Canadian Securities Institute Investment Funds in Canada IFC Exam Questions in PDF

Free Canadian Securities Institute IFC Dumps Questions (page: 2)

The demand for blue widgets increases sharply due to a newspaper report that using blue widgets improves recovery from influenza.
What can be said about the law of supply?

  1. Price decreases and production increases
  2. Price increases and production decreases
  3. Price and production both decrease
  4. Price and production both increase

Answer(s): D

Explanation:

The law of supply dictates that when demand exceeds supply, prices rise, prompting producers to increase production to meet demand and maximize profits. The feedback from the document states:
"The law of supply states that when demand is greater than supply, the price increases, and producers increase production to meet demand and maximize profit."


Reference:

Chapter 3 ­ Economic PrinciplesLearning Domain: An Introduction to the Mutual Funds Marketplace



If the Consumer Price Index (CPI) was 140.6 last year and 146.9 this year, what was the inflation rate over the year?

  1. 4.12%
  2. 5.20%
  3. 4.48%
  4. 6.04%

Answer(s): C

Explanation:

The inflation rate is calculated by subtracting the previous year's CPI from the current year's CPI, dividing by the previous year's CPI, and multiplying by 100. In this case:

(146.9 - 140.6) / 140.6 = 6.3 / 140.6 0.0448 or 4.48%.

The feedback from the document confirms:

"To calculate the rate of inflation over a period of time one must subtract the CPI at the beginning of the period from the CPI at the end of the period and then divide the result by the CPI at the beginning of the period. In this example, the solution can be derived as follows: (146.9 - 140.6) / 140.6."


Reference:

Chapter 3 ­ Economic PrinciplesLearning Domain: An Introduction to the Mutual Funds Marketplace



Gary chooses not to recommend that his client sell a current mutual fund to purchase a similar new mutual fund despite pressure to meet a sales target for the new fund.
What responsibility applies to

Gary's action?

  1. Compliance
  2. Professional
  3. Ethical
  4. Legal

Answer(s): C

Explanation:

Gary's decision to prioritize the client's interests over meeting a sales target reflects his ethical responsibility. The feedback from the document states:

"Gary is fulfilling his ethical responsibility by placing his client's needs ahead of his own need to reach a sales target. As the new fund is similar to the current investment, it would be an appropriate one for the client, so he would not be compromising his legal responsibility to ensure that all client orders are suitable."


Reference:

Chapter 1 ­ The Role of the Mutual Fund Sales RepresentativeLearning Domain: An Introduction to the Mutual Funds Marketplace



What does suitability mean?

  1. Recommendations are appropriate for the client's unique situation and investment objectives
  2. The investor's major concerns are addressed
  3. Understanding the personal and financial knowledge of the client
  4. Recommendations are not based on the personal and financial knowledge of the client

Answer(s): A

Explanation:

Suitability ensures that recommendations align with the client's unique situation and investment objectives, based on their personal and financial circumstances. The feedback from the document states:

"Suitability means ensuring that all recommendations are appropriate for the client's unique situation and investment objectives. It also means that recommendations are based on a personal and financial knowledge of the client and knowledge of the investment products being recommended."


Reference:

Chapter 1 ­ The Role of the Mutual Fund Sales RepresentativeLearning Domain: An Introduction to the Mutual Funds Marketplace



Which organization regulates mutual and investment funds?

  1. Investment Industry Regulatory Organization of Canada (IIROC)
  2. Securities commissions
  3. ICE Futures Canada
  4. Bourse de Montreal

Answer(s): B

Explanation:

Securities commissions are responsible for regulating mutual and investment funds in Canada. The feedback from the document confirms:

"The responsibility of regulating mutual funds lies with the securities commissions."


Reference:

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



What stage in the business cycle typically has increasing wages, rising inflation, rising interest rates with slowing sales, and decreasing business investment?

  1. Peak
  2. Expansion
  3. Trough
  4. Recovery

Answer(s): A

Explanation:

The peak stage of the business cycle is marked by demand exceeding supply, leading to rising wages, inflation, and interest rates, while sales slow and business investment decreases. The feedback from the document states:

"The top of the cycle is called a peak. A peak is characterized by the following activities: demand begins to outstrip the capacity of the economy to supply it; wages increase; inflation rises; interest rates rise and bond prices fall; sales begin to decline; business investment slows, and stock market activity begins to decline."


Reference:

Chapter 3 ­ Economic PrinciplesLearning Domain: An Introduction to the Mutual Funds Marketplace



Based on the financial planning pyramid, what security would be appropriate for a very aggressive investor?

  1. Commodities
  2. Tax shelters
  3. Foreign stocks
  4. Over the Counter (OTC) Securities

Answer(s): D

Explanation:

The financial planning pyramid illustrates the risk-return spectrum of investments. For a very aggressive investor, high-risk securities like OTC securities are suitable. The feedback from the document states:

"As a visual aid, the planning pyramid helps you show clients how mutual funds fit into the investment universe. A very aggressive investor could consider investments such as OTC Securities."


Reference:

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



Your client earns $100,000 from employment and $10,000 from investments each year. Her bills total $95,000 annually.
What is her discretionary income?

  1. $5,000
  2. $20,000
  3. $15,000
  4. $10,000

Answer(s): C

Explanation:

Discretionary income is the amount left after subtracting expenses from total income, available for savings or investments. Total income = $100,000 (employment) + $10,000 (investments) = $110,000. Subtracting $95,000 in bills gives $110,000 - $95,000 = $15,000. The feedback from the document states:

"Discretionary income eligible for savings and investments is the difference between the amount of money coming in from employment and other sources and the amount of money going out to pay bills. In this example, $100,000 + $10,000 - $95,000 = $15,000."


Reference:

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



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