CIFC V12.95 Canadian Investment Funds Exam PDF

IT Certification Guaranteed, The Easy Way! Exam : CIFC Title : Canadian Investment Funds Course Exam Vendor : IFSE Institute Version : V12.95 1  IT Certification Guarant...

IT Certification Guaranteed, The Easy Way! Exam : CIFC Title : Canadian Investment Funds Course Exam Vendor : IFSE Institute Version : V12.95 1  IT Certification Guaranteed, The Easy Way! NO.1 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? A. The government contributes an additional grant for low income families who qualify. B. Only one beneficiary may be named per RESP. C. Educational Assistance Payments (EAPs) may only be used for tuition for a post-secondary program. D. Educational Assistance Payments (EAPs) withdrawn from the plan are not taxable. Answer: A Explanation A self-directed RESP is a type of RESP where the subscriber (the person who opens the plan) has the freedom to choose and manage the investments within the plan, such as stocks, bonds, mutual funds, etc. A self-directed RESP can have one or more beneficiaries (the children who will use the funds for their education) and can be individual or family plans. A self-directed RESP is eligible for the Canada Education Savings Grant (CESG), which is a 20% matching grant on the first $2,500 of annual contributions per beneficiary, up to a lifetime limit of $7,200. Additionally, low income families who qualify may receive an extra 10% or 20% on the first $500 of annual contributions per beneficiary, depending on their net family income. This is called the Additional CESG. Educational Assistance Payments (EAPs) are the payments made from the RESP to the beneficiary when they enroll in a qualifying post-secondary program. EAPs consist of the CESG, the Additional CESG, and any income or growth earned within the plan. EAPs may be used for any education-related expenses, such as tuition, books, transportation, accommodation, etc. EAPs are taxable in the hands of the beneficiary, who usually has a lower tax rate than the subscriber. References: Canadian Investment Funds Course, Chapter 5: Registered Plans1 NO.2 Ai Fen has recently become registered to sell mutual funds with Acadian Eastern Financial, a mutual fund dealer. Ai Fen determined that with her background of being a Chartered Financial Analyst, she can help people understand the nature of investing more easily than others in her field. Which registration category will need to be prominently noted on Ai Fen's business card to comply with the "holding out rule"? A. Dealing Representative B. Registered Representative C. Investment Representative D. Chartered Financial Analyst Answer: A Explanation The holding out rule is a regulatory requirement that prohibits registered individuals from using any title or designation other than their registration category when dealing with clients or potential clients. The purpose of this rule is to prevent misleading or confusing representations about the qualifications, roles, and responsibilities of registered individuals. According to Section 4.4 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), individuals who are registered to sell mutual funds must use the title "dealing representative" when holding out to clients or potential clients. 2  IT Certification Guaranteed, The Easy Way! Therefore, Ai Fen must prominently note "dealing representative" on her business card to comply with the holding out rule. The other options are not valid registration categories for selling mutual funds. Option B is a generic term that does not specify the type of securities that can be sold. Option C is a registration category for individuals who trade securities on behalf of an investment dealer. Option D is a professional designation that does not indicate registration status. References: [Holding Out Rule], [Registration Categories], [Registration Requirements, Exemptions and Ongoing Registrant Obligations] NO.3 Pippa purchased a 15-year bond with a face value of $5,000 and a 7% coupon rate at the time of issuance. The bond is due to mature later this year. The general interest rate climate remained stable for the first 13 years of the bond's term. However, especially over the past 18 months, both inflation and general interest rates have increased more than expected. What is Pippa likely to experience from her bond? A. With the unanticipated rise in inflation, Pippa will benefit from a higher real rate of return as well. B. Due to inflation, Pippa will experience a capital loss once her bond reaches maturity. C. The return of investment capital will have lower purchasing power than prior to investing. D. With capital appreciation at 7% annually, Pippa's capital gain will be reduced by inflation at maturity. Answer: C Explanation According to the Canadian Investment Funds Course, inflation is the general increase in the prices of goods and services over time. Inflation reduces the purchasing power of money, meaning that a dollar can buy less in the future than it can today. Inflation also affects the returns of fixed income investments, such as bonds, which pay a fixed amount of interest and principal. If inflation is higher than expected, the real rate of return (the nominal rate minus inflation) of a bond will be lower than anticipated. In this case, Pippa purchased a 15-year bond with a 7% coupon rate at the time of issuance. The bond is due to mature later this year. The general interest rate climate remained stable for the first 13 years of the bond's term. However, especially over the past 18 months, both inflation and general interest rates have increased more than expected. This means that Pippa will receive less purchasing power from her bond's interest and principal payments than she expected when she bought the bond. She will not experience a capital loss, as she will receive the full face value of $5,000 at maturity. She will also not benefit from a higher real rate of return, as inflation erodes the value of her fixed payments. She will not receive any capital appreciation, as the bond's price does not change once it is held to maturity. Therefore, the correct answer is C. The return of investment capital will have lower purchasing power than prior to investing. References: 1: Canadian Investment Funds Course - IFSE Institute 2 (Unit 4: Fixed Income Securities) NO.4 Terri, 30 years old, is the marketing manager at Provincial Winery with an average annual income of $60,000. Her spouse Yvette, 28 years old, is a project manager with a telecommunications firm earning $70,000 per year. You are helping them to organize their investments and are trying to assess their financial resources. Which of the following is the best question to ask? A. Do you have any children? 3  IT Certification Guaranteed, The Easy Way! B. Do you have pension plans at work? C. When do you need the money? D. What is your investment experience? Answer: B Explanation One of the steps in the Know Your Client (KYC) rule is to assess the client's financial resources, which include their income, assets, liabilities, and net worth. Asking about pension plans at work is a relevant question to determine the client's sources of income and potential retirement savings. Pension plans can also affect the client's risk tolerance and investment objectives, as they may provide a stable and guaranteed income in the future. Asking about children, money needs, and investment experience are also important questions, but they relate to other aspects of the KYC rule, such as personal circumstances, time horizon, and investment knowledge. References: * Canadian Investment Funds Course (CIFC) Study Guide, Chapter 1: The Investment Funds Industry, Section 1.4: The Know Your Client (KYC) Rule, page 1-111 * Know Your Client (KYC) Definition - Investopedia NO.5 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%? A. $0 B. $743.75 C. $912.00 D. $1,425.00 Answer: B Explanation Thomas must contribute to CPP based on his pensionable earnings, which are his income from employment or self-employment that are subject to CPP. However, he can deduct a basic exemption amount from his pensionable earnings, which is $3,500 for the year. Therefore, his contributory earnings are: 16,0003,500=12,500 The CPP contribution rate is 5.95% for employees and self-employed workers. Therefore, Thomas must contribute: 12,500*5.95%=743.75 References: * Canadian Investment Funds Course (CIFC) Study Guide, Chapter 6: Registered Plans, Section 6.3: * Canada Pension Plan (CPP), page 6-101 * Canada Pension Plan - How much could you receive - Canada.ca2 NO.6 What is the national self-regulatory organization (SRO) for investment dealers? A. The National Securities Commission B. The Mutual Fund Dealers Association of Canada C. The Canadian Securities Administrators D. The Investment Industry Regulatory Organization of Canada 4  IT Certification Guaranteed, The Easy Way! Answer: D Explanation The national self-regulatory organization (SRO) for investment dealers is the Investment Industry Regulatory Organization of Canada (IIROC). An SRO is a non-governmental organization that sets and enforces rules and standards for its members in a specific industry or profession. IIROC is an SRO that oversees all investment dealers and their trading activity in Canada's debt and equity markets. IIROC's mandate is to protect investors and support healthy capital markets by ensuring high standards of conduct, competence, and compliance among its members and their representatives. Therefore, option D is correct regarding the national SRO for investment dealers. The other options are not correct or relevant to the question. Option A is false because there is no such organization as the National Securities Commission in Canada; rather, there are provincial and territorial securities regulators that form the Canadian Securities Administrators (CSA), which is a council of securities regulators that coordinates and harmonizes regulation for the Canadian capital markets. Option B is false because the Mutual Fund Dealers Association of Canada (MFDA) is not the national SRO for investment dealers; rather, it is the national SRO for mutual fund dealers and their representatives in Canada. Option C is false because the Canadian Securities Administrators (CSA) is not the national SRO for investment dealers; rather, it is a council of securities regulators that coordinates and harmonizes regulation for the Canadian capital markets. References: [IIROC - Home], [SROs | GetSmarterAboutMoney.ca], [CSA - Home] NO.7 Your client Charlie is thinking about making a large investment into the Sentinel Canadian Equity Fund on December 15. The ex-dividend date for the mutual fund is December 20. What advice would you give Charlie to avoid the tax trap? A. Purchase the mutual fund after the ex-dividend date of December 20. B. Make the purchase on December 15 but choose to reinvest the distributions. C. Make the purchase on December 15 but choose to receive the distributions in cash. D. Purchase the mutual fund before the ex-dividend date of December 20. Answer: A Explanation A tax trap is a situation where an investor buys a mutual fund just before its ex-dividend date and ends up paying taxes on the distributions that they receive shortly after. This reduces their after-tax return and erodes their capital. To avoid the tax trap, it is advisable to buy the mutual fund after the ex-dividend date, when the fund's net asset value (NAV) drops by the amount of the distribution. This way, the investor does not receive any taxable income and preserves their capital. Therefore, you should advise Charlie to purchase the Sentinel Canadian Equity Fund after December 20, when the fund goes ex-dividend. References: Canadian Investment Funds Course, Unit 8, Section 8.2; 4; 5; 6 NO.8 Over the course of a couple of weeks and several appointments, Harold was finally able to provide an investment solution for his new client, Felicia. It was a lump sum investment where they plan to see her money grow for the next 5 years. With regards to Know Your Client (KYC) requirements, what are Harold's responsibilities moving forward? A. Monitor investment performance to determine if the investment solution is on track to satisfy Felicia's financial needs. 