Free Practice Questions for CSI IFC Exam

A mutual fund dealing representative must complete a training program within 90 days of starting to act in that role and be closely supervised for six months. The feedback from the document states:

"All mutual fund dealing representatives are required to complete a training program within 90 days from the day that they first start acting as a dealing representative and must be closely supervised for six months."

Defined benefit pension plans base retirement income on formulas that may use:

Career average earnings → lower protection against inflation.

Final average earnings (last few years of salary) → better protection against inflation, since the calculation reflects recent, higher earnings that have already adjusted for inflation.

Defined contribution and group RRSPs do not guarantee inflation-adjusted benefits.

Thus, the Final average pension plan offers better inflation protection before retirement.

Foreign dividend income is taxed at the investor’s marginal tax rate without the benefit of a dividend tax credit, unlike Canadian dividend income, which qualifies for a tax credit. The feedback from the document states:

"Foreign dividend income is not eligible for any dividend tax credit, and is taxed at an investor’s marginal tax rate."

According to the life-cycle hypothesis, medium-term goals for clients in their family commitment years (ages 25–50) include education savings for children.

Emergency fund = short-term goal

Down payment on a house = short-term to medium-term, but typically earlier in life-cycle stage

Retirement = long-term goal

Thus, the correct medium-term financial target is saving for a child’s university education.

Taline’s risk profile should be “low” because her risk capacity is low and she cannot afford large investment losses. Risk capacity is the degree of risk that an investor must take in order to achieve their financial goals, while risk tolerance is the degree of risk that an investor is willing to take. Risk capacity is more important than risk tolerance in determining an investor’s risk profile1. Taline has a low risk capacity because she lives on a low, fixed income and cannot afford to lose money. Her risk tolerance may be high, but that does not mean she should take more risk than she can handle. Faruq should not override Taline’s risk capacity or assess her risk profile based on the higher of her risk tolerance and risk capacity, as that would be unsuitable and unethical. References: Unit 3: Suitability

An asset allocation fund is a type of mutual fund that invests in a combination of cash, fixed income, and equity securities, but has the flexibility to adjust the portfolio according to market conditions and the fund manager’s outlook. The fund manager can change the asset mix to take advantage of opportunities or reduce risks in different asset classes and markets. The fund’s objective is to achieve a balanced risk-return profile by diversifying across different assets and investment styles. Quattro Fund is an example of an asset allocation fund, as it can invest in cash, fixed income, and equity securities, and Louis can adjust the portfolio according to his views on interest rates and the market.

Canadian Investment Funds Course, Unit 6, Section 6.2; 4; 5; 6

Tony is employing a top-down investment approach, which is a method of selecting securities based on macroeconomic factors, such as the state of the economy, the industry trends, and the market conditions. A top-down investor starts by analyzing the big picture and then drills down to the specific sectors, regions, and companies that are expected to perform well in that environment. Tony has done an economic analysis of the various provinces and sectors of the Canadian economy and has determined that Nova Scotia and Alberta present the best prospects. He has also identified potential in the oil and gas sector. He then narrows down his selection to an oil supply firm in Medicine Hat and a drilling company in Halifax. This shows that he is using a top-down approach to choose his investments.

Canadian Investment Funds Course, Chapter 3: Risk and Return1