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NEW QUESTION # 42
Wilma has always used the services of a tax preparation firm to file her taxes but is skeptical that she has really benefitted. This year she plans to file her own taxes for the first time.
What would be useful for her to know?
- A. Wilma's tax deductions permit her to reduce her tax payable dollar-for-dollar.
- B. Wilma's non-refundable tax credits may only reduce her taxable income dollar-for-dollar.
- C. Wilma's top marginal tax rate will be applied to every taxable dollar when her tax return is filed.
- D. Wilma's marginal tax rate may be lowered when tax deductions are applied to her total income.
Answer: D
Explanation:
Explanation
Tax deductions are amounts that reduce your total income before calculating your tax payable. They lower your marginal tax rate, which is the tax rate that applies to your last dollar of income. For example, if Wilma's total income is $50,000 and she claims $5,000 in tax deductions, her taxable income will be $45,000 and her marginal tax rate will be lower than if she had no deductions. Therefore, A is the correct answer.
References: All deductions, credits, and expenses - Personal income tax - Canada.ca
NEW QUESTION # 43
Which of the following formulas correctly shows how taxable income is calculated?
- A. gross income less tax credits
- B. total income less tax deductions
- C. the sum of earned income and investment income
- D. the sum of income from all sources
Answer: B
Explanation:
Explanation
According to the Canada Revenue Agency, taxable income is the amount used to calculate federal tax and provincial or territorial tax on the income tax return. Taxable income is calculated by subtracting tax deductions from total income. Total income is the sum of income from all sources, such as employment, business, investment, pension, and other income. Tax deductions are amounts that can be subtracted from total income to reduce the amount of income that is subject to tax. Some examples of tax deductions are RRSP contributions, child care expenses, moving expenses, and alimony payments. Tax credits are not subtracted from total income, but rather from the tax payable. Tax credits are amounts that can reduce the amount of tax owed or increase the amount of refund. Some examples of tax credits are basic personal amount, spouse or common-law partner amount, Canada workers benefit, and foreign tax credit.
Therefore, the correct answer is C. total income less tax deductions.
References: 1: Line 26000 - Taxable income - Canada.ca 2
NEW QUESTION # 44
What trait or characteristic is normally associated with a person who would be designated as a Trusted Contact Person (TCP)?
- A. Can simplify difficult financial concepts for the client.
- B. Often involved with providing care for the client who requires personal assistance.
- C. Normally has a financial interest in the client's account or assets.
- D. Has the authority to make financial decisions on behalf of the client.
Answer: B
Explanation:
Explanation
A Trusted Contact Person (TCP) is someone who the client authorizes their financial advisor to contact in limited circumstances, such as when the client is vulnerable, has a health issue, or cannot be reached. A TCP should be someone who the client trusts and who is mature and can handle difficult conversations about the client's personal situation. Often, a TCP is someone who is involved with providing care for the client who requires personal assistance, such as a family member, a friend, or a caregiver. A TCP does not have a financial interest in the client's account or assets, does not have the authority to make financial decisions on behalf of the client, and does not need to simplify financial concepts for the client
NEW QUESTION # 45
Which of the following statements describes a feature of the Home Buyers' Plan (HBP)?
- A. Once you are required to repay the amounts back to your RRSP. any missed or incomplete payments are subject to tax.
- B. To qualify- as a first-time home buyer you or your spouse must never have previously owned a home
- C. A qualifying home must be purchased by December 31 of the year of withdrawal.
- D. If you have a spouse or common-law partner, each of you can withdraw up to JE50.000 from your registered retirement savings plans (RRSPs).
Answer: A
NEW QUESTION # 46
Lydia wants to transfer units of her Sussex Growth Fund to her registered retirement savings plan (RRSP) as her RRSP contribution. The current market value is $10,600 and the cost of the units is $4,500.
Which of the following statements is CORRECT?
- A. Lydia's RRSP contribution will be valued at $10,600.
- B. Lydia will incur a capital gain of $4,500 from the contribution.
- C. Lydia is only permitted to contribute cash to her RRSP not units of her mutual fund.
- D. Lydia's RRSP contribution will be valued at $4,500.