5  IT Certification Guaranteed, The Easy Way! B. There are no other responsibilities for Harold to fulfill until the time horizon has been reached for this investment solution. C. Within 36 months of the implementation of the investment, Harold must review the KYC to ensure it is current. D. KYC does not need to be revisited or revised until there is a need to conduct additional trades for Felicia's account. Answer: A Explanation Know Your Client (KYC) requirements are ongoing obligations that advisors must fulfill to ensure that they provide suitable recommendations and services to their clients. KYC requirements include collecting and documenting information about the client's personal and financial situation, investment objectives, risk tolerance, and investment knowledge. KYC requirements also include monitoring and updating the client's information and investment performance on a regular basis. According to the Mutual Fund Dealers Association of Canada (MFDA), advisors must review the KYC information at least once every 36 months, or more frequently if there are any material changes in the client's circumstances or needs1. Advisors must also monitor the investment performance of the client's portfolio and compare it with the client's expectations and goals. If the investment performance is not satisfactory or consistent with the client's risk tolerance, advisors must take appropriate actions, such as rebalancing the portfolio, switching funds, or revising the investment strategy2. Therefore, Harold's responsibility moving forward is to monitor the investment performance of Felicia's lump sum investment and determine if it is on track to satisfy her financial needs for the next 5 years. He must also review her KYC information at least once every 36 months, or sooner if there are any changes in her situation or objectives. References: * MFDA Bulletin #0756-P - Know-Your-Client and Suitability1 * MFDA Bulletin #0760-P - Monitoring of Investment Performance2 NO.9 Pierre buys a call option on a stock. What is the implication of this transaction? A. Pierre has the right to buy the stock if he exercises the option. B. Pierre is obligated to sell the stock if the option is exercised. C. Pierre has the right to sell the stock if he exercises the option. D. Pierre is obligated to buy the stock if the option is exercised. Answer: A Explanation According to the What Is a Call Option and How to Use It With Example - Investopedia, a call option is a contract that gives the buyer the right, but not the obligation, to buy an underlying stock at a specified price (the strike price) within a specified time period (the expiration date). The seller of a call option is obligated to sell the stock if the buyer exercises the option. Pierre buys a call option on a stock, which means he has the right to buy the stock if he exercises the option. He can also choose not to exercise the option or sell it before expiration. NO.10 Which of the following statements about pension adjustments (PA) is TRUE? A. They represent how much your pension is reduced due to market conditions. B. They increase your registered retirement savings plan (RRSP) room by the amount of the pension adjustment. 6  IT Certification Guaranteed, The Easy Way! C. They represent how much your pension will increase due to years of service. D. You will receive a PA whether you are in a defined contribution or a defined benefit pension plan. Answer: D Explanation A pension adjustment (PA) is the amount that the Canada Revenue Agency (CRA) assigns to your pension plan each year to reflect the value of the pension benefits that you earned. The PA reduces your registered retirement savings plan (RRSP) contribution room for the following year by the same amount. The PA ensures that all taxpayers have access to comparable tax assistance, regardless of the type of pension plan they participate in. You will receive a PA whether you are in a defined contribution or a defined benefit pension plan, but the calculation of the PA will differ depending on the type of plan. (Canadian Investment Funds Course, Chapter 8, Section 8.2) References: * Canadian Investment Funds Course, Chapter 8, Section 8.2: Retirement Savings Plans and Pension Plans * Investopedia: Pension Adjustment: Definition and Types of Plans1 * PlanEasy: What Is A Pension Adjustment?2 NO.11 Which of the following individuals would qualify for a full or partial Old Age Security (OAS) pension? A. Lenny, who is 65 years old and was born and raised in Canada, but lived in Jamaica from ages 25 to 65. B. Marcus, who is 60 years old, a Canadian citizen, and has lived in Canada for 20 years. C. Katrina, who is 75 years old and just immigrated to Canada from the U.S. last month. D. Donald, who is 65 years old and has lived in Canada since his birth but worked in Australia for the past 10 years. Answer: A Explanation Lenny would qualify for a partial OAS pension, because he meets the following criteria: *He is 65 years old or older. *He is a Canadian citizen or a legal resident at the time of his OAS pension application. *He has resided in Canada for at least 10 years since the age of 18. The amount of his partial OAS pension would be proportional to the number of years he has lived in Canada after the age of 18, divided by 40. For example, if he has lived in Canada for 15 years, he would receive 15/40 or 37.5% of the full OAS pension1 References = web search results from search_web(query="Old Age Security pension eligibility") NO.12 Anthony purchased 500 units of XYZ Fund at a price of $12.00 per unit. Near the end of the year, the mutual fund made a distribution of $1.50 per unit. The net asset value per unit (NAVPU) immediately before the distribution was $16.50. Anthony immediately reinvested his distribution at the new NAVPU. How many new units did Anthony purchase when his distribution was reinvested? A. 45.50 B. 50.00 C. 52.60 D. 55.40 Answer: B 7  IT Certification Guaranteed, The Easy Way! Explanation When a mutual fund makes a distribution, its net asset value per unit (NAVPU) decreases by the amount of the distribution. Therefore, the new NAVPU of XYZ Fund after the distribution was $$(16.50 - 1.50 = 15.00) NO.13 Stan, a portfolio manager, is looking at two steel companies as potential investments. Truesteel Inc. has a current ratio of 2:1 while Strongco Ltd. has a current ratio of 0.8:1. What could this information indicate? A. It appears that Truesteel is more profitable than Strongco. B. Truesteel is better able to meet its short-term financial obligations than Strongco. C. The stock market is more optimistic about the prospects for Truesteel than Strongco. D. Stronqco is reiving less on debt financing than Truesteel. Answer: B Explanation The current ratio is a liquidity ratio that measures a company's ability to pay its short-term obligations with its current assets. A higher current ratio indicates that the company has more current assets than current liabilities, which means it can meet its short-term obligations more easily. A lower current ratio indicates that the company has less current assets than current liabilities, which means it may face liquidity problems or default risk. Therefore, the information given in the question indicates that Truesteel is better able to meet its short-term financial obligations than Strongco. The current ratio does not necessarily reflect the profitability, market outlook, or debt financing of the companies. References: Current Ratio Explained With Formula and Examples, Current Ratio Formula, Current ratio NO.14 Daisy is a Dealing Representative registered in the province of Saskatchewan only. Daisy's client, Orville, a resident of Lloydminster, Saskatchewan is a retiree who presently has a $1,000,000 with her dealer, Easy Ride Financial. Orville is now planning to move to Vegreville, Alberta next month. Easy Ride Financial is registered in Alberta and Saskatchewan. Neither Easy Ride Financial nor Daisy have any clients who are resident in Alberta. Which of the following should Daisy do if she wants to continue to service Orville's account? A. Request approval from the Mutual Fund Dealers Association of Canada to be eligible to be a registered Dealing Representative in Alberta B. Daisy could seek permission from her dealer to request a client mobility exemption with the Alberta Securities Commission. C. Daisy will need to forfeit her registration in Saskatchewan if she wants to be registered in Alberta to keep Orville as a client. D. Register with a different mutual fund dealer that is registered in Alberta so she can keep Orville as a client. Answer: B Explanation Daisy could seek permission from her dealer to request a client mobility exemption with the Alberta Securities Commission. This exemption allows a registered individual in one jurisdiction to service a client who moves to another jurisdiction, without having to register in the new jurisdiction, subject to certain conditions. Some of these conditions are that the individual must be registered with a dealer that is registered in both jurisdictions, the individual must not have more than five clients in the new 8  IT Certification Guaranteed, The Easy Way! jurisdiction, and the individual must notify the regulator in the new jurisdiction of the exemption. References: Client Mobility Exemption NO.15 Maureen is 65 years old and will be retiring soon. She has a modest portfolio of mutual funds that focus on growth. As she approaches retirement, Maureen wants to switch to investments that provide steady income with low to medium risk. Given Maureen's wishes, which of the following mutual funds would be suitable for her? A. money market funds, mortgage funds, bond funds B. money market funds. Canadian dividend funds, sector funds C. Canadian dividend funds, global equity index funds, bond funds D. money market funds, global equity funds, bond funds Answer: A Explanation Maureen is looking for investments that provide steady income with low to medium risk. Money market funds, mortgage funds, and bond funds are suitable for her because they invest in fixed- income securities that pay regular interest and have lower volatility than equity funds. Money market funds invest in short-term debt instruments such as treasury bills and commercial paper. Mortgage funds invest in mortgages or mortgage-backed securities that are secured by real estate properties. Bond funds invest in bonds issued by governments or corporations with varying maturities and credit ratings. References: 9 Best Retirement Income Funds Of 2023 - Forbes Advisor, 5 Best Income Funds for Retirement - U.S. News, 7 Best Funds for Retirement | Investing | U.S. News NO.16 Douglas, aged 73, won a lottery prize of $100,000 last week. Today he contacted Vincent, his Dealing Representative, with instructions to contribute the winnings to his registered retirement income fund (RRIF) account. Which of the following statement about RRIF is CORRECT? A. Deposits to RRIFs cannot be withdrawn for 5 years. B. Deposits into RRIFs are not permitted. C. Deposits to a RRIF entitle Douglas to a tax deduction. D. Withdrawals from a non-qualifying RRIF are not taxable. Answer: B Explanation A RRIF is a retirement income option that allows you to withdraw income from the savings accumulated under your RRSP. You cannot contribute new amounts to