IFC Exam Training Practice Tests (CISI Investment Funds in Canada (IFC))]

Question 1

What is a characteristic of joint investment accounts?

A. They require at least one signature. B. They require a witness acknowledgement. C. They require the risk tolerance of all holders to be identical. D. They require an application for discretionary trading.

Correct Answer: A

Question 2

Evan owns retractable preferred shares of Ingram Corp. Which statement CORRECTLY describes a key feature of Evan's shares?

A. Offers Evan the opportunity to receive additional dividends if Ingram Corp's profit exceeds a stated level. B. Entitles Evan to sell the shares back to Ingram Corp at a pre-determined price and time in the future. C. Gives Evan the option to convert the Ingram Corp preferred shares into a fixed number of common shares at a predetermined price within a specified period. D. Allows Ingram Corp to buy back the preferred shares at a pre-determined price within a defined period.

Correct Answer: D

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Question 3

Which of the following statement about Exchange Traded Funds (ETFs) is TRUE?

A. ETFs have lower MERs compared to mutual funds. B. Investors may sell their ETFs in the stock market or redeem them through the Fund at the NAVPU of the day. C. Usually the market price of an ETF is the net asset value per unit (NAVPU) of the Fund on that day. D. All ETFs are actively managed.

Correct Answer: A

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Question 4

What type of transaction must be reported under current anti-money laundering and terrorist financing legislation?

A. Any transaction of $10,000 CDN or more B. Deposit transactions of $5,000 CDN or more C. Deposit transactions of $10,000 CDN or more D. Any cross-border transactions of $10,000 CDN or more

Correct Answer: C

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Question 5

What expense ratio is paid by mutual fund investors for the explicit costs of running the fund?

A. Management fee ratio B. Operating expense ratio C. Management expense ratio D. Trading expense ratio

Correct Answer: C

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Question 6

Which of the following is a rationale for a portfolio manager to use a passive portfolio management strategy?

A. The manager believes he or she can outperform the market with his or her stock picking skills. B. The manager wishes to create c apital gains in the mutual fund by frequently buying and selling stocks C. The manager does not believe in using benchmarks. D. The manager believes that as the markets are fairly priced, it would be futile to look for mis-priced securities.

Correct Answer: D

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Question 7

A mutual fund representative meets with a young family whose net worth/level of wealth is categorized as low, but they have the potential to become wealthy. In general, the family seems susceptible to believing that market events are predictable. Also, the family has a stronger impulse to avoid losses than earn gains. How might the mutual fund representative effectively address each of the two biases, respectively?

A. Conform to the first bias and moderate the second. B. Moderate the first bias and adapt to the second. C. Moderate both biases identified. D. Conform to both biases identified.

Correct Answer: B

Question 8

Which client has demonstrated the endowment behavioural bias?

A. Peter, who chose to hold his mutual fund shares despite the fact that the shares had lost value, the prospects for the fund were poor and believing there are stronger alternative investments available B. Farida, who purchased shares in a real estate company based on the success of previous real estate company purchases C. Kendra, who believed that funds managed by a certain fund management company must be good quality since she often sees the advertisements D. Dave, who wants to sell his income property at a price that is higher than comparable properties in the area

Correct Answer: D

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Question 9

Which term describes the tendency of a mutual fund manager to move away from the original stated investment objectives by investing in classes of securities different from those named in the fund's prospectus?

A. Market timing B. Style drift C. Momentum investing D. Sector rotation

Correct Answer: B

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Question 10

On which of the following does the Personal Information Protection and Electronic Documents Act (PIPEDA) impose requirements?

A. consumers B. departments and agencies of provincial governments C. organizations in the private sector subject to federal regulation D. departments and agencies of the Government of Canada

Correct Answer: C

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Question 11

What type of pension plan usually provides better protection against inflation up to the time of retirement?

A. Career average B. Defined contribution C. Final average D. Group RRSP

Correct Answer: C

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Question 12

Which type of fund is least likely to produce capital gains income?

A. Mortgage fund B. Short-term bond fund C. Preferred dividend fund D. Money market fund

Correct Answer: D

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Question 13

Which stock would be considered the most defensive?

A. ABC Bank with a beta of 0.5 B. ISS Technology with a beta of 1.5 C. KYX Manufacturing with a beta of 1.0 D. Unity Corp with a beta of 2.0

Correct Answer: A

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Question 14

What personal information must be obtained from clients opening a non-registered account?
Date of birth
Social insurance number
Permanent address
Full legal name

A. 1 and 2 B. 3 and 4 C. 1 and 4 D. 2 and 3

Correct Answer: B

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Question 15

A risk-averse investor is meeting with their advisor to discuss investment solutions. Traditionally, the investor has considered GICs only, but they are open to considering other alternatives. To what emotional bias is the investor most susceptible?

A. Status quo B. Hindsight C. Loss aversion D. Endowment

Correct Answer: A

CISI Investment Funds in Canada (IFC) - IFC Exam Practice Test