RESP Contribution Limit Quiz
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Questions and Answers

What is the maximum A-CESG payment that George and Maria can receive for their daughter's RESP account if they contribute $1000 annually?

  • $150
  • $200
  • $50
  • $100 (correct)

    • If a family's adjusted net income is $50,000, what is the CESG rate that would be applicable to their RESP contributions?

  • 5%
  • 25%
  • 15% (correct)
  • 20%

    • What is the maximum annual CESG contribution limit per beneficiary as per the text?

  • $2,000
  • $500 (correct)
  • $1,000
  • $7,200

    • If a child is born in 2002, would they be eligible to receive Canada Learning Bond (CLB) payments?

    <p>No</p> Signup and view all the answers

    Would the CESG lifetime maximum change if A-CESG payments are made as per the text?

    <p>No</p> Signup and view all the answers

    What happens to the CLB (Canada Learning Bond) if a beneficiary does not attend a qualified post-secondary education program?

    <p>It must be returned to the federal government.</p> Signup and view all the answers

    If the parents decide to close Pavan's RESP, what must be done with the CESG (Canada Education Savings Grant) money?

    <p>Refund it to the contributor.</p> Signup and view all the answers

    For how long can RESPs remain open according to the text?

    <p>36 years</p> Signup and view all the answers

    What happens to any investment earnings from an RESP according to the text?

    <p>They become taxable income for the subscriber.</p> Signup and view all the answers

    If Kiran has no other income and receives Educational Assistance Payments (EAPs) from her RESP, what can be said about her tax obligation?

    <p>She may pay very little, if any, tax.</p> Signup and view all the answers

    What is the total amount the couple is eligible to receive when opening an RESP account for their daughter Alyssa?

    <p>$1,025</p> Signup and view all the answers

    How is the CESG contribution calculated for Alyssa?

    <p>$1000 x 20%</p> Signup and view all the answers

    In what circumstances can withdrawals be made from an RESP account?

    <p>Once the beneficiary is accepted into a post-secondary educational institution</p> Signup and view all the answers

    What must be done to receive the additional $25 from the CLB program when opening an RESP account?

    <p>Set up a direct deposit account</p> Signup and view all the answers

    What happens to the CESG contributions not used in one year?

    <p>They can be carried forward and used in future years</p> Signup and view all the answers

    What is the maximum lifetime contribution per beneficiary that can be made to an RESP?

    <p>$50,000</p> Signup and view all the answers

    In an RESP, are the contributions tax deductible for the contributors?

    <p>No, they are not tax deductible</p> Signup and view all the answers

    What is the matching percentage provided by the Canada Education Savings Grant (CESG) on the first $2,500 annual contribution?

    <p>20%</p> Signup and view all the answers

    Until when is the Canada Education Savings Grant (CESG) available for a child?

    <p>Until the end of the calendar year in which the child turns 17</p> Signup and view all the answers

    Is there an annual limit to the amount that can be contributed to an RESP?

    <p>No, there is no annual limit</p> Signup and view all the answers

    Bethany purchased 2,500 units of Gamma International Equity Fund at a NAVPU of $32.67. If she decides to sell all her units when the NAVPU is $44.46, what is the market value of her investment?

    <p>$111,150</p> Signup and view all the answers

    What is the deferred sales charge percentage if units are redeemed in year 3 of the fund?

    <p>3%</p> Signup and view all the answers

    Based on the redemption fee schedule, what would be the deferred sales charge if Bethany redeemed her 2,500 units in year 2?

    <p>$6,267.00</p> Signup and view all the answers

    When will Bethany's redemption charges fall to zero according to the redemption fee schedule?

    <p>Year 5</p> Signup and view all the answers

    If Bethany holds onto her units until Year 5 before redeeming them, how much would she pay as a deferred sales charge?

    <p>$0</p> Signup and view all the answers

    If a qualified beneficiary contributes $2,000 to their RESP in a year, how much CESG payment would they receive based on the text?

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

    What is the maximum age limit up to which the federal government will pay CESG for a beneficiary according to the text?

    <p>17</p> Signup and view all the answers

    If a family with an adjusted net income above a certain threshold contributes $3,000 into an RESP, would they be eligible for Additional Canada Education Savings Grant (A-CESG) payments based on the text?

    <p>No, they would not be eligible</p> Signup and view all the answers

    If a beneficiary can only manage to receive half of their eligible CESG in a year, what happens to the remaining grant room according to the text?