a RRIF. You can only transfer funds from your RRSP or another RRIF to your RRIF. References = IFSE CIFC Module 6: Registered Plans, page 6-11. Can I deposit money in an RRIF? | Fonds FTQ NO.17 Your client, Helen, just received her non-registered account statement which states that one of her mutual funds made an interest income distribution during the year. She asks you how she will be taxed on the distribution. What do you tell Helen? A. She will pay taxes on 50% of the distribution. B. She will pay taxes at her top marginal tax rate. C. She will pay taxes on the grossed-up amount of the income. D. She will pay taxes at her average tax rate. 9  IT Certification Guaranteed, The Easy Way! Answer: B Explanation Interest income distribution is a type of income that a mutual fund pays to its investors from the interest earned on its fixed-income investments, such as bonds and mortgages. Interest income distribution is taxed as ordinary income at the investor's top marginal tax rate, which is the highest tax rate that applies to their income bracket. Therefore, B is the correct answer. References: Interest Income and Taxes - Fidelity, Topic No. 403, Interest Received | Internal Revenue Service NO.18 Your client, Cosmo, recently inherited $50,000 from his uncle. He wants to use this money towards his retirement savings. Cosmo is a 50-year old, self-employed carpenter and he earns on average $65,000 per year. He has a registered retirement savings plan (RRSP) with the bank worth $425,000 and a tax-free savings account (TFSA) worth $46,000. He started saving when he was 25 years old and has always made his own investment decisions. His money is mostly invested in balanced funds. He feels most comfortable with these types of mutual funds since they offer potential investment growth but without being too aggressive. Cosmo has no other assets. What additional information do you need about Cosmo to fulfill your know your client obligation? A. time horizon B. income and net worth C. risk tolerance D. investment objectives Answer: C Explanation To fulfill the know your client (KYC) obligation, an advisor must collect and document information about the client's personal and financial situation, investment objectives, risk tolerance, and investment knowledge. The KYC rule is a regulatory requirement that ensures that the advisor understands the client's needs and goals, and provides suitable recommendations that match the client's profile. In this case, Cosmo has provided some information about his personal and financial situation, such as his age, occupation, income, assets, and inheritance. He has also given some indication of his investment objectives, such as saving for retirement, and his investment knowledge, such as making his own investment decisions and preferring balanced funds. However, he has not disclosed his risk tolerance, which is his willingness and ability to accept fluctuations in the value of his investments. Risk tolerance is an important factor that affects the choice of investment strategies and products. Therefore, to complete the KYC process, the advisor needs to obtain additional information about Cosmo's risk tolerance. References: * Canadian Investment Funds Course (CIFC) Study Guide, Chapter 1: The Investment Funds Industry, Section 1.4: The Know Your Client (KYC) Rule, page 1-111 * Know Your Client (KYC) Definition - Investopedia2 NO.19 Which among the following BEST describes a company's income statement? A. It shows the amount of profit that is reinvested in the company in the form of retained earnings. B. It shows the amount of capital contributed to the company by its shareholders or owners. C. It shows the earnings and expenses of a business over a period of time. D. It provides a snapshot of a company's financial position at a specific point in time Answer: C Explanation 10  IT Certification Guaranteed, The Easy Way! An income statement is a financial report that shows the earnings and expenses of a business over a period of time, such as a month, a quarter, or a year. It also shows the net income or net loss of the business, which is the difference between the total revenues and the total expenses. An income statement helps investors and creditors evaluate the profitability, performance, and risk of a business. The other options are not accurate descriptions of an income statement. Option A describes retained earnings, which are part of the equity section of the balance sheet. Option B describes contributed capital, which is also part of the equity section of the balance sheet. Option D describes the balance sheet, which is another financial statement that shows the assets, liabilities, and equity of a business at a specific point in time. References: Income Statement - Definition, Explanation and Examples, Income Statement: How to Read and Use It - Investopedia, How to Prepare an Income Statement | HBS Online NO.20 You are meeting a potential client, William, for the first time. He is a high net worth individual and you are keen to get his business. Which of the following would you consider the most important to create an impressive first impression on your potential client? A. your body language B. volume of your voice C. your words D. tone of your voice Answer: A Explanation Your body language would be the most important to create an impressive first impression on your potential client. Body language is the non-verbal communication that includes your posture, gestures, facial expressions, eye contact, and physical distance. Body language can convey your confidence, enthusiasm, professionalism, and trustworthiness. According to research, body language accounts for 55% of the impact of a first impression, while tone of voice accounts for 38% and words account for only 7%. The other statements are less important than body language. Volume of your voice is part of your tone of voice, which can affect how your words are perceived by your potential client. However, volume alone is not enough to create an impressive first impression; you also need to consider your pitch, pace, and intonation. Your words are what you say to your potential client, which can include your introduction, your value proposition, and your questions. Your words are important to convey your message and establish rapport with your potential client. However, your words have less impact than your body language and tone of voice on your first impression. Tone of your voice is how you say your words, which can include your volume, pitch, pace, and intonation. Your tone of voice can influence how your potential client feels about you and your message. However, your tone of voice has less impact than your body language on your first impression. References: Unit 10: Sales Process, [The Importance Of Body Language In First Impressions] NO.21 Which statement regarding the Fund Facts document is CORRECT? A. Before accepting an order from a client, a Dealing Representative is expected to provide and explain the Fund Facts document. B. The Fund Facts document must be delivered to the client, electronically or in writing, within 5 days of the transaction date. 11  IT Certification Guaranteed, The Easy Way! C. For leveraged accounts, the Fund Facts document is not required if the client has been provided with the Leverage Risk Disclosure document. D. The Fund Facts document must not contain performance data. Answer: A Explanation The Fund Facts document is a summary disclosure document that highlights key information about a mutual fund or an exchange-traded fund (ETF), such as the performance history, investments, fees, and risks. According to the Point of Sale (POS) disclosure rules, a Dealing Representative must provide and explain the Fund Facts document to the client before accepting an order to buy or switch a fund. This allows the client to make an informed investment decision and to know their rights. References = Fund Facts | AMF - Autorite des marches financiers, Fund Facts/ETF Facts - Fidelity , Understanding Fund Facts | GetSmarterAboutMoney.ca, IFSE CIFC Module 2: The Investment Industry, page 2-16. NO.22 Which of the following statements about registered education savings plans (RESPs) is CORRECT? A. Contributions to RESPs are tax deductible. B. There is a yearly contribution limit per beneficiary. C. RESPs must be collapsed by the end of the 31st year of its starting date D. Contributed funds grow tax-free within the plan. Answer: D Explanation Contributed funds grow tax-free within the plan3. This means that any income or capital gains earned by the investments in an RESP are not taxed until they are withdrawn3. This allows the plan to grow faster than a taxable account with the same investments and contributions3. The other statements are incorrect. Contributions to RESPs are not tax deductible3. This means that you cannot deduct the amount you contribute to an RESP from your taxable income3. However, you do not have to pay tax on the contributions when they are withdrawn from the plan3. There is no yearly contribution limit per beneficiary, but there is a lifetime contribution limit of $50,000 per beneficiary3. This means that you can contribute any amount to an RESP in any given year, as long as you do not exceed the lifetime limit for each beneficiary3. RESPs must be collapsed by the end of the 35th year of its starting date3. This means that you have up to 35 years to use the funds in an RESP for educational purposes or transfer them to another plan3. If you do not use or transfer the funds by then, you have to close the plan and pay tax on the accumulated income portion3. References: Unit 8: Retirement NO.23 Which of the following statements is TRUE about inflation? A. Inflation results in a redistribution of income from borrowers to lenders. B. Generally inflation will benefit those who are living on investment income. C. Purchasing power rises as inflation rises. D. An increase in the inflation rate could mean investors have less money to invest. Answer: D Explanation 12  IT Certification Guaranteed, The Easy Way! Inflation is the general increase in the prices of goods and services over time. Inflation reduces the purchasing power of money, meaning that a dollar can buy less than it used to. Inflation also erodes the real value of investment income, such as interest, dividends, and capital gains. Therefore, an increase in the inflation rate could mean that investors have less money to invest, as their income and savings lose value. References = Canadian Investment Funds Course, Unit 5: Types of Investments, Lesson 1: Economic Factors and Financial Markets, Section 5.1.2: Inflation1; CIFC prepkit, Chapter 5: Types of Investments, Question 5.1.2 2 NO.24 Jabir begins the registration process with his new dealer Prosper Wealth Inc. Jabir is excited about his new career and eager to start calling clients, opening new accounts, and selling investments. Which of the following CORRECTLY describes when Jabir will be eligible to open new client accounts and sell investments? A. Upon employment with the dealer B. Upon registration application by the dealer C. Upon passing the proficiency course D. Upon formal confirmation from the regulator Answer: D Explanation Jabir will be eligible to open new client accounts and sell investments only upon formal confirmation from the regulator. Before he can start his activities as a dealing representative, he must complete the registration process, which includes passing the proficiency course, applying for registration through his dealer, and obtaining approval from the securities regulator in his jurisdiction. References: Guide to Broker-Dealer Registration NO.25 Pacari is a Dealing Representative with Cavalry Investments, a mutual fund dealer. Pacari's client, Darsha, is a long-time customer