CSI CSI-IFC Online Practice Questions and Exam Preparation

CSI CSI-IFC Online Questions & Answers

• Question 21:

  When selecting an investment to add to a portfolio, what feature would reduce the overall risk?

  A. High standard deviation
  B. High beta
  C. Low variance
  D. Low alpha
  C. Low variance

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  Explanation

  Variance measures the dispersion of returns around the mean; lower variance indicates greater stability and less volatility. Adding a security with low variance and low correlation to the portfolio reduces overall risk.

  High standard deviation = higher risk.

  High beta = greater sensitivity to market moves .

  Low alpha = underperformance, not risk reduction.

  Thus, the feature that reduces portfolio risk is Low variance.

• Question 22:

  What can a capital loss be applied against when computing Canadian income taxes?

  A. Dividend income only
  B. All types of investment income
  C. Capital gains only
  D. All types of income
  C. Capital gains only

• Question 23:

  Which of the following individuals would qualify for a full or partial Old Age Security (OAS) pension?

  A. Lenny, who is 65 years old and was born and raised in Canada, but lived in Jamaica from ages 25 to 65.
  B. Marcus, who is 60 years old, a Canadian citizen, and has lived in Canada for 20 years.
  C. Katrina, who is 75 years old and just immigrated to Canada from the U.S. last month.
  D. Donald, who is 65 years old and has lived in Canada since his birth but worked in Australia for the past 10 years.
  A. Lenny, who is 65 years old and was born and raised in Canada, but lived in Jamaica from ages 25 to 65.

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  Explanation

  Lenny would qualify for a partial OAS pension, because he meets the following criteria:

  - He is 65 years old or older.

  - He is a Canadian citizen or a legal resident at the time of his OAS pension application.

  18. The amount of his partial OAS pension would be proportional to the number of years he has lived in Canada after the age of 18, divided by 40. For example, if he has lived in Canada for 15 years, he would receive 15/40 or 37.5% of the full OAS pension1

  References:

  web search results from search_web(query="Old Age Security pension eligibility")

• Question 24:

  What is the first step before becoming eligible for registration as a mutual fund dealing representative?

  A. File a registration application through the dealer.
  B. Complete the 90-day training program.
  C. Pass the proficiency examination.
  D. Pay the registration fee with the applicable securities administrator.
  B. Complete the 90-day training program.

• Question 25:

  Using historical market data, which investment strategy's purchasing power is least susceptible to inflation risk?

  A. A diversified portfolio of equities
  B. Laddered GIC strategy with maximum maturities of five years
  C. Mixed-maturity Government of Canada bond portfolio
  D. Balanced allocation of equities and corporate bonds
  A. A diversified portfolio of equities

• Question 26:

  Eleanora receives a $500 eligible Canadian dividend from her mutual fund. Her federal marginal tax rate for the year is 29%.

  Assuming the enhanced gross-up of 38% and a federal dividend tax credit of 15.02%, how much federal tax will she pay on her dividend?

  A. $69.90
  B. $189.16
  C. $96.46
  D. $115.40
  C. $96.46

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  Explanation

  The federal tax on eligible Canadian dividends is calculated as follows: First, the dividend amount is grossed up by 38%, which means multiplying it by 1.38. This is to account for the corporate tax that has already been paid by the company. Eleanora's grossed-up dividend is $500 x 1.38 = $690.

  Second, the grossed-up dividend is multiplied by the federal marginal tax rate to get the gross federal tax.

  Eleanora's gross federal tax is $690 x 0.29 = $200.10.

  Third, the grossed-up dividend is multiplied by the federal dividend tax credit rate to get the federal tax credit. This is to avoid double taxation of the dividend income. Eleanora's federal tax credit is $690 x 0.1502 = $103.64.

  Fourth, the federal tax credit is subtracted from the gross federal tax to get the net federal tax. Eleanora's net federal tax is $200.10 - $103.64 = $96.46.

  Therefore, Eleanora will pay $96.46 in federal tax on her dividend.

  References:

  How Dividends Are Taxed and Reported on Tax Returns - Investopedia, Dividend Tax Credit in Canada - TurboTax

• Question 27:

  Which of the following asset allocation statements is correct?

  A. A fixed income component of less than 25% is appropriate for conservative portfolios
  B. You should review a client's asset allocation when the investment environment changes
  C. Portfolio security selection determines the long-term growth potential
  D. Equity weightings greater than 90% should not be recommended
  B. You should review a client's asset allocation when the investment environment changes

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  Explanation

  Asset allocation should be reviewed when the investment environment changes to ensure it remains suitable for the client's objectives. The feedback from the document states: "In general terms, an equity weighting of less than 25% is considered conservative and more than 75% is considered aggressive. Only if the client is very aggressive should the weighting of his equity component reach 90%."

  References:

  Chapter 8 - Constructing Investment PortfoliosLearning Domain: Understanding Investment Products and Portfolios

• Question 28:

  Fernanda, an advisor, is setting up her process for completing client suitability assessments.

  What must Fernanda do with respect to investment suitability?a

  A. Reassess suitability as market conditions change.
  B. Recommend the lowest cost products.
  C. Review the Know Your Client information with clients at least annually.
  D. Assess suitability on solicited orders only.
  C. Review the Know Your Client information with clients at least annually.

• Question 29:

  Which among the following BEST describes a company's income statement?

  A. It shows the amount of profit that is reinvested in the company in the form of retained earnings.
  B. It shows the amount of capital contributed to the company by its shareholders or owners.
  C. It shows the earnings and expenses of a business over a period of time.
  D. It provides a snapshot of a company's financial position at a specific point in time
  C. It shows the earnings and expenses of a business over a period of time.

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  Explanation

  An income statement is a financial report that shows the earnings and expenses of a business over a period of time, such as a month, a quarter, or a year. It also shows the net income or net loss of the business, which is the difference between the total revenues and the total expenses. An income statement helps investors and creditors evaluate the profitability, performance, and risk of a business. The other options are not accurate descriptions of an income statement.

  Option A describes retained earnings, which are part of the equity section of the balance sheet.

  Option B describes contributed capital, which is also part of the equity section of the balance sheet.

  Option D describes the balance sheet, which is another financial statement that shows the assets, liabilities, and equity of a business at a specific point in time.

  References:

  Income Statement -Definition, Explanation and Examples, Income Statement: How to Read and Use It - Investopedia, How to Prepare an Income Statement | HBS Online

• Question 30:

  A client contributes to an RRSP.

  What is one potential benefit of the contribution?

  A. Tax-free withdrawals at any time
  B. Immediate elimination of all taxes
  C. A deduction that may reduce taxable income
  D. Guaranteed investment returns
  C. A deduction that may reduce taxable income

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  Explanation

  RRSP contributions may be deducted from taxable income, potentially reducing the amount of income tax payable. Withdrawals are generally taxable and investment returns are not guaranteed. Therefore, Option C is correct.