    <p>It will carry forward to future years</p> Signup and view all the answers

    What is the lifetime limit for accumulating CESG per qualified beneficiary as mentioned in the text?

    <p>$7,200</p> Signup and view all the answers

    What components make up the contribution room for a TFSA in any given year?

    <p>Maximum contribution for the current year, unused contribution room from the previous year, withdrawals made from the TFSA in the previous year</p> Signup and view all the answers

    In the given scenario, how much did Marco withdraw from his TFSA in August 2012?

    <p>$6,000</p> Signup and view all the answers

    What was Marco's investment income in August 2012?

    <p>$1,000</p> Signup and view all the answers

    In 2013, what is Marco's total contribution room for his TFSA?

    <p>$16,500</p> Signup and view all the answers

    Which action does not affect an individual's contribution room for a TFSA?

    <p>Earning investment income within the TFSA</p> Signup and view all the answers

    What did Marco do when he turned 18 in 2011?

    <p>Contributed the maximum allowed amount to his TFSA</p> Signup and view all the answers

    What is the consequence of contributing more than the annual limit to a TFSA?

    <p>Being subject to a penalty tax on the excess amount</p> Signup and view all the answers

    What is the purpose of the cash portion in mutual funds?

    <p>To fulfill client redemption requests</p> Signup and view all the answers

    In which type of fund might you find real property investments?

    <p>Specialty Funds</p> Signup and view all the answers

    Which type of fund focuses on market capitalization when selecting investments?

    <p>Equity Funds</p> Signup and view all the answers

    What is the main purpose of tactical asset allocation funds?

    <p>To adjust investments in response to market conditions</p> Signup and view all the answers

    Which type of fund would be most likely to invest significantly in short-term, low-risk securities?

    <p>Fixed Income Funds</p> Signup and view all the answers

    What is the primary investment objective of money market funds?

    <p>Safety of principal and income</p> Signup and view all the answers

    What is the main difference between money market funds and balanced funds?

    <p>Combination of income and growth</p> Signup and view all the answers

    What is the typical term to maturity for securities in a money market fund?

    <p>1 year or less</p> Signup and view all the answers

    Which type of fund focuses primarily on safety of capital and steady income?

    <p>Money market funds</p> Signup and view all the answers

    What distinguishes balanced funds from fixed income funds?

    <p>Combination of income and growth objectives</p> Signup and view all the answers

    What is the primary difference between money market funds and traditional bank accounts?

    <p>Money market funds are managed to keep the fund price constant</p> Signup and view all the answers

    Why are money market funds considered better suited for short-term goals?

    <p>They provide principal protection and income</p> Signup and view all the answers

    In what direction do investment returns in money market funds usually move in relation to general interest rates?

    <p>They move in the same direction as general interest rates</p> Signup and view all the answers

    What is a key characteristic of U.S. money market funds compared to Canadian money market funds?

    <p>Denominated in a different currency</p> Signup and view all the answers

    Why are money market funds considered suitable for investors who want principal protection?

    <p>They offer principal protection and some income</p> Signup and view all the answers

    What is the main reason why mortgage funds typically pay higher income than money market funds?

    <p>Mortgage rates are generally higher than interest rates on money market securities.</p> Signup and view all the answers

    How does the price of a mortgage fund react to an increase in interest rates?

    <p>The price decreases.</p> Signup and view all the answers

    In a mortgage fund, what happens to the principal repayment received on mortgages?

    <p>It is used to purchase new mortgages.</p> Signup and view all the answers

    What role does the Canada Mortgage and Housing Corporation (CMHC) play in relation to NHA mortgages?

    <p>Guaranteeing NHA mortgages.</p> Signup and view all the answers

    Why are mortgage securities pooled together in mortgage funds?

    <p>To facilitate packaging as securities for the secondary market.</p> Signup and view all the answers

    Which type of mutual fund may have a market price that does not reflect its net asset value per unit (NAVPU)?

    <p>Closed-end mutual fund</p> Signup and view all the answers

    In contrast to closed-end funds, open-end mutual funds are characterized by:

    <p>Continuous offering and buying/selling through the investment fund manager.</p> Signup and view all the answers

    Which type of mutual fund is always bought and sold at a market price reflecting its NAVPU?

