CSI CSI-IFC Online Practice Questions and Exam Preparation

CSI CSI-IFC Online Questions & Answers

• Question 341:

  Solomon is a Dealing Representative who is excited about a new equity fund his dealer recently approved. He thinks investors will be attracted to the fund's historical performance. He has a prospective new client, Madira, who is 25 years old.

  Madira has invested in mutual funds before, but not with Solomon's dealer. She has made an appointment to open a new RRSP with Solomon's firm.

  What does Solomon need to do to make this a suitable recommendation?

  A. Show from past fund performance, that mutual fund costs are not important if there are high returns.
  B. Rely on the risk rating of the mutual fund when offering an investment solution.
  C. Identify how the proposed investment is in alignment with the investor's profile and holdings.
  D. Match the past rates of return of the mutual fund with what is the anticipated rate of return.
  C. Identify how the proposed investment is in alignment with the investor's profile and holdings.

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  Explanation

  To make a suitable recommendation, Solomon needs to identify how the proposed investment is in alignment with the investor's profile and holdings. A suitable recommendation is one that meets the investor's needs, goals, risk tolerance, time horizon, and personal circumstances. It also considers the investor's existing portfolio and how the new investment would affect its diversification, performance, and risk. Therefore, option C is correct regarding what Solomon needs to do to make a suitable recommendation. The other options are not correct or sufficient to make a suitable recommendation.

  Option A is false because mutual fund costs are important regardless of the past fund performance, as they reduce the net returns and compound over time.

  Option B is false because relying on the risk rating of the mutual fund is not enough to offer an investment solution, as it does not reflect the investor's return expectations, liquidity needs, tax situation, or personal preferences.

  Option D is false because matching the past rates of return of the mutual fund with what is the anticipated rate of return is not a reliable way to make a recommendation, as past performance does not guarantee future results and may not be consistent with the investor's risk tolerance or time horizon.

  References:

  [Suitability | GetSmarterAboutMoney.ca], [Mutual Fund Fees | GetSmarterAboutMoney.ca], [Risk Rating | GetSmarterAboutMoney.ca]

• Question 342:

  A client wishes to invest money that may be needed immediately for emergencies.

  Which mutual fund feature would likely be most important?

  A. Foreign diversification
  B. Liquidity
  C. Leverage
  D. Tax deferral
  B. Liquidity

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  Explanation

  Emergency savings require quick access to funds. Liquidity is therefore a key consideration because it allows investments to be converted into cash with minimal delay. Therefore, Option B is correct.

• Question 343:

  Julia is looking for a mutual fund that will give her growth with moderate volatility. Her dealing representative has suggested the Laurentian Fund. The mutual fund's mandate limits the amount of equity exposure in the portfolio to 60%. Also, the portfolio must hold between 40 - 60% in fixed income at all times. The mutual fund distributes interest, dividends, and capital gains to its unitholders.

  What type of mutual fund is the Laurentian Fund?

  A. asset allocation
  B. balanced
  C. specialty
  D. index
  B. balanced

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  Explanation

  A balanced mutual fund is a type of fund that invests in a mix of equities and fixed income securities, with the aim of achieving both growth and income objectives. A balanced fund typically has a target asset allocation that is specified in its mandate, and may vary within a certain range depending on market conditions. A balanced fund may also distribute interest, dividends, and capital gains to its unitholders. The Laurentian Fund is an example of a balanced fund, as it limits its equity exposure to 60% and holds between 40 - 60% in fixed income at all times.

• Question 344:

  Irina Pluskova is a financial advisor for a multi-national firm. She is a well-known personality within the local community for her philanthropic work with children's charities.

  What must Irina do to uphold the Standards of Conduct?

  A. Conduct her charitable work outside of business hours.
  B. Disclose her charitable work to her colleagues.
  C. Conduct her charitable work in a responsible and moderate manner.
  D. Disclose her charitable work to her clients.
  C. Conduct her charitable work in a responsible and moderate manner.

