IFC Exam Questions and Answers | Exam-Dumps (Page: 10)

QUESTION: 73

A fund manager has diversified the equity portfolio he manages in order to reduce the potential negative impact of unfavorable information relating to any one stock.
What type of risk has he reduced?

Default risk
Interest rate risk
Market risk
Unique risk

Answer(s): D

Explanation:

Unique risk, also known as firm-specific risk, is reduced through diversification, as it relates to volatility caused by information specific to individual securities. The feedback from the document states:

"If a security's price is affected by new information, and if new information arrives frequently, then its price will tend to be volatile and so will the returns that it generates. This source of volatility is specific to a given security and is known as unique risk. Diversifying a portfolio reduces unique risk."

Reference:

Chapter 15 Selecting a Mutual FundLearning Domain: Evaluating and Selecting Mutual

Funds

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QUESTION: 74

You are comparing the performance of ABC Equity Fund and XYZ Equity Fund to their benchmark.
Indicate the correct statement.

Return | Year 1 | Year 2 | Year 3 | 3 Year Compound Return

Benchmark | -2.0% | 12.6% | 20.6% | 10.0%

ABC Equity Fund | -10.0% | 16.0% | 24.0% | 9.0%

XYZ Equity Fund | 8.0% | 9.0% | 10.0% | 9.0%

Fund XYZ would have offered a lower likelihood of loss if a client needed to sell the investment
Fund ABC showed greater consistency in its simple annual returns
Fund ABC demonstrated a superior performance in a bearish market
Fund XYZ offered less protection on the downside

Answer(s): A

Explanation:

Fund XYZ's more consistent annual returns (less variation) reduce the likelihood of selling at a loss, especially in volatile markets. The feedback from the document states:

"After finding comparable funds with good long-term performance, look for funds with the best performance from year to year. In comparing two funds, the one with less variation in simple rates of return from year to year is a more consistent performer. Although equity funds are intended for the long-term, if liquidity is needed, the fund with a more consistent performance is less likely to be sold at a loss."

Reference:

Chapter 15 Selecting a Mutual FundLearning Domain: Evaluating and Selecting Mutual Funds

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QUESTION: 75

What type of fee does a mutual fund sponsor often reduce the longer an investor holds a back-end load fund?

Sales fee
Acquisition fee
Redemption fee
Trailer fee

Answer(s): C

Explanation:

Back-end load funds often have a decreasing redemption fee (deferred sales charge) schedule, which reduces the longer the investor holds the fund. The feedback from the document states:

"Fund sponsors use a decreasing redemption fee (deferred sales charges) schedule to recover their costs from investors who opt out of the fund early. In most cases, redemption fees on a back-end load fund decrease the longer the investor holds the fund."

Reference:

Chapter 16 Mutual Fund Fees and ServicesLearning Domain: Evaluating and Selecting Mutual Funds

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QUESTION: 76

Which factors would cause the management expense ratio charged by a mutual fund to be higher?

The fund invests in foreign equities

The fund is large in size

The fund is managed by the fund sponsor's management team

The fund pays a trailer fee

2 and 3
1 and 2
1 and 4
3 and 4

Answer(s): C

Explanation:

Factors that increase a mutual fund's management expense ratio (MER) include investing in foreign equities and paying trailer fees, as these add to operational costs. The feedback from the document states:

"Four factors primarily affect the management expense ratio. Funds that invest in foreign equities; are small in size; are managed by an outside specialist firm; and charge trailer fees will have higher management expense ratios."

Reference:

Chapter 16 Mutual Fund Fees and ServicesLearning Domain: Evaluating and Selecting Mutual Funds

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QUESTION: 77

An investor purchases units of an equity fund for $17.60. In which of the following circumstances would an investor potentially owe taxes on capital gains?

The fund is sold today for $18.80 per unit and the proceeds are reinvested
The fund is currently valued at $18.80 per unit
A dividend distribution is reinvested into additional units of the same fund
The fund is currently valued at $16.45 per unit

Answer(s): A

Explanation:

Capital gains are realized when an investor sells a fund at a profit. Selling units at $18.80 (purchased at $17.60) triggers a taxable capital gain in a non-registered account. The feedback from the document states:

"Capital gains are generated when an investor sells an investment for more than the price paid; for example, selling a stock at a profit will generate a capital gain. Capital gains are not realized when an investment goes up in price; a sale must occur."

Reference:

Chapter 16 Mutual Fund Fees and ServicesLearning Domain: Evaluating and Selecting Mutual Funds

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QUESTION: 78

Which exemplifies the tendency of mutual fund companies to shut down poor performing funds?

Standby underwriting
Survivorship bias
Short selling
Standard lot

Answer(s): B

Explanation:

Survivorship bias occurs when poor-performing funds are closed, excluding them from performance rankings and inflating the perceived performance of surviving funds. The feedback from the document states:

"All comparison universes also exhibit some degree of survivorship bias no matter how carefully the universes are constructed. Survivorship bias develops as defunct portfolios drop out and are excluded from rankings in subsequent quarters. A performance universe is essentially a universe of survivors."

Reference:

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

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QUESTION: 79

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

S&P/TSX Composite
MSCI EAFE Index
FTSE Canada Universe Bond Index
S&P 500

Answer(s): D

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."

Reference:

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

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QUESTION: 80

Which Sharpe ratio result would indicate that the fund earned a return less than the risk-free return?

2.5
1
-0.2
0.5

Answer(s): C

Explanation:

A negative Sharpe ratio indicates that the fund's return is less than the risk-free rate, as the numerator (Fund Return - T-bill Rate) is negative. The feedback from the document states:

"The Sharpe ratio is calculated as (Fund Return - T-bill Rate) ÷ Fund Standard Deviation. A negative Sharpe ratio means the mutual fund has a return less than the risk-free rate, as the numerator of the ratio would be negative."

Reference:

Chapter 15 Selecting a Mutual FundLearning Domain: Evaluating and Selecting Mutual Funds

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CSI IFC Exam (page: 10) CSI Investment Funds in Canada Updated on: 09-Feb-2026

QUESTION: 73

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QUESTION: 74

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QUESTION: 75

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QUESTION: 76

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QUESTION: 77

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QUESTION: 78

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QUESTION: 79

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QUESTION: 80

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CSI IFC Exam (page: 10)
CSI Investment Funds in Canada
Updated on: 09-Feb-2026