CSI CSI-IFC Online Practice Questions and Exam Preparation

CSI CSI-IFC Online Questions & Answers

• Question 421:

  Ian is 25, employed, and has no dependents. He has no current financial or family obligations. He has asked for your recommendation for investing a $50,000 inheritance.

  What asset allocation would typically suit an investor with Ian's characteristics?

  A. 10% in a bond fund, 80% in equity funds, 10% in a money market fund
  B. 10% in equity funds, 70% in a bond fund, 20% in a money market fund
  C. 35% in equity, 25% in a money market fund, 60% in a bond fund
  D. 50% in equity funds, 20% in a bond fund, and 30% in a money market fund
  A. 10% in a bond fund, 80% in equity funds, 10% in a money market fund

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  Explanation

  Ian, as a Stage 1 - Early Earning Years investor, has no family or financial commitments, allowing for a higher risk tolerance. An asset allocation with a heavy equity weighting, such as 80% in equity funds, is suitable. The feedback from the document states: "Ian would be considered a Stage 1 - Early Earning Years investor. Stage 1 investors, in general, are free of family and financial commitments, and would typically have a higher ability to tolerate risk. Thus, with its higher level of risk and lower component of income-based investments, 10% in a bond fund, 80% in equity funds and 10% in a money market fund would be most likely to be suitable."

  References:

  Chapter 4 - Getting to know the clientLearning Domain: The Know Your Client Communication Process

• Question 422:

  At 4:00 p.m.

  Eastern Time on July 6, the following information is collected for the Marigold Canadian Dividend Fund: What is the net asset value per unit NAVPU for the Marigold Canadian Dividend Fund for July 6?

  A. $7.19
  B. $7.65
  C. $8.25
  D. $9.27
  C. $8.25

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  Explanation

  This is the net asset value per unit (NAVPU) for the Marigold Canadian Dividend Fund for July 6. The NAVPU is calculated by dividing the net asset value (NAV) of the fund by the number of units outstanding.

  In this case, the NAVPU is $8.25 ($45,668,900 / 5,564,443).

  The NAV is the value of a fund's assets minus the value of its liabilities. The value of assets is the value of all the securities in the portfolio, plus any cash and cash equivalents, plus any accrued income for the day. The value of liabilities is the value of all short-term and long-term liabilities, plus any accrued expenses for the day. The NAV is usually expressed on a per-share or per-unit basis, which is the NAVPU. The NAVPU is the price at which investors can buy or sell units of the fund. It is determined at the end of each trading day based on the closing market prices of the portfolio's securities. The NAVPU can change daily depending on the performance of the securities in the fund and the fund's expenses.

• Question 423:

  Which type of managed fund has been in existence the longest?

  A. Hedge
  B. Investment
  C. Segregated
  D. Discretionary
  B. Investment

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  Explanation

  Investment funds, commonly referred to as mutual funds, are the longest-established form of managed funds. The Investment Funds in Canada course explains that mutual funds have existed for decades and were created to allow individual investors to pool their money and gain access to professionally managed, diversified portfolios. This structure predates hedge funds, segregated funds, and discretionary portfolio management services.

  Hedge funds are a relatively recent development and are generally restricted to accredited or sophisticated investors. Segregated funds were introduced later by insurance companies and combine investment features with insurance guarantees. Discretionary management is a service model rather than a fund structure and became more prominent as wealth management evolved. The CIFC text emphasizes that mutual funds form the foundation of the Canadian managed products industry due to their accessibility, regulatory oversight, and long history. Because investment (mutual) funds were the first widely available managed investment vehicle, Option B is the correct and fully verified answer.

• Question 424:

  What is Widget Inc.'s gross profit?

  Widget Inc. Earnings Statement

  Sales: $200,000

  Cost of Goods Sold: $80,000

  Selling & General Expenses: $40,000 Depreciation: $5,000 Total Expenses: $30,000 Net Earnings: $40,000

  A. $75,000
  B. $50,000
  C. $120,000
  D. $45,000
  C. $120,000

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  Explanation

  Gross profit is calculated as sales minus the cost of goods sold.

  For Widget Inc.: $200,000 - $80,000 = $120,000. The feedback from the document states: "Sales are reduced by the expenses that were incurred in order to generate the goods sold (cost of goods sold). These expenses include the cost of inventories used to produce the goods as well as the labour that went into their production.

  The sales revenue, net of the cost of producing those goods, is known as gross profit. In this case, gross profit = $200,000 - $80,000 = $120,000."

  References:

  Chapter 9 - Understanding Financial StatementsLearning Domain: Understanding Investment Products and Portfolios

• Question 425:

  Robin is preparing for a client meeting. She is gathering information about a mutual fund that she would like to recommend to her client.

  Which of the following documents would be considered sales communication?

  A. the prospectus
  B. fund facts
  C. marketing brochure
  D. annual information form
  C. marketing brochure

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  Explanation

  Sales communication is any written or electronic communication that is intended to promote the sale of a mutual fund, or to influence a person to buy or sell a mutual fund. Sales communication includes any advertisement, brochure, report, newsletter, or other material that is distributed to existing or potential clients. A marketing brochure is an example of sales communication, as it is designed to inform and persuade clients about the features and benefits of a mutual fund. A prospectus, a fund facts, and an annual information form are not considered sales communication, as they are legal documents that provide essential information about a mutual fund, such as its investment objectives, strategies, risks, fees, and performance. These documents are required by securities regulators and must be delivered to investors before or after they purchase a mutual fund.

