CSI CSI-IFC Online Practice Questions and Exam Preparation

CSI CSI-IFC Online Questions & Answers

• Question 481:

  Your clients, Jessica and Ken, want to buy a house next year. You recommend a money market fund.

  How do you think a money market fund will help Jessica and Ken reach their goal?

  A. Money market funds are safe investments because their net asset value per unit does not usually fluctuate.
  B. Money market funds provide high returns without risking the capital invested.
  C. Money market funds pay income weekly which can be automatically reinvested.
  D. Money market funds provide investors a guaranteed fixed rate of return.
  A. Money market funds are safe investments because their net asset value per unit does not usually fluctuate.

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  Explanation

  Money market funds are safe investments because their net asset value per unit does not usually fluctuate. Money market funds invest in highly liquid instruments like high-interest savings accounts, term deposits, short-term debt securities, cash equivalents, and other low-risk, short-term investments 3. These funds aim to preserve capital and provide liquidity while generating some income 3. Money market funds typically have a stable net asset value per unit (NAVPU) that does not change much over time 3. The other statements are false. Money market funds do not provide high returns without risking the capital invested. Money market funds offer low returns that may not keep up with inflation or meet long-term investment goals 3. Money market funds also have some risks, such as credit risk, interest rate risk, and liquidity risk 3. Money market funds do not pay income weekly which can be automatically reinvested. Money market funds may pay income monthly, quarterly, semi-annually, or annually, depending on the fund's distribution policy 3. Investors can choose to receive cash distributions or reinvest them in more units of the fund 3. Money market funds do not provide investors a guaranteed fixed rate of return. Money market funds do not guarantee any return or principal amount 3. The return of money market funds depends on the interest rates and yields of the underlying investments, which may vary over time 3.

  References:

  Best Money Market ETFs in Canada 2023: Cash And HISA ETFs, Best Money Market Funds in Canada | WOWA.ca, 3

  Best Canadian Money Market Funds (2023) - PiggyBank

• Question 482:

  Douglas, aged 73, won a lottery prize of $100,000 last week. Today he contacted Vincent, his Dealing Representative, with instructions to contribute the winnings to his registered retirement income fund (RRIF) account.

  Which of the following statement about RRIF is CORRECT?

  A. Deposits to RRIFs cannot be withdrawn for 5 years.
  B. Deposits into RRIFs are not permitted.
  C. Deposits to a RRIF entitle Douglas to a tax deduction.
  D. Withdrawals from a non-qualifying RRIF are not taxable.
  B. Deposits into RRIFs are not permitted.

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  Explanation

  A RRIF is a retirement income option that allows you to withdraw income from the savings accumulated under your RRSP. You cannot contribute new amounts to a RRIF. You can only transfer funds from your RRSP or another RRIF to your RRIF.

  References:

  IFSE CIFC Module 6: Registered Plans, page 6-11.

  Can I deposit money in an RRIF? | Fonds FTQ

• Question 483:

  You are collecting know your client (KYC) information for your new client, Yael. She has recently accepted an early retirement package from her employer and has $100,000 to invest. She is looking for an investment that will provide income to help pay her ongoing monthly expenses. Without this extra income, she would have trouble paying her bills. From your discussions, Yael understands that markets fluctuate and says she is comfortable with high risk.

  Which of the following would be a suitable investment?

  A. global equity fund
  B. money market fund
  C. mortgage fund
  D. Canadian equity index fund
  C. mortgage fund

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  Explanation

  A mortgage fund is a type of income fund that invests in mortgages and other debt instruments secured by real estate. It provides a steady stream of income to investors and has a low correlation with other asset classes. A mortgage fund is suitable for Yael because she needs income to pay her monthly expenses and is comfortable with high risk. A global equity fund, a money market fund, and a Canadian equity index fund are not suitable for Yael because they do not meet her income objective and risk tolerance.

• Question 484:

  Which exchange in Canada deals exclusively with financial and equity futures and options?

  A. The Montreal Exchange
  B. The Toronto Stock Exchange
  C. Canadian Securities Exchange
  D. The TSX Venture Exchange
  A. The Montreal Exchange

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  Explanation

  The Montreal Exchange (also referred to as Bourse de Montreal) is the only Canadian exchange specializing exclusively in financial and equity futures and options. The feedback from the document confirms: "The Montreal Exchange (Bourse de Montreal) is the only exchange in Canada that deals exclusively with financial and equity futures and options."

  References:

  Chapter 2 - Overview of the Canadian Financial MarketplaceLearning Domain: An Introduction to the Mutual Funds Marketplace

• Question 485:

  Gershon is a Dealing Representative and he opens a new account for his client, Isaac. Gershon collects the necessary information from Isaac in order to designate the Trusted Contact Person (TCP) for Isaac's account.

  Which of the following statements about Isaac's TCP is CORRECT?

  A. The TCP is an alternative to a Power of Attorney (PQA) and has the authority to make changes to Isaac's account and direct trading.
  B. The TCP is an alternative authority on Isaac's account that has the power to place a temporary hold on Isaac's account to disallow trading.
  C. The TCP is the person whom Gershon can speak to if he becomes concerned about Isaac's mental capacity to make financial decisions.
  D. The TCP is the person who is designated with authority to direct financial dealings for Isaac's account and make financial decisions.
  C. The TCP is the person whom Gershon can speak to if he becomes concerned about Isaac's mental capacity to make financial decisions.

