IFIC Practice Test 1 questions with verified answers graded A+ latest update, Exams of Nursing

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IFIC Practice Test

1 questions with

verified answers

graded A+ latest

update

IFIC Practice Test

1 questions with

verified answers

graded A+ latest

update

Question Results

1. What is the purpose of the fund facts? A. To determine if a fiduciary duty is present in the representative-client relationship. B. To clarify for clients the nature and terms of their relationship with the dealer of the fund. C. To better align the interests of the fund with the client. D. To provide clients with key fund information that is relevant to their investment decisions.
2. What term describes the range of possible future outcomes on the price of a security? A. Fluctuation. B. Return. C. Risk. D. Beta.
3. A client has $100,000 in a savings account, $5,000 in a chequing account, and $10,000 in loans. Calculate his net worth. A. $115, B. $90, C. $105, D. $95,
4. Which newspaper article would be likely to result in foreign capital moving out of a country? A. International Ranking of Domestic Level of Education Rises Significantly. B. New Taxes on Foreign Direct Investment. C. Government Re-elected for a Fourth Consecutive Term. D. Corporate Taxes Reduced.
5. Which example demonstrates direct use of capital savings? A. Depositing funds in a Canadian bank account. B. Building a new factory. C. Purchasing an investment fund. D. Purchasing a company’s stocks.
6. Which of the following transactions takes place in the secondary market? A. Issue of new debt and equity securities. B. Issue of federal Treasury bills. C. Sale of mutual funds. D. Resale of previously issued securities.
7. Which exchange in Canada deals exclusively with financial and equity futures and options? A. The Montreal Exchange. B. The Toronto Stock Exchange. C. Canadian Securities Exchange. D. The TSX Venture Exchange.
8. What term applies to unemployment created by a new technology that eliminates the need for subway train drivers? A. Structural. B. Frictional. C. Cyclical. D. Natural.
9. The demand for blue widgets increases sharply due to a newspaper report that using blue widgets improves recovery from influenza. What can be said about the law of supply? A. Price and production both decreases. B. Price increases and production decreases. C. Price decreases and production increases. D. Price and production both increases.

10. If the Consumer Price Index (CPI) was 140.6 last year and 146.9 this year, what was the inflation rate over the year? A. 5.20% B. 6.04% C. 4.48% D. 4.12% 11.Gary chooses not to recommend that his client sell a current mutual fund to purchase a similar new mutual fund despite pressure to meet a sales target for the new fund. What responsibility applies to Gary’s action? A. Legal. B. Compliance. C. Ethical. D. Professional.
11. What does suitability mean? A. Recommendations are not based on the personal and financial knowledge of the client. B. The investor’s major concerns are addressed. C. Understanding the personal and financial knowledge of the client. D. Recommendations are appropriate for the client’s unique situation and investment objectives.
12. Which organization regulates mutual and investment funds? A. Investment Industry Regulatory Organization of Canada. B. Bourse de Montreal. C. Mutual Fund Dealers Association. D. Securities commissions.
13. What stage in the business cycle typically has increasing wages, rising inflation, rising interest rates with slowing sales, and decreasing business investment? A. Recovery. B. Expansion. C. Peak. D. Trough.
14. Based on the financial planning pyramid, what security would be appropriate for a very aggressive investor? A. Tax shelters. B. Over the Counter (OTC) Securities. C. Commodities. D. Foreign stocks.
15. Your client earns $100,000 from employment and $10,000 from investments each year. Her bills total $95,000 annually. What is her discretionary income? A. $15, B. $10, C. $20, D. $5,
16. What bias results in investors valuing an asset that they own over an asset that another individual owns? A. Representativeness. B. Risk aversion. C. Endowment. D. Status Quo.

26.Ian is 25, employed, and has no dependents. He has no current financial or family obligations. He has asked for your recommendation for investing in a $50,000 inheritance. What asset allocation would typically suit an investor with Ian’s characteristics? A. 50% in equity funds, 20% in a bond fund and 30% in a money market fund. B. 10% in a bond fund, 80% in equity funds, 10% in a money market fund. C. 35% in equity, 25% in a money market fund, 60% in a bond fund. D. 10% in equity funds, 70% in a bond fund, 20% in a money market fund.