and an elderly widow. Darsha depended on her husband, for financial decisions before he passed. Pacari has also noticed that Darsha's capacity seems to be declining over the years. Luckily, with Pacari's help, Darsha has been managing her finances well. However, Darsha's daughter has been getting involved recently and has even tried to enter trades without Darsha's authorization. Pacari is particularly concerned about the last transaction for Darsha's account: a very large redemption. Pacari fears that Darsha has become a victim of financial exploitation and he raises his concerns with his dealer Cavalry. Which of the following statements about how Cavalry may proceed is CORRECT? A. Cavalry can place a permanent hold on Darsha's account and disallow all future transactions. B. Cavalry must place a temporary hold on Darsha's account to disallow all transactions for the account. C. Cavalry can place a temporary hold on Darsha's account to temporarily disallow the redemption. D. Cavalry must proceed with the redemption because temporary and permanent holds are not permitted. Answer: C Explanation Cavalry can place a temporary hold on Darsha's account to temporarily disallow the redemption if they have reasonable grounds to believe that Darsha is being financially exploited or that she lacks 13  IT Certification Guaranteed, The Easy Way! mental capacity to make financial decisions. This is in accordance with the guidance issued by the Mutual Fund Dealers Association of Canada (MFDA) on how to deal with vulnerable clients. A temporary hold can be placed for up to 15 business days, which can be extended for another 15 business days if necessary. During this time, Cavalry must conduct an internal review of the matter and contact Darsha and any trusted contact person or legal representative to resolve the situation. Cavalry cannot place a permanent hold on Darsha's account without her consent or a court order. Cavalry is not required to place a temporary hold on Darsha's account, but it is an option available to them to protect their client's interests. References: What We Heard Report: Financial Crimes and Harms Against Seniors, MFDA Bulletin #0859-P - Guidance on Vulnerable Clients NO.26 At the close of business, Great Lengths Equity Fund had total assets of $135 million and total liabilities of $10 million. They had 11 million units outstanding. In addition, their current assets totalled $13 million and current liabilities were $3 million. Which of the following statements regarding Great Lengths Equity Fund's net asset value per unit (NAVPU) is correct? A. The NAVPU is the total liabilities divided by the number of outstanding units. B. Current assets and current liabilities are used in the NAVPU calculation. C. There is not enough information available to calculate the NAVPU. D. Great Lengths Equity Fund's NAVPU is $11.36. Answer: D Explanation The net asset value per unit (NAVPU) of a mutual fund is calculated by dividing the net asset value (NAV) of the fund by the number of outstanding units. The NAV is the difference between the total assets and total liabilities of the fund. Current assets and current liabilities are not relevant for the NAVPU calculation. Therefore, Great Lengths Equity Fund's NAVPU is ($135 million - $10 million) / 11 million = $11.36. References: Canadian Investment Funds Course (CIFC) | IFSE Institute, Unit 8, Lesson 1 NO.27 Russell is a Dealing Representative with Wealth Quest Strategies Ltd., a mutual fund dealer and member of the Mutual Fund Dealers Association of Canada (MFDA). Russell is developing his website to include sales content on a Target Date Fund. Which of the following is Russell permitted to include on his website about the Target Date Fund? i. the asset mix through the life of the fund until the future date ii. the expected decline in the fund's risk level as the fund reaches its target date iii. the guaranteed return that the client will receive on the future date iv. a graphic illustration of the fund's promised growth on target date A. i and ii B. i and iii C. ii and iv D. iii and iv Answer: A Explanation A target date fund is a type of mutual fund that adjusts its asset allocation and risk level according to a predetermined future date, such as retirement or college education. A target date fund typically starts with a higher proportion of stocks and a lower proportion of bonds and cash, and gradually shifts to a more conservative mix as the target date approaches. This is called the fund's glide path, 14  IT Certification Guaranteed, The Easy Way! which shows the asset mix through the life of the fund until the future date. Russell is permitted to include this information on his website, as it is factual and relevant to the fund's characteristics and suitability. Russell is also permitted to include information about the expected decline in the fund's risk level as the fund reaches its target date, as this is part of the fund's objective and strategy. However, Russell is not permitted to include any information that implies or suggests that the target date fund offers a guaranteed return or a promised growth on the future date, as this would be misleading and inaccurate. Target date funds are not guaranteed investments, and their performance depends on the market conditions and the fund manager's decisions. Russell must not make any false or exaggerated claims about the target date fund's benefits or returns on his website. References: Canadian Investment Funds Course, Chapter 7: Know Your Product1 NO.28 One of your clients, Rakesh, had a portfolio composed of 60% ABC Equity Fund and 40% ABC Bond Fund. Since equities were performing much better than fixed income, he had increased his holdings in ABC Equity Fund to 70% and had reduced his holding in ABC Bond Fund to 30% of his portfolio. After benefitting the growth in his ABC Equity Fund for over 2 years, Rakesh is uncomfortable with this heavy exposure to equity funds and decides to rebalance his portfolio back to 60% of ABC Equity Fund and 40% of ABC Bond Fund. He instructs you to switch 10% of the portfolio from the ABC Equity Fund to the ABC Bond Fund. Which of the following statements is CORRECT? A. Rakesh will not be subjected to a switch fee if it is outlined in the prospectus. B. Rakesh will not be subjected to a switch fee if his equity fund is a no-load fund. C. Rakesh will not be subjected to a switch fee if his original units were purchased with a sales charge. D. Rakesh will not be subjected to a switch fee if his equity fund is a low-load fund. Answer: A Explanation Rakesh will not be subjected to a switch fee if it is outlined in the prospectus. A switch fee is a charge that may apply when an investor switches from one fund to another within the same fund family. The prospectus is the legal document that provides information about the fund, including its fees and charges. If the prospectus states that there is no switch fee or that there are certain conditions under which the switch fee is waived, then Rakesh will not have to pay a switch fee. The type of fund (no- load, low-load, or sales charge) does not determine whether there is a switch fee or not, as different fund families may have different policies regarding switch fees. References: Mutual Fund Fees, Prospectus NO.29 What purpose does it serve for non-money market mutual funds to hold money market instruments? A. Money market instruments primarily generate investment income that provides investors with preferential tax treatment. B. If the portfolio manager has an immediate need for cash, money market instruments are relatively easy to liquidate. C. They are purchased by non-money market funds to satisfy the regulatory requirement of fund diversification. 15  IT Certification Guaranteed, The Easy Way! D. They ensure that the fair market value of a mutual fund will not drop below a minimal market value. Answer: B Explanation The purpose of holding money market instruments for non-money market mutual funds is to provide liquidity for the fund. If the portfolio manager has an immediate need for cash, such as to pay expenses or meet redemption requests, money market instruments are relatively easy to liquidate because they have short maturities and low credit risk. Money market instruments do not primarily generate investment income that provides investors with preferential tax treatment, as interest income from money market instruments is fully taxable at the investor's marginal tax rate. Money market instruments are not purchased by non-money market funds to satisfy the regulatory requirement of fund diversification, as there is no such requirement for mutual funds. Money market instruments do not ensure that the fair market value of a mutual fund will not drop below a minimal market value, as money market instruments can also fluctuate in value depending on interest rate changes and supply and demand factors. References: Money Market Instruments NO.30 Iliana owns 1,000 participating preferred shares in the First Canadian Bank. Which of the following features are characteristic of her investment? A. Iliana has the right to purchase more preferred shares in the company before common shareholders. B. Iliana is able to vote at the annual general meeting and elect members of the board of directors. C. Iliana can convert her preferred shares to common shares at a fixed price and within a specified time period. D. Iliana has a right to share in the bank's net profits over and above the specified dividend rate. Answer: D Explanation Participating preferred shares are a type of preferred shares that give the holder a right to share in the issuer's net profits over and above the specified dividend rate. This means that participating preferred shareholders may receive additional dividends if the issuer performs well. Iliana owns participating preferred shares in the First Canadian Bank, which means she has a right to share in the bank's net profits over and above the specified dividend rate. References: Investment Funds in Canada (IFC) | Canadian Securities Institute NO.31 Your employer has a contributory group RRSP under which he matches employee contributions, up to a maximum of 5% of salary. Which of the following statements about a group registered retirement savings plan (RRSP) is CORRECT? A. It is more costly and time consuming to administer than traditional pension plans. B. If you leave your employer, your group RRSP stays with the employer. C. You need to wait until you file your taxes to receive your contribution tax deduction. D. The employer chooses the plan provider. Answer: D Explanation A group RRSP is a retirement savings plan sponsored by an employer that allows employees to contribute through regular payroll deductions and benefit from tax advantages and possible 16  IT Certification Guaranteed, The Easy Way! employer matching. The employer is responsible for choosing the plan provider, which is the financial institution that administers the group RRSP and offers a range of investment options for the employees to choose from. The employer may also negotiate lower fees and better services with the plan provider than what individual RRSPs can offer. Therefore, statement D is correct. The other statements are incorrect for the following reasons: * Statement A: A group RRSP is less costly and time consuming to administer than traditional pension plans, as it does not require actuarial valuations, funding requirements, or regulatory filings. * Statement B: If you leave your employer, your group RRSP does not stay with the employer. You can transfer your group RRSP to an individual RRSP or another registered plan without tax consequences, as long as there are no locked-in provisions. * Statement C: You do not need to wait until you file your taxes to