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  Explanation

  A Trusted Contact Person (TCP) is someone that an investor authorizes their brokerage firm to contact in limited circumstances, such as if the broker has trouble reaching the investor or has a reasonable belief that the investor's account may be exposed to possible financial exploitation. A TCP does not have the authority to make changes to the investor's account or direct trading, unlike a Power of Attorney (POA). A TCP also does not have the power to place a temporary hold on the investor's account, which is a decision made by the brokerage firm. Therefore, C is the correct answer.

  References:

  What is a Trusted Contact Person and why you should name one, Do You Need A 'Trusted Contact' To Help Protect You?, Investor Bulletin: Please Consider Adding a Trusted Contact Person to Your Account

• Question 486:

  A mutual fund representative misrepresents the risks associated with a particular mutual fund in order to encourage a conservative client to purchase it.

  What part of MFDA Rule No.

  2 "Business Conduct" did the representative violate?

  A. Deal fairly, honestly, and in good faith with clients
  B. Have such experience and training as is consistent with the standards acceptable to the industry
  C. Not engage in business conduct or practice that is unbecoming or detrimental to the public interest
  D. Observe a high standard of ethics and conduct
  A. Deal fairly, honestly, and in good faith with clients

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  Explanation

  Misrepresenting risks violates the MFDA Rule No. 2 requirement to deal fairly, honestly, and in good faith with clients. The feedback from the document states: "MFDA Rule No 2 'Business Conduct' sets out the standards applicable to all MFDA members and their respective dealing representatives. In this case, the representative has not dealt honestly with the client by misrepresenting information."

  References:

  Chapter 17 - Mutual Fund Dealer RegulationLearning Domain: Ethics, Compliance and Mutual Fund Regulations

• Question 487:

  Which statement is most accurate about fund wraps?

  A. There is essentially no regulatory difference between a fund wrap and a standard mutual fund
  B. Each model is designed to meet the needs of the individual
  C. The investor pays fees to both the wrap manager and the manager of the underlying funds
  D. The fund wrap sponsor is responsible for asset allocation decisions
  D. The fund wrap sponsor is responsible for asset allocation decisions

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  Explanation

  Fund wraps are managed portfolios with pre-selected asset allocation models, where the wrap sponsor is responsible for allocation decisions. The feedback from the document states: "A fund wrap program provides a series of portfolios with multiple mutual funds to reflect pre-selected asset allocation models. Each model is designed to meet the needs of a group of investors sharing a similar client profile. Responsibility for the asset allocation decision falls to the wrap sponsor."

  References:

  Chapter 12 - Riskier Mutual Fund ProductsLearning Domain: Analysis of Mutual Funds

• Question 488:

  Which of the following statements regarding mutual fund fees is correct?

  A. Redemptions are made from units held by investors to pay trailer fees.
  B. Trailer fees are only paid to mutual fund dealers when a purchase is made.
  C. The mutual fund dealer receives trailer fees based on the value of assets under management.
  D. Trading commissions are paid from the management fee.
  C. The mutual fund dealer receives trailer fees based on the value of assets under management.

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  Explanation

  Trailer fees are ongoing fees that are paid by mutual fund managers to mutual fund dealers for providing ongoing services to their clients who hold units of their funds. Trailer fees are calculated as a percentage of the value of assets under management (AUM) of the clients who hold units of the fund. Trailer fees are paid out of the management fee that is charged by the mutual fund manager to cover the costs of operating and administering the fund. Therefore, option C is correct regarding mutual fund fees. The other options are incorrect.

  Option A is false because redemptions are not made from units held by investors to pay trailer fees; rather, trailer fees are paid out of the management fee that is deducted from the net asset value (NAV) of the fund.

  Option B is false because trailer fees are not only paid to mutual fund dealers when a purchase is made; rather, trailer fees are paid on an ongoing basis as long as the clients hold units of the fund.

  Option D is false because trading commissions are not paid from the management fee; rather, trading commissions are paid from the trading expense ratio (TER) that reflects the costs of buying and selling securities within the fund.

  References:

  [Mutual Fund Fees Explained | Wealthsimple], [Mutual Fund Fees | GetSmarterAboutMoney.ca], [Understanding Mutual Fund Fees | Investopedia]

• Question 489:

  When opening a new non-registered account, which client information is optional?

  A. Social insurance number
  B. Personal income
  C. Third-party trading authorization
  D. Investment knowledge
  A. Social insurance number

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  Explanation

  When opening a new non-registered account, the Know Your Client (KYC) rule requires collecting information such as: personal and financial circumstances, investment knowledge, investment objectives, risk profile, and time horizon.

  The Social Insurance Number (SIN) is mandatory only for registered accounts (RRSP, TFSA, RESP, etc.) to track tax-related reporting, but it is optional for non-registered accounts.

  Thus, the correct answer is A. Social insurance number.

• Question 490:

  BUG Inc. has a beta of 1.65. If the market drops by 18.48% over the next 12 months, by approximately how much could BUG Inc.

  shares fall over that time period?

  A. 16.83%
  B. 11.20%
  C. 20.13%
  D. 30.49%
  D. 30.49%