27. Your client contacts you, requesting that you purchase a mutual fund based on a “hot tip” from a friend who has been a successful investor. What bias is your client most likely being affected by? A. Endowment. B. Hindsight. C. Availability. D. Overconfidence. 28.Jeff is a new client. He is 50 years old with modest savings in the low six figures, and wants to reinvest his portfolio to ensure that he can retire comfortably at age 65. In his meeting with Jeff, the advisor uncovered some of Jeff’s biases. Jeff displayed several strong emotional biases along with a few weak cognitive biases. What should the advisor do? A. The advisor should adapt to Jeff’s cognitive biases. B. The advisor should moderate and adapt to Jeff’s emotional biases. C. The advisor should moderate Jeff’s emotional biases. D. The advisor should moderate and adapt to Jeff’s cognitive biases.
28. How is a $10,000 withdrawal from a registered retirement savings plan (RRSP) taxed? A. As regular income. B. As a deduction against other income. C. Based on the type of investment income type. D. At a set rate of 30%.
29. What portion of the withdrawal from a Registered Educational Savings Plan is tax-free? A. Capital gains earned. B. Canadian Educational Savings Grant (CESG) amounts. C. Dividend income earned. D. Original capital contributed.
30. An employer wants to offer his employees a pension plan. The goal is to provide a simple-to-understand plan that will reward all participants equally, regardless of their income level, and provide a retirement income based on a participant’s years of service with the company. What plan will best meet his requirements? A. Career average plan. B. Final average plan. C. Defined contribution plan. D. Flat benefit plan.
31. Your client, a high-income earner in a high marginal tax bracket, is seeking to minimize the amount of tax he pays on investment income while continuing to invest in mutual funds. Which mutual fund would best meet his investment objective? A. Money market fund. B. Foreign equity fund. C. Fixed-income fund. D. Canadian equity fund.

33. Your client’s unused RRSP contribution room is $46,000. He contributes $15,000 in the current taxation year. How much RRSP contribution room can he carry forward? A. $31, B. $46, C. $35, D. $38,
34. What is a key difference between marketable government bonds and treasury bills? A. Marketable government bonds may be sold at a discount while treasury bills are sold at a premium. B. Treasury bills trade in the over-the-counter market, while marketable bonds trade on the exchange. C. Marketable government bonds actively trade in the secondary market while treasury bills can only be bought from and sold to the government. D. Treasury bills do not pay any coupon interest, while marketable bonds do.
35. Which security is most likely to provide a capital gain if held to maturity? A. Cumulative preferred shares bought at par value. B. A corporate bond bought at a discount. C. Common shares of a mature company. D. A government bond bought at a premium. 36.For the last year, an investor earned a return before adjustment for inflation of 2% on a money market fund, while inflation averaged 1.5%. What was his nominal rate of return? A. 1.50% B. 2.00% C. 3.50% D. 0.50%
36. Fund A has a 5-year average return of 10% and a standard deviation of 5%. Fund B has a 5-year average return of 8% and a standard deviation of 2%. Select the most accurate statement about Funds A and B. A. Fund B is less risky than Fund A. B. Fund A’s returns have ranged from 5% to 10%. C. Fund A will always provide a higher return than Fund B. D. Fund B’s lowest return is lower than Fund A’s lowest return.
37. Calculate the 2-year simple return for the AAA Mutual Fund. A. 8% B. 7% C. - 3% D. 3%
38. Which statement best describes what a rational investor will do when comparing the risk and return of two investments? A. He will select the one that minimizes risk and maximizes return. B. He will select the one that maximizes risk and maximizes return. C. He will select the one with the higher expected risk because that is the only way to earn a higher return. D. He will select the one with the lower risk because all investors are risk averse.

48. Rank the decisions made by a portfolio manager in order of importance for the success of the portfolio. A. Security selection, sector weighting, asset allocation. B. Asset allocation, sector weighting, security selection. C. Sector weighting, security selection, asset allocation. D. Asset allocation, security selection, sector weighting.
49. Which of the following asset allocation statements is correct? A. You should review a client’s asset allocation when the investment environment changes. B. A fixed income component of less than 25% is appropriate for conservative portfolios. C. Portfolio security selection determines the long-term growth potential. D. Equity weightings greater than 90% should not be recommended.
50. Which financial leverage ratio measures a company’s ability to repay its borrowings? A. Total debt ratio B. Operating profit margin ratio. C. Cash flow from operations to total debt ratio. D. Interest coverage ratio.
51. What is Widget Inc.’s gross profit? A. $75, B. $45, C. $50, D. $120,
52. Apex Mutual Fund has been structured to avoid taxation by distributing any net interest, dividends, and capital gains to unitholders each calendar year. This is an example of what type of mutual fund structure? A. Open-ended mutual fund. B. Mutual fund trust. C. Closed-end mutual fund. D. Mutual fund corporation.
53. What criteria does the independent review committee use to determine if a potential conflict of interest, such as inter- fund trading, should be approved? A. Will the action contravene National Instrument 81-102? B. Will the action contravene a unitholder’s statutory rights? C. Will the action require unitholder approval? D. Will the action achieve a fair and reasonable result for the fund?
54. Why is it important that an investor receives a copy of the Fund Facts document prior to buying a mutual fund? A. The investor can verify that the fund has not misstated any material facts. B. The investor can verify that the fund manager is adhering to the fund’s stated investment objectives. C. The investor can verify that his statutory rights have been respected. D. The investor can verify that the fund’s stated investment objectives and risk profile match his own.

