpose of trailer fees in relation to mutual fund clients?

    <p>To encourage long-term client service by dealers and representatives</p> Signup and view all the answers

    Where do trailer fees come from within a mutual fund company?

    <p>From the management fees paid by investors</p> Signup and view all the answers

    How long can a dealer receive a trailer fee?

    <p>For as long as the investor holds units of the fund</p> Signup and view all the answers

    What is the basis for determining the size of a trailer fee?

    <p>The assets under administration by the dealer</p> Signup and view all the answers

    What is the main function of trailer fees for dealers and representatives?

    <p>To encourage them to provide ongoing service to clients</p> Signup and view all the answers

    What was the annual return in the first year for Raj's investment portfolio?

    <p>7.20%</p> Signup and view all the answers

    What was the year-end balance in the fourth year for Kiran's investment portfolio?

    <p>$9,865</p> Signup and view all the answers

    Which investor was unable to withdraw $20,000 during the last year of their 5-year investment horizon?

    <p>Kiran</p> Signup and view all the answers

    What did the switch from Series T8 to Series T6 involve for an investor?

    <p>Reducing the annual payout rate from 8% to 6%</p> Signup and view all the answers

    What was the percentage change in the portfolio value from Year 2 to Year 3 for Raj?

    <p>+17.61%</p> Signup and view all the answers

    How did Raj's and Kiran's investment portfolios differ in terms of their ending balances after 5 years?

    <p>$11,114 for Raj and $0 for Kiran</p> Signup and view all the answers

    What did the negative returns in Kiran's first year of retirement result in?

    <p>Requiring an adjustment to the withdrawal amount in the final year</p> Signup and view all the answers

    Why was Raj able to withdraw $20,000 per year despite experiencing negative returns later on?

    <p>His negative returns occurred later in the investment horizon</p> Signup and view all the answers

    What type of pension plan is characterized by retirement benefits determined by a fixed formula usually based on salary and years of service?

    <p>Defined benefit pension plan</p> Signup and view all the answers

    Which party is responsible for funding the registered pension plan?

    <p>Employer</p> Signup and view all the answers

    What is a key advantage of registered pension plans in terms of tax treatment for investment earnings?

    <p>Investment earnings grow tax-free</p> Signup and view all the answers

    Which entity administers the Income Tax Act's registration requirements for registered pension plans in Canada?

    <p>Canada Revenue Agency</p> Signup and view all the answers

    What feature of registered pension plans ensures that employees cannot lose their pension benefits if they declare bankruptcy?

    <p>'Creditor-proof' benefits</p> Signup and view all the answers

    Which type of employer-sponsored plan is known for having retirement benefits that vary based on investment performance?

    <p>Defined contribution pension plan</p> Signup and view all the answers

    What role might unions play in the sponsorship of pension plans according to the text?

    <p>Administrative oversight</p> Signup and view all the answers

    How are retirement benefits from registered pension plans taxed when employees start to withdraw money?

    <p>'Taxable'</p> Signup and view all the answers

    What is a key focus in Lesson 3 of the Retirement unit?

    <p>Withdrawing from RRSPs</p> Signup and view all the answers

    Why is it important for a Dealing Representative to understand government and employer plans?

    <p>To create a sound investment strategy for clients</p> Signup and view all the answers

    What type of accounts are covered in Lesson 4 of the Retirement unit?

    <p>Locked-In Accounts</p> Signup and view all the answers

    In Lesson 2 of the Retirement unit, what is the main topic of discussion?

    <p>Registered Retirement Savings Plans (RRSPs)</p> Signup and view all the answers

    What aspect of retirement planning is most emphasized in the Retirement unit?

    <p>Private retirement savings plans</p> Signup and view all the answers

    What is a critical concept a Dealing Representative should grasp regarding retirement savings planning?

    <p>Being familiar with RRSP rules and contribution limits</p> Signup and view all the answers

    What is the primary goal of Lesson 1 in the Retirement unit?