receive your contribution tax * deduction. Your contributions are deducted from your gross income before tax is calculated, so you receive an immediate tax benefit on your paycheque. References: Canadian Investment Funds Course, Unit 9, Section 9.1 NO.32 Which of the following qualifies as personal information under the Personal Information Protection and Electronic Documents Act (PIPEDA)? A. employee's business address B. employee's name C. employee's credit record D. employee's business telephone number Answer: C Explanation According to the Personal Information Protection and Electronic Documents Act (PIPEDA), personal information is any factual or subjective information, recorded or not, about an identifiable individual. This includes information in any form, such as age, name, ID numbers, income, ethnic origin, or blood type. However, PIPEDA also specifies some exceptions to the definition of personal information, such as business contact information. Business contact information is any information that is used for the purpose of communicating or facilitating communication with an individual in relation to their employment, business or profession. This includes the employee's name, position name or title, work address, work telephone number, work fax number or work electronic address. Therefore, an employee's business address and business telephone number are not considered personal information under PIPEDA. An employee's name could be considered personal information if it is not used for business purposes, but it is not clear from the question whether that is the case. An employee's credit record is clearly personal information under PIPEDA, as it reveals sensitive information about the individual's financial situation and history. References: 1: PIPEDA in brief - Office of the Privacy Commissioner of Canada 2 NO.33 Which of the following CORRECTLY describes a material conflict of interest that has been properly addressed by the Dealing Representative? A. Cametra asks to meet with her client, Pietro, to update his Know Your Client (KYC) information. They have not had a face-to-face meeting in years. Pietro feels updating the KYC information is unnecessary. He tells Cametra he is too busy and there is no reason for her to be concerned with the information 17  IT Certification Guaranteed, The Easy Way! she already has. Even though they fail to meet, Cametra continues to submit purchase orders at his request. B. Gibson reviews two similar mutual funds for his client. One fund pays higher trailer fees than the other. Gibson discloses the difference between the trailer fees before recommending the fund that has higher trailer fees. C. Keaira recommends a growth fund to her client, Shilo, but her Compliance Department questions the trade because Shilo's risk profile is too low. Rather than cancel the trade and absorb the market losses herself, Keaira recommends that Shilo keep the investment even though it is not in her best interest. Keaira updates Shilo's KYC to "high" risk and gets Shilo to sign the KYC update form. D. Oscar wants to recommend a fund to his client which has a higher management expense ratio (MER) than other mutual funds. Since the MER could impact the client's decision, Oscar reports the conflict of interest to his dealer and discloses the conflict of interest to his client. Oscar explains how the higher MER is in the client's best interest because the overall cost for the client will still be less than a fee-for-service account holding mutual funds with a lower MER. Answer: D Explanation A material conflict of interest is a situation where a Dealing Representative or their firm has an interest that could reasonably be expected to affect the exercise of their professional judgment or influence their actions or recommendations. A Dealing Representative must identify, disclose, and manage any material conflicts of interest in the best interest of their clients. Oscar has properly addressed the material conflict of interest arising from the higher MER by reporting it to his dealer, disclosing it to his client, and explaining how it is in the client's best interest. The other scenarios do not demonstrate proper management of material conflicts of interest. References: Canadian Investment Funds Course, Chapter 8: Suitability and Know Your Client1 NO.34 Felipe is a Dealing Representative who is developing a non-registered investment solution for Laryssa. Felipe is debating between recommending either mutual fund trusts or mutual fund corporations. He wants to recommend an investment that reduces Laryssa's exposure to taxation. Which feature may influence his recommendation? A. Distributions from mutual fund corporations are not taxable to investors. B. Mutual fund trusts can only distribute capital gains and Canadian dividends. C. Capital losses may be distributed from mutual fund corporations. D. Any income received by a mutual fund corporation is distributed in the form of either capital gains or Canadian dividends. Answer: D Explanation A mutual fund corporation is a type of mutual fund structure that is organized as a corporation and issues different classes of shares to investors. A mutual fund corporation has the ability to allocate its income and expenses among the different classes of shares, and to distribute any income received by the corporation in the form of either capital gains or Canadian dividends. These types of distributions are taxed at lower rates than interest or foreign income, which may reduce the tax liability of the investors. A mutual fund corporation can also use capital losses to offset capital gains, and carry them forward or back to reduce taxable income in other years. 18  IT Certification Guaranteed, The Easy Way! References = Canadian Investment Funds Course, Unit 6: Mutual Funds, Lesson 2: Mutual Fund Structures, Section 6.2.2: Mutual Fund Corporations1; CIFC prepkit, Chapter 6: Mutual Funds, Question 6.2.2 2 NO.35 Jehona is a Dealing Representative with Vista Wealth Investments Inc., a mutual fund dealer in Ontario and Nova Scotia. Jehona has reviewed her client Sokol's account and wants to adjust the holdings and re-balance the portfolio. Which of the following statements about Jehona's permitted activities is CORRECT? A. If Sokol has signed a Limited Authorization Form, Jehona can process the trades in the account without Sokol's pre-approval. B. If Jehona wants to execute trades for Sokol's account, Sokol must provide his specific authorization before the trades are entered. C. If Sokol has given Jehona discretionary trading authority, Jehona can process trades in the account without Sokol's pre-approval. D. If Jehona wants to execute the trades without Sokol's pre-approval, Sokol must first appoint Jehona as his Power of Attorney. Answer: B Explanation The statement that is correct about Jehona's permitted activities is option B. According to Section 13.3 of National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations (NI 31-103), registered individuals must not engage in discretionary trading, meaning that they must not execute a transaction for a client's account without the specific authorization of the client before the transaction. Therefore, if Jehona wants to execute trades for Sokol's account, Sokol must provide his specific authorization before the trades are entered. The other statements are not correct about Jehona's permitted activities. Option A is false because a Limited Authorization Form does not allow Jehona to process trades in the account without Sokol's pre-approval; rather, it allows Jehona to accept instructions from a third party authorized by Sokol, such as a spouse or a lawyer. Option C is false because Sokol cannot give Jehona discretionary trading authority, as it is prohibited by NI 31-103 for mutual fund dealers and their representatives. Option D is false because appointing Jehona as his Power of Attorney does not allow Jehona to execute trades without Sokol's pre-approval; rather, it allows Jehona to act on behalf of Sokol in legal and financial matters, subject to certain conditions and limitations. References: [Registration Requirements, Exemptions and Ongoing Registrant Obligations], [Discretionary Trading | GetSmarterAboutMoney.ca], [Limited Authorization Form | IFIC], [Power of Attorney | GetSmarterAboutMoney.ca] NO.36 Jacinta is a Dealing Representative with WealthSource Partners Inc., a mutual fund dealer registered in Ontario. Jacinta meets with her friend Saabir, who is a licensed insurance agent. Saabir asks Jacinta for a list of Jacinta's clients so that Saabir can reach out to them to ensure that their insurance needs are being met. Which of the following statements about Jacinta sharing the list with Saabir is CORRECT? A. If Saabir obtains prior consent from Jacinta to use the clients' personal information for a reasonable purpose, Saabir can contact the clients to inquire about their insurance needs. 19  IT Certification Guaranteed, The Easy Way! B. If Saabir promptly discloses that he has collected the clients' personal information from Jacinta without their consent, Saabir can use the information for a new stated purpose. C. If Jacinta determines that there is a reasonable purpose for sharing the list with Saabir, she can disclose the information to Saabir without obtaining prior consent from the clients. D. If Jacinta shares the list with Saabir without obtaining the clients' prior consent, she will be in breach of the Personal Information Protection and Electronic Documents Act (PIPEDA). Answer: D Explanation The correct answer is D. If Jacinta shares the list with Saabir without obtaining the clients' prior consent, she will be in breach of the Personal Information Protection and Electronic Documents Act (PIPEDA). PIPEDA is the federal privacy law for private-sector organizations in Canada. It sets out the ground rules for how businesses must handle personal information in the course of their commercial activity. One of the key principles of PIPEDA is consent. This means that organizations must obtain meaningful consent from individuals before collecting, using, or disclosing their personal information, unless an exception applies. Consent must be obtained for the original purpose of collecting the information, and for any new purpose that arises later. Consent can be express or implied, depending on the sensitivity of the information and the reasonable expectations of the individual. In this scenario, Jacinta's clients' personal information is sensitive, as it relates to their financial situation and investment goals. Jacinta's clients would not reasonably expect that their information would be shared with Saabir, who is not affiliated with WealthSource Partners Inc., for the purpose of marketing insurance products. Therefore, Jacinta must obtain express consent from her clients before disclosing their information to Saabir. If she does not, she will violate PIPEDA and risk legal action from her clients or from the Office of the Privacy Commissioner (OPC). NO.37 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? A. Clarify Client Status, Problems and Opportunities B. Identify Strategies and Present the Plan C. Implement the Plan D. Monitor and Update Answer: B Explanation The Strategic Investment Planning (SIP) process is a four-step process that helps advisors to create and deliver customized investment plans for their clients. The four steps are: * Clarify Client Status, Problems and Opportunities: This step involves gathering information about the client's personal and financial situation, goals, risk tolerance, and investment knowledge. The advisor also identifies the client's problems and opportunities, such as tax issues, estate planning needs, or market trends. * Identify Strategies and Present the Plan: