CSI CSI-IFC Online Practice Questions and Exam Preparation

CSI CSI-IFC Online Questions & Answers

• Question 101:

  Who has the ultimate responsibility for the activities of a mutual fund corporation?

  A. The board of directors
  B. The portfolio manager
  C. Canadian Investment Regulatory Organization
  D. The shareholders
  A. The board of directors

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  Explanation

  In a mutual fund corporation, the Investment Funds in Canada course states that ultimate responsibility rests with the board of directors. The board acts on behalf of shareholders to oversee the management and operations of the mutual fund corporation and to ensure that the fund is managed in compliance with securities legislation and in the best interests of investors. While portfolio managers are responsible for day-to-day investment decisions, they operate under the authority and supervision of the board. The board appoints key service providers, approves contracts, establishes governance policies, and ensures that conflicts of interest are properly managed. This governance structure is central to investor protection.

  Regulatory bodies such as the Canadian Investment Regulatory Organization (CIRO) oversee market participants and enforce rules, but they do not manage or control individual mutual fund corporations. Shareholders are owners of the corporation, but they do not have operational control or responsibility for daily activities.

  The CIFC curriculum clearly distinguishes between ownership and governance, emphasizing that directors bear fiduciary responsibility for ensuring proper management. Therefore, Option A is the correct and fully CIFC-aligned answer.

• Question 102:

  What is a key difference between marketable government bonds and treasury bills?

  A. Treasury bills do not pay any coupon interest, while marketable bonds do
  B. Marketable government bonds may be sold at a discount while Treasury bills are sold at a premium
  C. Treasury bills trade in the over-the-counter market, while marketable bonds trade on the exchange
  D. Marketable government bonds actively trade in the secondary market while Treasury bills can only be bought from and sold to the government
  A. Treasury bills do not pay any coupon interest, while marketable bonds do

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  Explanation

  Treasury bills (T-bills) have short maturities and are sold at a discount, with the return being the difference between the purchase price and par value at maturity, without coupon interest. Marketable bonds, however, pay coupon interest. The feedback from the document states:

  "Because T-bills have such short maturities, they do not pay any coupon interest; instead, they are sold to investors at a discount from par value. When the T-bill matures, you receive par value. The difference between the price paid and the par value represents your return."

  References:

  Chapter 7 - Types of Investment Products and How They Are TradedLearning Domain: Understanding Investment Products and Portfolios

• Question 103:

  A self-directed investor bases stock purchase decisions on internet recommendations and stock tips, believing this provides the most accurate information.

  What is the investor's behavioural bias?

  A. Endowment
  B. Availability
  C. Representativeness
  D. Overconfidence
  B. Availability

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  Explanation

  The availability bias occurs when investors rely on easily available or recent information rather than a thorough analysis. In this case, the investor bases decisions on internet recommendations and stock tips, believing they are accurate, instead of analyzing fundamentals. This clearly matches availability bias. Endowment bias applies when investors overvalue what they already own. Representativeness bias applies when investors judge outcomes by stereotypes or past patterns. Overconfidence refers to excessive faith in one's own knowledge.

  Thus, the behavioural bias here is Availability .

• Question 104:

  What is the role of a custodian?

  A. to ensure safekeeping of all the securities in the portfolio
  B. to oversee the general administration of the mutual fund
  C. to construct and manage the portfolio of investments
  D. to calculate the daily net asset value per unit (NAVPU) of the mutual fund
  A. to ensure safekeeping of all the securities in the portfolio

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  Explanation

  A custodian in mutual fund is a trust company, bank, or similar financial institution that is responsible for holding and safeguarding the securities owned within a mutual fund. The custodian also records and reports all transactions to the fund manager. The custodian does not oversee the general administration, construct and manage the portfolio, or calculate the NAVPU of the mutual fund. These are the roles of other entities such as the fund administrator, the fund manager, and the fund accountant.

  References:

  Canadian Investment Funds Course (CIFC) - Module 2: Investment Products - Section 2.2: Mutual Funds1 and web search results from search_web(query="role of a custodian in mutual funds")23 1: (https://www.ifse.ca/wp-content/uploads/2021/08/CIFC-Module-2.pdf)

• Question 105:

  What bias would be considered an emotional behavioural bias?

  A. Overconfidence
  B. Anchoring
  C. Hindsight
  D. Status quo
  D. Status quo

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  Explanation

  Behavioural biases are divided into: Cognitive biases (errors in thinking, e.g., anchoring, hindsight, overconfidence).

  Emotional biases (driven by feelings and instincts).

  The status quo bias is considered an emotional behavioural bias, because it arises from an emotional reluctance to change, rather than a logical error.

  Therefore, the correct answer is D. Status quo.

• Question 106:

  What effect does contractionary monetary policy have on money supply and credit in the economy?

  A. It decreases money supply and decreases credit
  B. It decreases money supply and increases credit
  C. It increases money supply and decreases credit
  D. It increases money supply and increases credit
  A. It decreases money supply and decreases credit

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  Explanation

  Contractionary monetary policy is used when the economy is overheating or facing inflationary pressure. The Bank of Canada increases interest rates, which leads to reduced borrowing and lending. This action decreases the money supply in circulation and reduces the availability of credit to consumers and businesses.

  Therefore, the correct effect of contractionary monetary policy is that it reduces both money supply and credit in the economy.

• Question 107:

  A client has $100,000 in savings, $5,000 in bank accounts, and $10,000 in loans. Calculate his net worth.

  A. $115,000
  B. $90,000
  C. $105,000
  D. $95,000
  D. $95,000

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  Explanation

  Net worth is calculated as total assets minus total liabilities. The client's assets are $100,000 (savings) + $5,000 (bank accounts) = $105,000. The liabilities are $10,000 (loans). Thus, net worth = $105,000 - $10,000 = $95,000. The feedback from the document confirms: "Net worth is calculated as the value of all of the client's assets after subtracting outstanding loan and mortgage balances. In this example, the client has $100,000 + $5,000 = $105,000 in assets, and $10,000 in loans. Therefore, his net worth is $105,000 - $10,000 = $95,000."

  References:

  Chapter 1 - The Role of the Mutual Fund Sales RepresentativeLearning Domain: An Introduction to the Mutual Funds Marketplace

• Question 108:

  The following data is available for an investment: Purchase value $125

  End of the year value

  $133

  Quarterly dividend amount

  $1

  What is the annual return for this investment if held for one year?

  A. 9.6%
  B. 3.2%
  C. 9.0%
  D. 7.2%
  A. 9.6%

• Question 109:

  What type of asset allocation strategy rebalances asset classes to pre-defined corridors?

  A. Model
  B. Tactical
  C. Expected
  D. Strategic
  D. Strategic

• Question 110:

  Which document provides key information about a mutual fund, including risks, costs, and performance?

  A. Prospectus summary
  B. Annual report
  C. Fund Facts document
  D. Tax information slip
  C. Fund Facts document

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  Explanation

  The Fund Facts document is designed to provide investors with concise information about a mutual fund's investment objectives, risks, costs, and historical performance before purchase. Therefore, Option C is correct.