• Question 426:

  Patrick is a portfolio manager for the HyperTally Growth Fund. It has generated an annualized rate of return of 10% this past year. However, with the anticipation of very high inflation to soon occur, there is also an expectation of higher interest rates. Patrick is concerned about the future returns of existing stocks within the fund.

  What may Patrick do to protect against the market value of the fund dropping?

  A. Agree to buy forward contracts where he is in the "long' position.
  B. Buy call options for the existing stocks stored within the fund.
  C. Avoid the use of derivatives because they are speculative in nature.
  D. Purchase put options for the fund's existing assets.
  D. Purchase put options for the fund's existing assets.

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  Explanation

  A put option is a contract that gives the buyer the right, but not the obligation, to sell an underlying stock at a specified price (the strike price) within a specified time period (the expiration date). The seller of a put option is obligated to buy the stock if the buyer exercises the option. Patrick can purchase put options for the fund's existing assets, which means he can lock in a minimum selling price for his stocks in case the market value drops below the strike price. This way, he can protect against potential losses and hedge his portfolio against market risk.

  References:

  What Is a Put Option and How to Use It With Example - Investopedia, How to Hedge With Stock Index Futures - Investopedia

• Question 427:

  Which of the following statements about total return for money market funds is TRUE?

  A. Performance is displayed with both current yield and effective yield.
  B. Effective yield will always be lower than current yield.
  C. Current yield incorporates the compounding effect.
  D. Current yield reflects the income earned on a money market fund for the most recent 14 day period.
  A. Performance is displayed with both current yield and effective yield.

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  Explanation

  Current yield and effective yield are two ways of measuring the total return for money market funds. Current yield reflects the income earned on a money market fund for the most recent 14 day period, annualized. Effective yield incorporates the compounding effect of reinvesting the income earned on a money market fund over a year. Both current yield and effective yield are displayed in the performance reports of money market funds, as they provide different information to investors.

  References:

  5: Types of Investments, Lesson

  4: Money Market Instruments, Section 5.4.3: Total Return for Money Market Funds1 CIFC prepkit, Chapter

  5: Types of Investments,

• Question 428:

  Malik has been saving money for retirement but he is worried about the impact inflation may have on the value of his savings. He wants to purchase a bond that will give him a steady stream of income that is greater than the inflation rate. He has found a bond issued by a major airline with a market price of $9,200, a par value of $10,000, and a coupon rate of 6.75%.

  What is the current yield of this bond?

  A. 7.34%
  B. 6.75%
  C. 6.25%
  D. 6.21%
  A. 7.34%

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  Explanation

  The current yield of a bond is the annual interest payment divided by the current market price of the bond. The annual interest payment is the coupon rate multiplied by the par value of the bond. In this case, the annual interest payment is:

  6.75%x10,000=675

  The current market price of the bond is $9,200. Therefore, the current yield is:

  9200675x100%=7.34%

  The current yield is higher than the coupon rate because the bond is selling at a discount, meaning that its market price is lower than its par value. This implies that the bond is offering a higher return than the prevailing market interest rate.

  However, the current yield does not take into account the capital gain or loss that will occur when the bond matures or is sold. A more accurate measure of the bond's return is the yield to maturity (YTM), which is the annualized rate of return that accounts for both the interest payments and the price change of the bond over its remaining term.

  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 429:

  On which of the following does the Personal Information Protection and Electronic Documents Act (PIPEDA) impose requirements?

  A. consumers
  B. departments and agencies of the Government of Canada
  C. organizations in the private sector subject to federal regulation
  D. departments and agencies of provincial governments
  C. organizations in the private sector subject to federal regulation

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  Explanation

  The Personal Information Protection and Electronic Documents Act (PIPEDA) is a federal law that imposes requirements on the collection, use, and disclosure of personal information by organizations in the private sector that are subject to federal regulation, such as banks, telecommunications, transportation, and broadcasting. PIPEDA also applies to organizations that operate in provinces or territories that do not have substantially similar privacy legislation, such as Alberta, British Columbia, and Quebec. PIPEDA does not apply to consumers, departments and agencies of the Government of Canada, or departments and agencies of provincial governments, as they are governed by other privacy laws or regulations12

  References: 7: The Regulatory Environment, Lesson 3: Privacy Legislation, Section 7.3.1: Personal Information Protection and Electronic Documents Act (PIPEDA) 1 Office of the Privacy Commissioner of Canada website

• Question 430:

  In a mutual fund sales representative's interaction with clients, what term best describes a set of moral principles that incorporate both the letter of the law and the spirit of the law?

  A. Compliance
  B. Ethical conduct
  C. Fiduciary
  D. Professional responsibility
  B. Ethical conduct

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  Explanation

  Ethics in the securities industry are defined as moral principles that go beyond simple compliance with the law, incorporating both the letter and the spirit of the law.

  Compliance = following rules only.

  Fiduciary duty = acting in the best interest of clients.

  Professional responsibility = broader conduct obligations.

  The correct term here is Ethical conduct.