This step involves analyzing the information collected in the previous step and developing strategies to address the client's problems and opportunities. The 20  IT Certification Guaranteed, The Easy Way! advisor also presents the plan to the client, explaining the rationale, benefits, costs, and risks of the proposed strategies. This is the stage where Sonya mentions factors such as inflation, interest rates, and rates of return, as they are relevant to the investment approaches she is offering to Elijah. * Implement the Plan: This step involves executing the agreed-upon strategies with the client's consent. The advisor also ensures that the necessary documentation and transactions are completed. * Monitor and Update: This step involves reviewing the performance of the plan and making adjustments as needed. The advisor also communicates with the client regularly and updates the plan according to any changes in the client's situation or goals. References: * Canadian Investment Funds Course (CIFC) Study Guide, Chapter 2: The Sales Process, Section 2.3: The Strategic Investment Planning (SIP) Process, page 2-81 * Strategic Investment Planning Process - IFSE Institute2 NO.38 Janine will celebrate her 71st birthday this year. She currently has a lot of money in a personal registered retirement savings plan (RRSP) and knows there are rules about what she can do with those funds. Which of the following is TRUE? A. She can convert her RRSP to a locked-in retirement income fund (LRIF). B. She can convert her RRSP to a registered retirement income fund (RRIF) this year or by December 31st of next year. C. She can take the entire amount in cash, with no tax consequences because her RRSP funds were tax-sheltered. D. She can purchase a registered term or life annuity. Answer: B Explanation A registered retirement savings plan (RRSP) is a retirement savings and investing vehicle for employees and the self-employed in Canada. Contributions to an RRSP are tax-deductible and grow tax-deferred until withdrawal. However, RRSPs have a maturity date of December 31st of the year in which the holder turns 71. By then, the holder must convert the RRSP to a registered retirement income fund (RRIF), purchase an annuity, or withdraw the funds in cash (subject to tax). Therefore, B is the correct answer. References: Registered Retirement Savings Plan (RRSP): Definition and Types, Registered Retirement Savings Plan (RRSP) - Canada.ca NO.39 Kendrick is a newly registered Dealing Representative for Oak Solid Financial. He has been assigned the task of contacting existing clients where there has been no record of consultation within the last 12 months. The first person he sees on his list is a client named Chandra Ruffino. He double- checks if her phone number is on the Do Not Call List (DNCL) registry. Which of the following statements apply? A. If Chandra is on the DNCL registry, Kendrick is still eligible to contact the client of Oak Solid Financial. B. If Chandra has been on the DNCL registry for 18 months, then Kendrick is not allowed to contact her. C. If Chandra is on the DNCL, then Kendrick can only contact her if she is specifically his client. D. If Chandra had closed her account within the last 12 months and registered herself on the DNCL, 21  IT Certification Guaranteed, The Easy Way! then Kendrick cannot call her. Answer: A Explanation The Do Not Call List (DNCL) is a national registry of personal telephone numbers that consumers can register to reduce the number of unsolicited telemarketing calls they receive. Telemarketers are required to subscribe to the DNCL and avoid calling the numbers on the list, unless they have an exemption. One of the exemptions is for existing business relationships, which means that a telemarketer can call a consumer who has purchased a product or service from them or their employer within the last 18 months, or who has made an inquiry or application within the last six months. Therefore, Kendrick is still eligible to contact Chandra, who is an existing client of Oak Solid Financial, even if she is on the DNCL registry. However, Kendrick must respect Chandra's right to request that he stop calling her and remove her number from his contact list. References: Canadian Investment Funds Course, Chapter 1: The Canadian Financial Services Industry1, National Do Not Call List - Canada.ca2 NO.40 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? A. Investment objective B. Shirley's risk profile. C. Expected time horizon. D. The tax consequences. Answer: B Explanation Shirley's risk profile is the primary consideration for Jonathan when making an investment recommendation. Risk profile is a measure of how much risk an investor is willing and able to take on in their portfolio. It is determined by factors such as age, income, net worth, investment objectives, time horizon, and personal preferences. It is essential for a dealing representative to assess the risk profile of their client before recommending any investment products or strategies, as they have a fiduciary duty to act in the best interest of their client and ensure that their recommendations are suitable for their client's needs and goals. The other variables are also important, but they are secondary to the risk profile. References: [Risk Profile], [Know Your Client (KYC)] NO.41 Your client has very limited investment knowledge and is confused about what is meant by "marginal tax rate". What do you tell him? A. It is the tax rate applied to the next dollar earned. B. It is the tax rate used in calculating taxable capital gains. 22  IT Certification Guaranteed, The Easy Way! C. It is an amount resulting from dividing your total tax liability by your taxable income for the year. D. It is the number used to gross-up Canadian dividend income. Answer: A Explanation The marginal tax rate is the percentage of tax that an individual pays on the last dollar of income earned in a given year. It is also the tax rate that applies to any additional income earned in that year. The marginal tax rate varies depending on the individual's income level and tax bracket. For example, if an individual's taxable income for the year is $50,000 and the tax rate for that income bracket is 20%, then the marginal tax rate is 20%. This means that the individual pays 20% tax on the last dollar of income earned, as well as on any additional income earned above $50,000. References = Canadian Investment Funds Course, Unit 5: Types of Investments, Lesson 6: Taxation, Section 5.6.1: Income Tax 1; CIFC prepkit, Chapter 5: Types of Investments, Question 5.6.1 2 NO.42 Pierre wants to discuss the merits of a specific mutual fund with his Dealing Representative, Simone. There are no trailer fees associated with this fund. Simone is familiar with the mutual fund that Pierre is referring to, which is not offered by her dealer. They schedule an appointment to further discuss his investment portfolio. Which behaviour from Simone is ethical? A. Simone's ability to keep her knowledge current on competitors' investment offerings shows that she is putting her client's interest first. B. Knowing Pierre does not like that her dealer's funds have trailer fees, she chooses not to discuss the relationship between trailer fees and MER while making comparisons. C. When comparing her dealer's own mutual funds to the one Pierre discovered, Simone emphasizes the importance of similar net rates of return and minimizes the significance of management expense ratios (MERs). D. While comparing Fund Facts of the different mutual funds, Simone points out that not only are the fund management expenses different but so are the investor profiles for each fund. Answer: D Explanation While comparing Fund Facts of the different mutual funds, Simone points out that not only are the fund management expenses different but so are the investor profiles for each fund. This behaviour from Simone is ethical because it shows that she is providing accurate and complete information to Pierre and helping him make an informed decision based on his personal circumstances and objectives4. Fund Facts is a document that summarizes key information about a mutual fund, such as its investment objectives, risks, fees, performance history, and investor rights5. By comparing Fund Facts of different mutual funds, Simone can help Pierre understand how each fund differs in terms of its suitability, costs, and potential returns. The other behaviours from Simone are unethical because they do not serve Pierre's best interests or comply with professional standards. Simone's ability to keep her knowledge current on competitors' investment offerings does not necessarily show that she is putting her client's interest first. She may have other motives for researching other funds, such as trying to persuade Pierre to stay with her dealer's funds or finding new opportunities for herself4. Knowing Pierre does not like that her dealer's funds have trailer fees, she chooses not to discuss the relationship between trailer fees and MER while making comparisons. This behaviour is unethical 23  IT Certification Guaranteed, The Easy Way! because it is misleading and omits relevant information that Pierre should know before investing4. Trailer fees are fees paid by the fund manager to the dealer for the ongoing services provided by the dealer and its advisors to unitholders5. Trailer fees are part of the management expense ratio (MER), which is the total cost of running and distributing a fund expressed as a percentage of its assets5. Trailer fees and MERs affect the net returns of a fund and may create conflicts of interest between the advisor and the client5. When comparing her dealer's own mutual funds to the one Pierre discovered, Simone emphasizes the importance of similar net rates of return and minimizes the significance of management expense ratios (MERs). This behaviour is unethical because it is biased and does not present a balanced view of the pros and cons of each fund4. Net rates of return are not the only factor to consider when evaluating a fund's performance. MERs are also important because they reduce the fund's gross returns and may indicate how efficiently the fund is managed5. A fund with a lower MER may have an advantage over a fund with a higher MER, all else being equal5. References: Unit 2: Know Your Client, What's a good MER fee plus 3 strategies to avoid high fees - Bellvest NO.43 Raybert has a very short-term investment objective and has decided to purchase money market instruments. There are plenty of 90-day money market securities available for him to choose from. Although Raybert is aware that all the respective issuers have a similar need for his capital, no matter what he decides, he can only afford to purchase one. In terms of financial markets and their relationship to the principles of supply and demand, which characteristic of investment capital are the issuers being exposed to? A. Mobility B. Risk C. Scarcity D. Sensitivity Answer: C Explanation Scarcity is a characteristic of investment capital that refers to the limited availability of capital relative to the demand for it. Scarcity affects the price and return of capital, as well as the allocation of capital among different issuers and sectors. When capital is scarce, issuers have to compete for it by offering higher returns or lower prices, or by adjusting their financing strategies. When capital is abundant, issuers have more access to it at lower costs or higher prices, or by diversifying their sources of capital. In this case, Raybert has a very short-term investment objective and has decided to purchase money market instruments. There are plenty of 90-day money market securities available for him to choose from, but he can only afford to purchase one. This means that the issuers of these securities are exposed to the scarcity of capital, as they have to attract Raybert and other investors with similar objectives by offering competitive rates or discounts. References = Canadian Investment Funds Course, Unit 5: Types of Investments, Lesson 1: Economic Factors and Financial Markets, Section 5.1.1: Characteristics of Investment Capital1; CIFC prepkit, Chapter 5: Types of Investments, Question 5.1.1 2 NO.44 You are meeting a new client, Steven, and you are trying to determine his level of understanding of different investments. Which question would give you the most information regarding your client's familiarity with investing? 