CSI CSI-IFC Online Practice Questions and Exam Preparation

CSI CSI-IFC Online Questions & Answers

• Question 281:

  Armand, a financial advisor, recently met with Austin, a potential client. Austin is interested in a conservative portfolio that focuses on mature companies that are out of favour with a low turnover.

  What is the best investment philosophy for Austin?

  A. Value style
  B. Growth at a reasonable price
  C. Momentum strategy
  D. Growth investing
  A. Value style

• Question 282:

  Sheldon is a 25 year old graphic designer. He has just started working and saves regularly. Apart from his regular salary he also earns extra money from freelancing after office hours and during weekends. His earnings from his freelance work are sufficient for meeting his living expenses. He saves the entire amount of his salary. He has heard about lifecycle funds but has come to you for additional information.

  Which of the following statement about lifecycle funds is TRUE?

  A. As Sheldon gets older, the life cycle asset allocation changes from more risky to less risky.
  B. All lifecycle funds start with equal allocations to cash, fixed income and equities before being re-balanced.
  C. The asset allocation of a lifecycle fund is set based on the age demographic of its unitholders and remains the same for the time frame of the lifecycle fund.
  D. Investor income is the only basis for changing the asset allocation of a lifecycle mutual fund.
  A. As Sheldon gets older, the life cycle asset allocation changes from more risky to less risky.

  ---

  Explanation

  A lifecycle fund is a type of asset-allocation fund that automatically adjusts its portfolio composition according to the investor's age and risk tolerance. As the investor gets closer to their retirement date or target date, the fund shifts from more risky assets, such as stocks, to less risky assets, such as bonds and cash. This is done to reduce the volatility and preserve the capital of the fund as the investor approaches their withdrawal phase. Therefore, statement A is true about lifecycle funds. Statement B is false because different lifecycle funds may have different initial allocations depending on their target dates and risk profiles. Statement C is false because the asset allocation of a lifecycle fund changes over time according to a predetermined glide path that gradually reduces risk. Statement D is false because investor income is not the only basis for changing the asset allocation of a lifecycle fund; other factors, such as age, risk tolerance, investment objectives, and time horizon, are also considered.

  References:

  Life-Cycle Fund: How They Work, Examples, Lifecycle Funds | The Thrift Savings Plan (TSP), What Is a Lifecycle Fund? | The Motley Fool

• Question 283:

  What is often a requirement of maintaining licensing as a mutual fund sales representative?

  A. Satisfying continuing education requirements.
  B. Choosing a product specialization.
  C. Keeping assets under management above minimum thresholds.
  D. Passing annual proficiency exams.
  A. Satisfying continuing education requirements.

• Question 284:

  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. Defined contribution plan
  B. Career average plan
  C. Flat benefit plan
  D. Final average plan
  C. Flat benefit plan

  ---

  Explanation

  A flat benefit plan is straightforward, provides retirement income based solely on years of service, and is not influenced by participants' income levels, making it ideal for the employer's requirements. The feedback from the document states: "The flat benefit plan is simple to understand, provides a retirement income based solely on years of service, and is not affected by plan members' individual incomes."

  References:

  Chapter 6 - Tax and Retirement PlanningLearning Domain: The Know Your Client Communication Process

• Question 285:

  Sylvia decided to use the savings from her bank account to purchase a 5-year bond. The face value of the bond is $10,000, the market price is $9,230 and the coupon rate is 7%. What is the current yield on the bond? Round to 2 decimal places.

  A. 7.00%
  B. 7.25%
  C. 7.58%
  D. 7.75%
  C. 7.58%

  ---

  Explanation

  The current yield on a bond is the annual interest payment divided by the current market price of the bond. In this case, the annual interest payment is 7% of the face value, which is $700. The current market price of the bond is $9,230.

  Therefore, the current yield is:

  9230700x100%=7.58%

  The current yield is different from the coupon rate, which is the annual interest payment divided by the face value of the bond. The coupon rate does not change over the life of the bond, but the current yield changes as the market price of the bond fluctuates.

  References:

  Canadian Investment Funds Course (CIFC) Study Guide, Chapter 5: Fixed-Income Securities, Section 5.2:

  Bond Pricing and Yield, page 5-61

  Current Yield Definition - Investopedia2

• Question 286:

  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
  B. commodity pool

  ---

  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 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

• Question 287:

  Zara buys a future contract with an underlying value of $100,000 worth of stocks. She is required to deposit $1,750 of margin. Two weeks later, the underlying value of the stocks is $101,900.

  What is Zara's total return?

  A. $3,650 gain
  B. $1,900 gain
  C. $150 gain
  D. $950 gain
  A. $3,650 gain

• Question 288:

  What would be considered a fixed asset of a company?

  A. Marketable securities
  B. Inventories
  C. Computers
  D. Trade receivables
  C. Computers

  ---

  Explanation

  Fixed assets are long-term tangible assets used in business operations, not held for resale (e.g., land, buildings, machinery, equipment, computers).

  Marketable securities (A) are current assets (short-term investments).

  Inventories (B) are current assets.

  Trade receivables (D) are current assets (accounts receivable).

• Question 289:

  What is an example of a direct investment?

  A. An individual purchases a vacation home
  B. An investor purchases a mutual fund
  C. A couple purchases a government bond
  D. An advisor purchases stocks for a client
  A. An individual purchases a vacation home

  ---

  Explanation

  Direct investment means the investor owns the asset directly, e.g., real estate property, stocks, or bonds held personally.

  Mutual funds (B) are indirect investments since they pool money. Government bonds (C) can be direct if held individually, but in CSC context, examples of direct investments often emphasize real estate ownership as the clearest form.

  Advisor purchases stocks for a client (D) is indirect because the advisor acts on behalf of the client.

• Question 290:

  What portion of the withdrawal from a Registered Educational Savings Plan is tax-free?

  A. Dividend income earned
  B. Capital gains earned
  C. Original capital contributed
  D. Canadian Educational Savings Grant (CESG) amounts
  C. Original capital contributed

  ---

  Explanation

  The original capital contributed to a Registered Educational Savings Plan (RESP) is not taxed upon withdrawal, while other amounts, such as income or grants, are taxable to the beneficiary. The feedback from the document states:

  "The original capital withdrawn from an RESP is not taxed; all other amounts are taxed in the hands of the beneficiary."

  References:

  Chapter 6 - Tax and Retirement PlanningLearning Domain: The Know Your Client Communication Process