55. What entity receives all fund money obtained from investors buying units/shares? A. Dealer. B. Custodian. C. Registrar. D. Fund manager.
56. The ZZZ Money Market Fund has a 7-day yield of 0.05%. What is the current yield for the fund? Round your answer to two decimal places. A. 2.22%. B. 2.61%. C. 1.61%. D. 0.05%.
57. Which type of fund is least likely to produce capital gains income? A. Money market fund. B. Preferred dividend fund. C. Short-term bond fund. D. Mortgage fund.
58. What type of risk is the fundamental risk factor for fixed-income securities? A. Reinvestment risk. B. Liquidity risk. C. Interest rate risk. D. Market risk.
59. Which statement is most accurate about fund wraps? A. The investor pays fees to both the wrap manager and the manager of the underlying funds. B. The fund wrap sponsor is responsible for asset allocation decisions. C. Each model is designed to meet the needs of the individual. D. There is essentially no regulatory difference between a fund wrap and a standard mutual fund.
60. Your client, Mrs. DaSousa, would like to diversify her portfolio by investing in a global equity fund. What should you advise her about the foreign currency risk? A. The value of the fund will go up if the Canadian dollar increases in value against the foreign currency. B. The fund manager can hedge the exchange risk by buying foreign currency through futures contracts. C. The foreign exchange risk will be offset by the lower liquidity risk. D. The fund may provide a hedge against a decline in the Canadian dollar.
61. Which type of fixed income fund has a short duration, with the objectives of preserving capital and generating better current income than a money market fund? A. Short-term bond fund. B. Mortgage fund. C. T-bill fund. D. Preferred dividend fund.
62. What best describes why mortgage funds generally have less sensitivity to changes in interest rates than bond funds? A. Many mortgage funds also hold T-bills and mortgage-backed securities, which are less volatile. B. Most mortgages held in mortgage funds are either NHA-insured or privately insured. C. Interest on mortgages is usually paid monthly, while interest on bonds is typically paid semiannually. D. Mortgage funds are highly diversified, often holding over 10,000 individual mortgages.

71. Which drawback of the comparison universe method makes average fund managers look more like underperformers as the comparison period lengthens? A. Universe size. B. Survivorship bias. C. Definition of universes. D. Matching risk profiles.
72. What type of fund offers the highest expected risk and the highest expected return in terms of the risk-return trade- off between different types of mutual funds? A. Canadian Equity fund. B. Mortgage fund. C. Real estate fund. D. Specialty fund. 73.A fund manager has diversified the equity portfolio he manages to reduce the potential negative impact of unfavorable information relating to any one stock. What type of risk has he reduced? A. Interest rate risk. B. Unique risk. C. Market risk. D. Default risk.
73. You compare the performance of ABC Equity Fund and XYZ Equity Fund to their benchmark. Indicate the correct statement. A. Fund XYZ offered less protection on the downside. B. Fund ABC showed greater consistency in its simple annual returns. C. Fund XYZ would have offered a lower likelihood of loss if a client needed to sell the investment. D. Fund ABC demonstrated a superior performance in a bearish market.
74. What type of fee does a mutual fund sponsor often reduce the longer an investor holds a back-end load fund? A. Sales fee. B. Trailer fee. C. Acquisition fee. D. Redemption fee.
75. Which factors would cause the management expense ratio charged by a mutual fund to be higher? i. The fund invests in foreign equities. ii. The fund is large in size. iii. The fund is managed by the fund sponsor’s management team. iv. The fund pays a trailer fee. A. 3 and 4. B. 1 and 2. C. 1 and 4. D. 2 and 3.