24  IT Certification Guaranteed, The Easy Way! A. Do you want to minimize taxes from your investments? B. What rate of return do you expect from investing? C. Do you understand the relationship between risk and return? D. Do you have the resources to invest for the long-term? Answer: C Explanation This question would give you the most information regarding your client's familiarity with investing because it tests their basic knowledge of one of the fundamental concepts in finance. The relationship between risk and return is the trade-off that investors face when choosing between different investments. Generally, the higher the risk, the higher the expected return, and vice versa. A client who understands this relationship would be able to evaluate the potential outcomes and costs of their investment decisions and choose the ones that match their risk tolerance and return objectives. A client who does not understand this relationship might have unrealistic expectations or make unsuitable choices. References = Risk-Return Tradeoff Definition - Investopedia, Risk and Return - Corporate Financ e Institute, Risk and Return: An Introduction - Morningstar NO.45 Which document contains information regarding the Independent Review Committee compensation? A. Annual Information Form B. Fund Facts C. Management Reports of Fund Performance D. Simplified Prospectus Answer: A Explanation The Annual Information Form (AIF) is a document that provides detailed information about a mutual fund, such as its history, structure, management, fees, expenses, risks, policies, and performance. The AIF also contains information regarding the Independent Review Committee (IRC) compensation, which is the amount of fees and expenses paid by the fund to the IRC members for their services. The IRC is a committee of independent individuals who oversee the fund manager's decisions on conflict of interest matters and act in the best interests of the fund and its investors12 References = web search results from search_web(query="Independent Review Committee compensation")12 and Canadian Investment Funds Course (CIFC) - Module 2: Investment Products - Section 2.2: Mutua l Funds3 3: https://www.ifse.ca/wp-content/uploads/2021/08/CIFC-Module-2.pdf NO.46 Barend is a Dealing Representative with Planvest Group Inc., a mutual fund dealer and member of the Mutual Fund Dealers Association of Canada (MFDA). Which of the following CORRECTLY describes Barend's obligation for conflicts of interest? A. Barend must identify material conflicts of interest and implement controls on behalf of the firm. B. Barend must disclose material conflicts of interest that cannot be addressed in the best interest of the client. C. Barend must avoid material conflicts of interest that cannot be addressed in the best interest of the client. D. Barend must identify material conflicts of interest and promptly report the conflicts of interest to 25  IT Certification Guaranteed, The Easy Way! clients. Answer: B Explanation A conflict of interest is a situation where an individual or a firm has competing or incompatible interests that may affect their ability to act fairly, honestly, and in the best interest of their clients. A material conflict of interest is a conflict of interest that a reasonable person would expect to know about and that may influence the client's decision to enter into or maintain a business relationship with the individual or the firm. According to the MFDA rules, Barend has an obligation to identify and address material conflicts of interest in a manner that prioritizes the client's interest over his own or the firm's interest1. If a material conflict of interest cannot be addressed in the best interest of the client, Barend must disclose it to the client before opening an account, providing advice, or executing a transaction. The disclosure must be clear, meaningful, and timely, and it must explain the nature and extent of the conflict of interest and how it could affect the client's interests2. Barend must also obtain the client's written consent to proceed with the account opening, advice, or transaction despite the conflict of interest. Barend must avoid material conflicts of interest that are prohibited by law or that would result in a breach of his fiduciary duty to the client. Barend must also report any material conflicts of interest to his firm and comply with the firm's policies and procedures for managing conflicts of interest3. References: * MFDA Rule 2.1.4 - Conflicts of Interest1 * MFDA Policy No. 2 - Minimum Standards for Account Supervision2 * MFDA Policy No. 9 - Disclosure of Conflicts of Interest (Outside Business Activities)3 NO.47 Khuyen is a Dealing Representative for Stark Contrast Investments. Her dealer has relationships with 20 different mutual fund families. This gave her the flexibility to sell two different types of funds from two different fund families to her client, Bao. $5,000 was invested in the Blue Moon Global Balanced fund and an additional $5,000 was invested in the Orange Sun Asset Allocation fund. Khuyen has been reviewing the performance of both funds and has determined that Bao would be better off being fully invested in the Blue Moon Global Balance fund. Bao had previously signed a Limited Authorization Form (LAF) for Khuyen, so she goes ahead and does not worry about consulting with Bao before making the change. What type of activity has Khuyen performed? A. Top-down management B. Churning C. Discretionary trading D. Value investing Answer: C Explanation Discretionary trading is a type of trading activity where the advisor makes investment decisions on behalf of the client without obtaining the client's prior consent for each transaction. Discretionary trading is only allowed if the client has signed a discretionary management agreement with the advisor and the advisor is registered as a portfolio manager. A limited authorization form (LAF) does not grant the advisor the authority to engage in discretionary trading. A LAF only allows the advisor to execute trades that are initiated by the client, such as pre-authorized contributions or withdrawals. Therefore, Khuyen has performed discretionary trading by switching Bao's funds without consulting him, which is a violation of her registrant responsibilities and ethical standards. 26  IT Certification Guaranteed, The Easy Way! References: * Canadian Investment Funds Course (CIFC) Study Guide, Chapter 2: The Sales Process, Section 2.4: Ethics and Compliance, page 2-161 * Discretionary Trading Definition - Investopedia2 NO.48 Which of the following statements about capital gains distributions from mutual fund trusts is correct? A. Capital gains from mutual fund trusts are deferred until the investor exits the mutual fund. B. Capital gains distributions from a mutual fund trust are reported annually on a T3. C. Capital gains distributions are not a disposition and are therefore not taxable. D. Capital gains from mutual fund distributions are 100% taxable. Answer: B Explanation B is correct because capital gains distributions from a mutual fund trust are reported annually on a T3 slip, which shows the amount and type of income received from the trust. Capital gains from mutual fund trusts are not deferred until the investor exits the mutual fund (A), as they are realized and distributed by the trust every year. Capital gains distributions are considered a disposition and are therefore taxable, as they increase the investor's adjusted cost base (ACB) and reduce the capital gain or increase the capital loss when the investor sells the mutual fund units. Capital gains from mutual fund distributions are 50% taxable (D), not 100%, as only half of the capital gain is included in the investor's taxable income. References: Canadian Investment Funds Course (CIFC) | IFSE Institute NO.49 Which of the following best describes implied needs of your clients? A. They are needs reflected by statements made by clients regarding problems and dissatisfactions. B. They are statements made by you showing readiness to solve a client's problem. C. They are statements made by clients expressing the desire for lower commissions. D. They are statements of wants and needs made by clients. Answer: A Explanation Implied needs of your clients are needs reflected by statements made by clients regarding problems and dissatisfactions1. For example, a client may say "I'm worried about outliving my savings" or "I don't understand how this investment works". These statements imply that the client has a need for retirement planning or financial education, respectively. Implied needs are different from explicit needs, which are statements of wants and needs made by clients1. For example, a client may say "I want to save for my child's education" or "I need a low-risk investment". These statements express the client's goals and preferences clearly. Statements made by you showing readiness to solve a client's problem are not implied needs, but rather responses to implied needs1. For example, you may say "I can help you create a retirement plan that suits your lifestyle" or "I can explain how this investment works and what are the benefits and risks". Statements made by clients expressing the desire for lower commissions are not implied needs, but rather objections or concerns that may arise during the sales process2. For example, a client may say "Your fees are too high" or "I can get a better deal elsewhere". These statements may indicate that the client is not convinced of the value of your service or product, or that they are trying to negotiate a lower price. References: Unit 2: Know Your Client, Unit 10: Sales Process 27  IT Certification Guaranteed, The Easy Way! NO.50 Danny is a Dealing Representative for Everbright Investments. He met with his client Adele, who has $1,000,000 to invest. During their meeting Danny determines that Adele has a high-risk profile. In addition, he learns that she has an excellent understanding of equities and how volatile they can be. Danny is considering recommending growth funds specifically, and making a recommendation from the following investment options: Based on the information provided, which mutual fund should Danny recommend? A. ABC Global Equity Fund. B. DEF European Equity Fund. C. LMN Asia Pacific Equity Fund. D. Invest equally in all 3 funds. Answer: D Explanation Adele has a high-risk profile and an excellent understanding of equities. Therefore, it would be appropriate for Danny to recommend growth funds. However, since Adele has $1,000,000 to invest, it would be prudent to diversify her investments and invest equally in all 3 funds. This way, she can benefit from the exposure to different regions and sectors, and reduce the impact of market fluctuations on her portfolio. Based on the table, all 3 funds have the same 5-year annualized returns net of MER, which is 15%. However, they have different MERs and Sharpe ratios. The MER is the fee charged by the fund manager for managing the fund, and the Sharpe ratio is a measure of risk- adjusted return. A lower MER means a lower cost for the investor, and a higher Sharpe ratio