    <p>Open-end mutual fund</p> Signup and view all the answers

    For the purpose of the course discussions, the focus is on:

    <p>Fixed income funds</p> Signup and view all the answers

    Which type of fund is considered a liquid investment that can be quickly converted to cash?

    <p>Money market fund</p> Signup and view all the answers

    What distinguishes closed-end mutual funds from open-end mutual funds?

    <p>Closed-end mutual funds are only offered through IPOs.</p> Signup and view all the answers

    Which statement accurately describes the structure of closed-end mutual funds?

    <p>Closed-end mutual funds trade on secondary markets after the IPO.</p> Signup and view all the answers

    What is a characteristic of open-end mutual funds?

    <p>Open-end fund units are traded on major stock exchanges like the TSX.</p> Signup and view all the answers

    When comparing closed-end and open-end mutual funds, which is true about how they operate in secondary markets?

    <p>Closed-end mutual funds adjust the number of units based on investor demand.</p> Signup and view all the answers

    What role does a secondary market play in the trading of closed-end mutual fund units?

    <p>Secondary markets facilitate investor trading of closed-end fund shares after the IPO.</p> Signup and view all the answers

    Which type of fund typically holds commercial, industrial, and residential mortgages?

    <p>Specialty funds</p> Signup and view all the answers

    Why do mortgage funds generally have lower price volatility than bond funds?

    <p>Due to lower average term to maturity</p> Signup and view all the answers

    What is the primary objective of bond funds?

    <p>To provide steady income</p> Signup and view all the answers

    How are bond funds typically classified?

    <p>By the creditworthiness of the bond's issuer</p> Signup and view all the answers

    Why do investment grade bonds generally pay lower interest rates?

    <p>To compensate for lower risk</p> Signup and view all the answers

    What makes mortgage funds different from bond funds in terms of risk?

    <p>Mortgage funds have lower average term to maturity</p> Signup and view all the answers

    Which type of fund primarily aims to produce income from interest and capital gains?

    <p>Fixed income funds</p> Signup and view all the answers

    What is the main advantage of bond funds over specialty funds?

    <p>More diversification in holdings</p> Signup and view all the answers

    Why do investment grade bonds involve lower risk compared to higher-risk bonds?

    <p>To compensate for lower risk by paying lower interest rates</p> Signup and view all the answers

    In which type of fund can you expect both interest income and capital gains as part of the investment objective?

    <p>Balanced funds</p> Signup and view all the answers

    What happens to the number of units issued after an initial public offering (IPO) for closed-end mutual funds?

    <p>The number of units remains fixed until more units are authorized and issued.</p> Signup and view all the answers

    How can investors trade units of closed-end mutual funds after the initial public offering (IPO)?

    <p>Through buying and selling on secondary markets like the Toronto Stock Exchange (TSX).</p> Signup and view all the answers

    Which factor primarily determines the market price of closed-end mutual fund units?

    <p>The demand from investors in the secondary market.</p> Signup and view all the answers

    How do open-end mutual funds primarily differ from closed-end mutual funds in terms of unit supply?

    <p>Open-end funds continually issue new units based on investor demand.</p> Signup and view all the answers

    What is a key feature of open-end mutual funds that differentiates them from closed-end mutual funds when it comes to buying and selling units?

    <p>Investors can buy and sell units at net asset value directly through the mutual fund company.</p> Signup and view all the answers

    What is a characteristic of open-end mutual funds?

    <p>Have a constant fund price</p> Signup and view all the answers

    What distinguishes closed-end mutual funds from open-end mutual funds?

    <p>Issue a fixed number of shares</p> Signup and view all the answers

    How is the market price of closed-end mutual funds determined?

    <p>By supply and demand in the secondary market</p> Signup and view all the answers

    In what way do closed-end mutual funds operate differently in the secondary market compared to open-end mutual funds?

    <p>They have a fixed number of shares that can be traded</p> Signup and view all the answers

    What is the key factor that influences the net asset value per unit (NAVPU) of open-end mutual funds?

    <p>Continuous issuance and redemption of units</p> Signup and view all the answers

    What is the main factor that determines the price of closed-end mutual funds?

    <p>Market conditions of supply and demand</p> Signup and view all the answers

    Why might the market price of a closed-end mutual fund differ from its net asset value per unit (NAVPU)?

    <p>Demand for the fund's units</p> Signup and view all the answers

    What distinguishes the market price behavior of open-end mutual funds from that of closed-end mutual funds?