77. An investor purchases equity fund units for $17.60. In which of the following circumstances would an investor potentially owe taxes on capital gains? A. The fund is sold today for $18.80 per unit and the proceeds are reinvested. B. The fund is currently valued at $16.45 per unit. C. The fund is currently valued at $18.80 per unit. D. A dividend distribution is reinvested into additional units of the same fund.
78. Which exemplifies the tendency of mutual fund companies to shut down poor performing funds? A. Survivorship bias. B. Short selling. C. Standard lot. D. Standby underwriting.
79. Which index would investors use as a benchmark for doing research on the largest listed public companies in the US marketplace? A. MSCI EAFE Index. B. S&P/TSX Composite. C. FTSE Canada Universe Bond Index. D. S&P 500.
80. Which Sharpe ratio result would indicate that the fund earned a return less than the risk-free return? A. 1 B. 0. C. 2. D. - 0.
81. What equity investment philosophy places greater emphasis on industry weighting than on security selection? A. Sector rotation. B. Momentum investing. C. Growth investing. D. Growth at a reasonable price.
82. A fund manager who utilizes an interest rate anticipation philosophy forecasts a rise in interest rates. What change in asset allocation should he implement? A. Increase long-term bond and low coupon bond holdings. B. Increase long-term and high coupon bond holdings. C. Increase short-term T-bill and low coupon bond holdings. D. Increase short-term T-bill and high coupon bond holdings.
83. Your soon-to-be retired client has accumulated $700,000 in a mutual fund investment. He has consulted with you with respect to systematic withdrawal plans. His other sources of income in retirement are uncertain. He is not interested in leaving a legacy at his death. Which plan would best suit his needs? A. Ratio withdrawal plan. B. Fixed-dollar withdrawal plan. C. Life withdrawal plan. D. Annuity.
84. In what circumstance would an investor receive a T3 or T5 reporting a capital gain from a mutual fund investment? A. When the fund sells investments at a price higher than the average cost of the investment. B. When the value of the investor’s fund units has risen. C. When the value of the fund’s investments has risen. D. When the investor sells her fund units at a price higher than their average cost.

92.A mutual fund sales representative receives a client’s purchase order for equity mutual funds and confirms that the order is appropriate based on the client’s recorded investment knowledge and risk profile. The client explains that she had inherited the funds from a family member. The client states her investment objective to be long term. The representative records this information and processes the order. What the representative doesn’t know is that the client has recently lost her job and is living on unemployment insurance. What step did the representative need to take in order to uphold her duty of care? A. The representative should have applied the test of suitability to the unsolicited order. B. The representative should have applied due diligence in matching the order to the client’s KYC information. C. The representative should have probed the client’s understanding of equity funds. D. The representative should have verified that the client’s KYC information was updated before applying the suitability test. 93.A mutual fund sales representative is under pressure to meet certain sales objectives. However, he consistently ignores these quotas when making client recommendations. Which obligation has he followed? A. The obligation to maintain a high standard of professional knowledge. B. The obligations to put the client’s interests first. C. The obligation to keep client information confidential. D. The obligation to take appropriate cautions for potentially unsuitable investments.

94. What personal information must be obtained from clients opening a non-registered account? i. Date of birth. ii. Social insurance number. iii. Permanent address. iv. Full legal name. A. 3 and 4. B. 1 and 2. C. 2 and 3. D. 1 and 4.
95. A husband wishes to transfer some of his non-registered mutual fund holdings to his wife but wants to maintain trading authority over the transferred assets. He also wishes to ensure that should she die the gift he is making will revert to him. What is the appropriate account type? A. Open a tenants in common account. B. Open a nominee account. C. Open a joint account. D. Open an account in his wife’s name only.
96. Jack and Jill hold a mutual fund account as tenants in common. What conditions would apply to their account? i. Should either die, full ownership of the account would pass to the other. ii. Each would be the owner of 50% of the account’s assets. iii. Either could issue trading instructions on all account assets. iv. Each would be required to provide KYC information. A. 1 and 3. B. 2 and 3. C. 1 and 4. D. 2 and 4.

97. A dealing representative explains the past performance of a mutual fund to a potential client, discussing the annual simple returns and compound returns that the fund had earned. She concluded by indicating she expects the fund’s NAVPU was likely to rise at similar rates in the future, given the economic outlook. What unacceptable selling practice has occurred? A. Representatives cannot promise NAVPU will increase by any amount. B. Representatives cannot comment upon the economic outlook. C. Representatives cannot quote a future purchase price. D. Representatives cannot discuss a fund’s past performance.
98. Sofie is a busy mutual fund sales representative. She would like to move clients that are invested in low-yielding cash accounts to her firm’s higher yielding proprietary money market mutual fund. She confirms the orders with the clients, then instructs her new sales assistant, who will sit the IFC exam next week, to enter orders to buy units in this fund. How has Sofie violated the standards of conduct? A. She has done insufficient research and violated her due diligence requirement. B. She violated no standards of conduct. C. She failed to establish a scheduled review for her clients’ accounts. D. She allowed an unregistered individual to process the order to buy units.
99. What is the time period during which an individual must complete a training program once she starts acting as a dealing representative? A. 90 days. B. 6 months. C. 3 months. D. 30 days. 100.A mutual fund sales representative has been asked to make a presentation to an investment club. During the presentation he discusses personal experiences of a questionable nature. What aspect of Professionalism is relevant to this situation? A. Other personal endeavors. B. Personal financial dealings with clients. C. Solicitation of client business. D. Conduct of personal business.