means a higher return per unit of risk. Therefore, investing equally in all 3 funds would allow Adele to achieve a balanced trade-off between cost and performance. References: * Canadian Investment Funds Course (CIFC) Study Guide, Chapter 4: Mutual Funds, Section 4.2: Types of Mutual Funds, page 4-6 * Canadian Investment Funds Course (CIFC) Study Guide, Chapter 5: Fixed-Income Securities, Section 5.5: Risk-Return Trade-Offs, page 5-14 * Sharpe Ratio Definition - Investopedia NO.51 Xian-Li believes she is a sophisticated investor. She has constructed her own portfolio and has had some success. She does not believe in studying a company's details such as earnings, expenses, or assets. She is more concerned with patterns in a company's stock price over time. She believes patterns form and can be used to predict future movements in the market. How does Xian-Li evaluate the companies in her portfolio? A. fundamental analysis B. flowchart analysis C. technical analysis D. value analysis Answer: C 28  IT Certification Guaranteed, The Easy Way! Explanation Technical analysis is the method of evaluating securities by analyzing the statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity. Xian-Li is using technical analysis to evaluate the companies in her portfolio. References: Canadian Investment Funds Course (CIFC) | IFSE Institute NO.52 Which of the following statements about your mutual fund registration is CORRECT? A. You can sell mutual funds anywhere in Canada as long as you are registered with one of the provincial or territorial securities commissions. B. Your online application must be reviewed and approved by your mutual fund dealer before you can begin to sell mutual funds. C. You must renew your registration through the online NRD system every two years. D. You must inform the regulatory authorities of any material or significant changes to your personal circumstances. Answer: D Explanation According to the Registered Investments (RIs) - Canada.ca, you must inform the regulatory authorities of any material or significant changes to your personal circumstances, such as a change of name, address, or employment status. You must also report any disciplinary actions, criminal charges, or civil lawsuits that may affect your suitability as a registrant. Failing to do so may result in suspension or revocation of your registration. NO.53 Which of the following are obligations on mutual fund dealing representatives imposed by The Proceeds of Crime (Money Laundering) and Terrorist Financing Act? A. record-keeping of large transactions, account-related information, and other relevant records B. reporting all financial transactions to the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) C. enhancing public awareness of matters related to money laundering and terrorist financing D. confirming client identity each time before concluding any transaction Answer: A NO.54 What type of mutual fund can invest in specified derivatives and forward contracts for grains, meats, metals, energy products, and coffee? A. global equity fund B. commodity pool C. labour-sponsored investment fund D. specialty fund Answer: B Explanation A commodity pool is a type of mutual fund that can invest in specified derivatives and forward contracts for commodities, such as grains, meats, metals, energy products, and coffee. A commodity pool allows investors to gain exposure to the commodity markets without having to buy or sell the physical commodities themselves. A commodity pool may also use leverage and hedging strategies to 29  IT Certification Guaranteed, The Easy Way! enhance returns and reduce risks. Therefore, B is the correct answer. References: Commodity Pool: Definition and How It Works - Investopedia, Canadian Investment Funds Course (CIFC) | IFSE Institute NO.55 What information does Fund Facts provide to potential investors? A. What the mutual fund is currently investing in. B. How to calculate the taxes owed from investment income. C. The portfolio management strategy that is used. D. The remuneration paid to the Independent Review Committee. Answer: A Explanation A Fund Facts document is a summary disclosure document that provides key information about a mutual fund, such as its investment objectives, risks, past performance, and fees. One of the information items that a Fund Facts document provides to potential investors is what the mutual fund is currently investing in, such as its top 10 holdings, asset mix, geographic allocation, and sector allocation. A Fund Facts document does not provide information on how to calculate taxes, portfolio management strategy, or remuneration of the Independent Review Committee. References: Fund facts guide | Sun Life Global Investments, Mutual Funds - Fund Facts | ScotiaFunds NO.56 In a mutual fund dealer, who is the person responsible for establishing and maintaining compliance policies and procedures as well as monitoring and assessing compliance? A. the chief executive officer B. the ultimate designated person C. the trustee D. the chief compliance officer Answer: D Explanation In a mutual fund dealer, the chief compliance officer (CCO) is the person responsible for establishing and maintaining compliance policies and procedures as well as monitoring and assessing compliance by the dealer and its representatives. The CCO must report to the board of directors or senior management of the dealer and must meet certain proficiency requirements, such as passing the Mutual Fund Dealers Compliance Exam. The CCO is also accountable to the securities regulators and self-regulatory organizations for any compliance issues or breaches. References: Guide to Broker- Dealer Registration NO.57 Quintin has been a Dealing Representative for Global Maximum Financial for 5 years. Today, he opened an account for his new client, Reginald. In addition to opening a new account, Reginald agreed to accept Quintin's investment recommendation and placed a purchase order to buy units of the Global Maximum Value Equity fund. Quintin informed his Branch Manager Lupita about this new account on the same day the purchase order was received. Lupita told Quintin that she would complete her review of the New Client Application Form (NCAF) by no later than tomorrow. Which statement regarding this new account opening is CORRECT? A. Quintin cannot accept purchase orders from a client until Lupita completes her review of the NCAF. B. Lupita has two business days from the date of opening the new account to approve the NCAF 30  IT Certification Guaranteed, The Easy Way! completed by Quintin. C. Quintin and Lupita are both following proper procedure regarding new account openings and purchase orders. D. Unless Quintin is presently under probation, he does not need Lupita's approval regarding the NCAF. Answer: A Explanation According to the MFDA Rules, a Dealing Representative must not accept any purchase orders from a client until the Branch Manager or other designated person has reviewed and approved the New Client Application Form (NCAF) for the client. This is to ensure that the Dealing Representative has obtained and verified all the necessary information about the client, such as identity, investment objectives, risk tolerance, financial situation, and suitability of investments. The review and approval of the NCAF must be completed before any trades are executed for the client, unless there are exceptional circumstances that justify a delay. In this case, Quintin should have waited for Lupita's approval of the NCAF before placing the purchase order for Reginald. References: 1: MFDA Rules as at December 31, 2021 - MFDA 2 (Rule 2.2.4) NO.58 Megan purchases a treasury bill for $98,200. When it matures for $100,000, how does Megan treat the $1,800 difference? A. as interest income B. as a capital gain C. as a dividend D. as return of capital Answer: A Explanation A treasury bill is a short-term debt instrument issued by the government at a discount from its face value and redeemed at par value at maturity. The difference between the purchase price and the face value is the interest income earned by the investor. Therefore, Megan treats the $1,800 difference as interest income for tax purposes. Interest income is fully taxable at the investor's marginal tax rate in the year it is received. Megan does not report any capital gain, dividend, or return of capital from the treasury bill. References: Canadian Investment Funds Course, Unit 5, Section 5.2 NO.59 Which of the following form part of the disclosure documents relating to mutual funds? A. balance sheet, income and cash flow statements of the portfolio management company B. statement of net assets, annual information form, management reports of fund performance C. annual proxy voting record, audited financial statements, and proof of registration D. new account information form, quarterly financial statements, and security certification Answer: B Explanation Disclosure documents are documents that provide information about a mutual fund's features, risks, performance, fees, and expenses to investors and regulators. Disclosure documents are required by securities laws and must be prepared and filed by the fund manager in accordance with the prescribed rules and standards. Disclosure documents relating to mutual funds include the following: * Statement of net assets: This is a document that shows the value of the fund's assets and liabilities 31  IT Certification Guaranteed, The Easy Way! as of a specific date. It also shows the net asset value per unit (NAVPU) of the fund, which is the price at which investors can buy or sell units of the fund. The statement of net assets is part of the fund's financial statements, which are prepared and filed semi-annually and annually. * Annual information form (AIF): This is a document that provides additional information about the fund that is not included in the simplified prospectus or the fund facts. The AIF includes information such as the fund's history, organization, management, governance, policies, risks, conflicts of interest, fees, expenses, taxation, and legal matters. The AIF is prepared and filed annually. * Management reports of fund performance (MRFP): These are documents that provide information about the fund's financial performance, portfolio composition, risk profile, and management expenses. The MRFPs are prepared by the fund manager and filed semi-annually and annually. The MRFPs include sections such as financial highlights, past performance, summary of investment portfolio, management discussion of fund performance, and financial statements. References: Canadian Investment Funds Course, Chapter 6: Fund Operations and Regulations1 NO.60 Darryl has a diversified investment portfolio of mutual funds in a non-registered account with Investwell Mutual Funds, a mutual fund dealer. Darryl's diversified portfolio is composed of 3 mutual funds. Each mutual fund is currently worth about $100,000. The ABC Canadian Equity Fund has a total return of 6%, the DEF Bond Fund has a total return of 8% and GHI Global Equity Fund has a total return of 10%. Darryl wants to make an in-kind contribution to his registered retirement savings plan (RRSP) account. He has unused RRSP contribution room of $60,000. From a tax-efficient viewpoint, which funds contribute in-kind to his RRSP account? A. Move the DEF Bond Fund to the RRSP. B. Move the GHI Global Equity Fund to the RRSP C. Move $20,000 from each of the three funds to the RRSP. D. Move the ABC Canadian Equity Fund to the RRSP. Answer: A Explanation Moving the DEF Bond Fund to the RRSP would be more tax-efficient than moving any of the other funds. This is because bond funds generate interest income, which is fully taxable at the investor's marginal tax rate in a non-registered account. By moving