    <p>Issuance of more units based on investor demand</p> Signup and view all the answers

    In what way do open-end mutual funds differ in their trading compared to closed-end mutual funds?

    <p>Investment fund manager involvement</p> Signup and view all the answers

    What role does the secondary market play in the trading of closed-end mutual fund units?

    <p>Facilitating unit trading between investors</p> Signup and view all the answers

    What distinguishes closed-end mutual funds from open-end mutual funds in terms of trading?

    <p>Closed-end mutual funds are traded on the secondary market, while open-end mutual funds are not.</p> Signup and view all the answers

    How is the market price of open-end mutual funds determined?

    <p>The market price is set by the fund manager based on net asset value (NAV) fluctuations.</p> Signup and view all the answers

    In terms of price volatility, how do closed-end mutual funds compare to open-end mutual funds?

    <p>Closed-end mutual funds have higher price volatility than open-end mutual funds.</p> Signup and view all the answers

    Which of the following statements about secondary market trading of mutual fund units is true?

    <p>Secondary market trading can impact the net asset value (NAV) per unit of a fund.</p> Signup and view all the answers

    What factor primarily determines the price of closed-end mutual funds in the secondary market?

    <p>The net asset value (NAV) per unit of the fund.</p> Signup and view all the answers

    What aspect differentiates the market price of ETFs from their net asset value?

    <p>The bid ask price process</p> Signup and view all the answers

    In secondary markets, what distinguishes closed-end mutual funds from open-end mutual funds?

    <p>The ability for new unit creation or redemption</p> Signup and view all the answers

    What is a key factor contributing to the tracking error in ETFs compared to the indexes they track?

    <p>Management fees</p> Signup and view all the answers

    When ETF bid and ask prices are matched, what occurs?

    <p>Sale of ETF shares</p> Signup and view all the answers

    In secondary markets, what role does the bid ask price process play in determining the traded price of closed-end mutual funds?

    <p>Setting market prices</p> Signup and view all the answers

    What is a distinguishing feature of closed-end mutual funds compared to open-end mutual funds?

    <p>They have a fixed number of shares available for purchase and trade on secondary markets</p> Signup and view all the answers

    What determines the market price of open-end mutual funds?

    <p>Net Asset Value per Unit (NAVPU)</p> Signup and view all the answers

    In the context of mutual funds, what is the primary purpose of trading on secondary markets?

    <p>To provide liquidity to investors by allowing them to buy and sell shares</p> Signup and view all the answers

    What is the main reason why open-end mutual funds do not experience significant price volatility compared to closed-end mutual funds?

    <p>Their shares are redeemable at their NAVPU value</p> Signup and view all the answers

    What is the primary reason why closed-end mutual funds are more likely to trade at a premium or discount to their Net Asset Value per Unit (NAVPU)?

    <p>Their shares have a fixed number available for trading</p> Signup and view all the answers

    What is a key characteristic that distinguishes closed-end mutual funds from open-end mutual funds?

    <p>Their market price may not reflect their net asset value per unit</p> Signup and view all the answers

    Which factor contributes significantly to the determination of market price in closed-end mutual funds?

    <p>The number of units outstanding</p> Signup and view all the answers

    When comparing the operation of closed-end and open-end mutual funds in secondary markets, which statement accurately describes this difference?

    <p>Closed-end funds may trade at prices different from their net asset value per unit</p> Signup and view all the answers

    What role does the secondary market play in the trading of closed-end mutual fund units?

    <p>Affecting the market price of the fund</p> Signup and view all the answers

    Why are closed-end mutual funds more likely to have their market prices deviate from the net asset value per unit compared to open-end mutual funds?

    <p>Their units are traded on exchanges</p> Signup and view all the answers

    In the context of secondary market trading, which action is least likely to affect an individual's contribution room for a TFSA?

    <p>Redeeming mutual fund units</p> Signup and view all the answers

    Which characteristic makes the market price determination of closed-end mutual funds more complex compared to open-end mutual funds?

    <p>Their exchange-traded nature</p> Signup and view all the answers

    What role do professional portfolio managers play in the determination of market prices for closed-end mutual funds?

    <p>They influence investor perceptions and demand for the fund's units</p> Signup and view all the answers

    What is one reason why closed-end mutual funds may be considered riskier investment options compared to open-end mutual funds?

    <p>They trade on exchanges rather than being redeemed by the fund itself</p> Signup and view all the answers

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