• Question 345:

  Your client, Kimberly has investments in both registered and non-registered plans.

  Which of the following investment strategies is best suited for Kimberly from a tax perspective?

  A. Include investments paying capital gains in the registered plan and foreign pay investments in the non-registered plan.
  B. Include domestic pay assets in the registered plan and foreign pay assets in the non-registered plan.
  C. Include interest paying investments in the registered plan and dividend paying investments in the non-registered plan.
  D. Include dividend paying investments in the registered plan and interest paying investments in the non-registered plan.
  C. Include interest paying investments in the registered plan and dividend paying investments in the non-registered plan.

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  Explanation

  According to the Canadian Investment Funds Course, different types of investment income are taxed differently in Canada. Interest income is fully taxed at the marginal rate, while dividend income is favourably taxed with a dividend tax credit.

  Capital gains are taxed on 50% of the gain at the marginal rate, and foreign income is subject to withholding tax. Therefore, a tax-efficient strategy is to include interest paying investments, such as bonds or GICs, in the registered plan, where they can grow tax-deferred until withdrawal. Dividend paying investments, such as Canadian stocks or ETFs, should be included in the non-registered plan, where they can benefit from the lower tax rate and the dividend tax credit. Foreign income should also be avoided in the non-registered plan, unless it is held in a U.S. dollar account or a foreign currency hedged ETF, to reduce the impact of withholding tax and currency fluctuations.

  1: Canadian Investment Funds Course - IFSE Institute 2 (Unit 9: Retirement)

• Question 346:

  The following information is available for Monique: Number of children Lifetime RESP contributions to date

  $45,000

  CESG received to date

  $7,200

  Family income

  $120,000

  Desired current year contribution

  $7,000

  What is the maximum RESP contribution that Monique can make this year?

  A. $7,000
  B. $5,000
  C. $5,500
  D. $0
  B. $5,000

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  Explanation

  The lifetime RESP contribution limit is $50,000 per beneficiary.

  Monique has already contributed $45,000.

  Remaining contribution room = $50,000 - $45,000 = $5,000.

  Even though she wants to contribute $7,000, the maximum allowed is $5,000.

  Thus, the correct answer is B. $5,000.

• Question 347:

  David is reviewing a simplified prospectus and is particularly interested in one of the funds. The investment objective stated for this fund is to provide dividend income, capital preservation, and some potential for capital gains.

  What fund is David interested in?

  A. Mortgage fund
  B. Preferred dividend fund
  C. Equity growth fund
  D. Bond fund
  B. Preferred dividend fund

• Question 348:

  Which index would investors use as a benchmark for doing research on the largest listed public companies in the US marketplace?

  A. S&P/TSX Composite
  B. MSCI EAFE Index
  C. FTSE Canada Universe Bond Index
  D. S&P 500
  D. S&P 500

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  Explanation

  The S&P 500 is the appropriate benchmark for researching the largest listed public companies in the US market. The feedback from the document provides: "Index: S&P 500, Description: The 500 largest publicly held companies that trade on U.S. markets, Performance uses: U.S. equity funds."

  References:

  Chapter 14 - Understanding Mutual Fund PerformanceLearning Domain: Evaluating and Selecting Mutual Funds

• Question 349:

  Charlotte has received proceeds from a deceased family member's estate. Charlotte decides to visit Malik, who's a Dealing Representative at her bank. She tells Malik, she does not know much about trading ETFs, but she wants to invest in ETFs. Charlotte says she feels fortunate to have this money and that she's not worried about losing it because she never planned on having any of it.

  What element of the Know Your Client (KYC) information has Malik been able to learn?