    <p>Introducing government and employer plans</p> Signup and view all the answers

    What fundamental knowledge does Lesson 3 aim to impart in the Retirement unit?

    <p>Withdrawing funds from locked-in accounts</p> Signup and view all the answers

    If Miguel switches to investing in a Registered Retirement Savings Plan (RRSP) like Priscilla, what will be the impact on his tax obligations?

    <p>His tax obligations will increase due to additional tax implications of RRSP contributions.</p> Signup and view all the answers

    What aspect of Priscilla's investment strategy allows her to accumulate a greater amount over time compared to Miguel?

    <p>Compound growth resulting from reinvesting returns.</p> Signup and view all the answers

    How does Priscilla's investment strategy differ from Miguel's in terms of taxation during the investment period?

    <p>Priscilla defers taxes until withdrawal, while Miguel pays taxes annually.</p> Signup and view all the answers

    What effect does the compounding of investment growth have on Priscilla's overall returns?

    <p>Increases the total amount she can accumulate over time.</p> Signup and view all the answers

    Which factor contributes significantly to the difference in the final savings amount between Priscilla and Miguel?

    <p>The compounding effect of reinvesting returns in Priscilla's account.</p> Signup and view all the answers

    What is the primary advantage of Priscilla's Registered Retirement Savings Plan (RRSP) account compared to Miguel's non-registered account?

    <p>Tax-deferred growth without annual tax payments.</p> Signup and view all the answers

    If Miguel decides to switch to a Tax-Free Savings Account (TFSA) instead of an RRSP, what would likely happen to his long-term savings compared to investing in a non-registered account?

    <p>His long-term savings would increase due to the tax benefits of a TFSA.</p> Signup and view all the answers

    What significant advantage does Priscilla gain by contributing to an RRSP instead of a non-registered account?

    <p>$10,000 compounded annually due to tax-deferred growth.</p> Signup and view all the answers

    What is Sue's minimum RRIF withdrawal for the year if her RRIF assets had a market value of $200,000 and she was 85 years old?

    <p>$17,020</p> Signup and view all the answers

    If an individual is 80 years old and has a $250,000 RRIF, what would be the minimum RRIF withdrawal amount?

    <p>$16,550</p> Signup and view all the answers

    At what age do the Non-Qualified RRIF Factor and Qualified RRIF Factor values become equal?

    <p>85</p> Signup and view all the answers

    In which type of annuity or RRIF do you have control over your investment options?

    <p>RRIF</p> Signup and view all the answers

    If a 73-year-old has a $180,000 RRIF, what is the minimum withdrawal amount?

    <p>$9,945</p> Signup and view all the answers

    At what age does the Non-Qualified RRIF Factor reach its peak value?

    <p>95</p> Signup and view all the answers

    What is the primary purpose of LRSPs and LIRAs compared to RRSPs?

    <p>Accepting transfers from RPP assets only</p> Signup and view all the answers

    What does vesting refer to in relation to a registered pension plan?

    <p>Employee's right to keep employer contributions and earnings</p> Signup and view all the answers

    What can an employee under the age of 55 do with pension benefits if they switch employers?

    <p>Move funds to a locked-in RRSP or LIRA</p> Signup and view all the answers

    What does the term 'vesting' specifically refer to in the context of pension plans?

    <p>Employee's right to keep employer contributions and growth</p> Signup and view all the answers

    What are the main limitations of LRSPs and LIRAs compared to RRSPs?

    <p>Restrictions on withdrawals before retirement age</p> Signup and view all the answers

    What is the significance of an employee's length of service regarding employer deposits?

    <p>Affecting the ability to transfer employer deposits</p> Signup and view all the answers

    What is a key feature that distinguishes LRSPs and LIRAs from RRSPs?

    <p>Sources of deposits limited to RPP assets transfers</p> Signup and view all the answers

    Why do LRSPs and LIRAs not allow regular contributions like RRSPs?

    <p>'Locked-in' nature due to source being RPP asset transfers</p> Signup and view all the answers

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