  A. Risk Profile
  B. Risk Capacity
  C. Risk Preference
  D. Risk Tolerance
  C. Risk Preference

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  Explanation

  The element of the Know Your Client (KYC) information that Malik has been able to learn is Charlotte's risk preference. KYC information is a collection of personal and financial information that registered firms and individuals must obtain from their clients before providing any investment advice or services. KYC information helps registered firms and individuals understand their clients' needs, goals, risk tolerance, time horizon, and personal circumstances, as well as comply with regulatory obligations such as suitability, disclosure, and reporting. One of the components of KYC information is risk preference, which is a measure of how much risk an investor is willing to take on in their portfolio. It reflects the investor's attitude, personality, and emotional factors that influence their investment decisions. Risk preference can be classified into three categories: risk-seeking, risk-averse, or risk-neutral. Based on Charlotte's statement that she does not know much about trading ETFs, but she wants to invest in ETFs, and that she feels fortunate to have this money and that she's not worried about losing it because she never planned on having any of it, Malik can infer that Charlotte has a high-risk preference or a risk-seeking attitude. This means that Charlotte is willing to take on more risk in exchange for higher potential returns, even if it means losing some or all of her money. Therefore, option C is correct regarding what element of KYC information Malik has been able to learn. The other options are not correct regarding what element of KYC information Malik has been able to learn.

  Option A is false because risk profile is not an element of KYC information; rather, it is an outcome of KYC information that summarizes the investor's overall suitability for different types of investments based on their KYC information.

  Option B is false because risk capacity is not an element of KYC information; rather, it is a measure of how much risk an investor can afford to take on in their portfolio based on their financial situation and goals.

  Option D is false because risk tolerance is not an element of KYC information; rather, it is a measure of how much risk an investor can handle in their portfolio without losing sleep or changing their plans.

  References:

  [Know Your Client (KYC) | IFIC], [Know Your Client (KYC) | GetSmarterAboutMoney. ca], [Risk Preference | Investopedia]

  Your client, James, would like to work beyond the normal retirement age. He comes to you for advice on his registered retirement savings plan (RRSP).

  What are the rules regarding terminating an RRSP?

  65. James must terminate the plan by the end of the year he turns

  67. James must terminate the plan by the end of the year he turns

  70. James must terminate the plan by the end of the year he turns 71.

  Answer: D

  According to the Canadian Investment Funds Course, an RRSP is a retirement savings plan that allows individuals to defer taxes on their contributions and investment income until they withdraw the funds. However, an RRSP cannot be held indefinitely and must be terminated by the end of the year the annuitant turns 71.

  At that point, the annuitant has three options to withdraw the funds from the RRSP: Make a lump-sum withdrawal, which is subject to withholding tax and income tax. Convert the RRSP to a registered retirement income fund (RRIF), which provides a steady stream of income with a minimum amount that must be withdrawn each year. Purchase an annuity, which offers a guaranteed income for life or for a specified period.

  1: Canadian Investment Funds Course - IFSE Institute 2 (Unit

  9: Retirement)

• Question 350:

  Derek submits an order to sell 300 units of the Evergreen Canadian Mortgage Fund at 8:00 p.m. EST on Friday, January 6.

  His proceeds will be based on the net asset value per unit (NAVPU) for which day (assume no holidays)?

  A. Friday, January 6
  B. Monday, January 9
  C. Tuesday, January 10
  D. Wednesday, January 11
  B. Monday, January 9

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  Explanation

  Mutual fund orders placed after the market closes are processed using the next business day's net asset value per unit (NAVPU). Since Derek submitted his sell order at 8:00 p.m. EST on Friday, January 6 (after the close of the markets), his proceeds will be based on the NAVPU for Monday, January 9, the next business day.

  References:

  This information is consistent with the standard practice for mutual fund transactions as outlined in the Canadian Investment Funds Course (CIFC). The CIFC materials provided by IFSE Institute (https://www.ifse.ca/courselist/canadian-investment-funds-course-cifc/andhttps://www.ifse.ca/resources/)covertheproceduresandtimingsrelatedtomutualfundtransactions.