Answer: A
Explanation:
Explanation
Lydia can make an in-kind contribution of her mutual fund units to her RRSP, as long as the fund is eligible for RRSPs. The value of her contribution will be based on the fair market value of the units at the time of the transfer, which is $10,600. However, she will also trigger a deemed disposition of the units and realize a capital gain of $6,100 ($10,600 - $4,500), which is taxable in the year of the transfer.
References = Canadian Investment Funds Course (CIFC) - Module 3: Registered Plans - Section 3.1:
Registered Retirement Savings Plan (RRSP)1 and web search results from search_web(query="RRSP contribution in kind")
NEW QUESTION # 47
Which of the following statements about your mutual fund registration is CORRECT?
- A. You must renew your registration through the online NRD system every two years.
- B. You can sell mutual funds anywhere in Canada as long as you are registered with one of the provincial or territorial securities commissions.
- C. Your online application must be reviewed and approved by your mutual fund dealer before you can begin to sell mutual funds.
- D. You must inform the regulatory authorities of any material or significant changes to your personal circumstances.
Answer: D
NEW QUESTION # 48
What purpose does it serve for non-money market mutual funds to hold money market instruments?
- A. Money market instruments primarily generate investment income that provides investors with preferential tax treatment.
- B. They ensure that the fair market value of a mutual fund will not drop below a minimal market value.
- C. They are purchased by non-money market funds to satisfy the regulatory requirement of fund diversification.
- D. If the portfolio manager has an immediate need for cash, money market instruments are relatively easy to liquidate.
Answer: D
Explanation:
Explanation
The purpose of holding money market instruments for non-money market mutual funds is to provide liquidity for the fund. If the portfolio manager has an immediate need for cash, such as to pay expenses or meet redemption requests, money market instruments are relatively easy to liquidate because they have short maturities and low credit risk. Money market instruments do not primarily generate investment income that provides investors with preferential tax treatment, as interest income from money market instruments is fully taxable at the investor's marginal tax rate. Money market instruments are not purchased by non-money market funds to satisfy the regulatory requirement of fund diversification, as there is no such requirement for mutual funds. Money market instruments do not ensure that the fair market value of a mutual fund will not drop below a minimal market value, as money market instruments can also fluctuate in value depending on interest rate changes and supply and demand factors. References: Money Market Instruments
NEW QUESTION # 49
Grant is a Dealing Representative with WealthPlus Securities Inc. Grant becomes a volunteer member of his local arena's Hockey Association and is appointed as the Association's new Treasurer. Which of the following statements about Grant's appointment as Treasurer is CORRECT?
- A. Grant must disclose the Treasurer position to his firm once he has accepted the position.
- B. Grant must obtain the firm's approval before he starts the Treasurer position.
- C. Since Grant holds the Treasurer position on a voluntary basis, it is not an outside activity.
- D. If Grant is not compensated for the Treasurer position, his firm's approval is not required.
Answer: B
Explanation:
Explanation
Grant's appointment as Treasurer is considered an outside activity, regardless of whether he is compensated or not. According to the CIFC, Dealing Representatives must obtain their firm's written approval before engaging in any outside activity that could interfere with their ability to perform their duties or create a conflict of interest with their clients or employer. Grant must disclose the nature and extent of his involvement with the Hockey Association and how it may affect his availability, reputation, or potential for conflicts of interest. The firm may approve, reject, or impose conditions on Grant's outside activity.
References: Canadian Investment Funds Course, Chapter 8: Suitability and Know Your Client1
NEW QUESTION # 50
Which of the following statements about standard deviation is CORRECT?
- A. Standard deviation is also referred to as beta.
- B. Measures the systematic risk of an investment relative to a benchmark index.
- C. Indicates how much an investment's performance fluctuates around its average historical return.
- D. A standard deviation greater than one indicates a higher level of volatility than the market.
Answer: C
Explanation:
Explanation
The correct answer is A. Indicates how much an investment's performance fluctuates around its average historical return.
Standard deviation is a measure of how spread out the data points are from the mean value. It is calculated as the square root of the variance, which is the average of the squared differences from the mean. Standard deviation can be used to assess the volatility or risk of an investment by showing how much the returns deviate from the expected or average return. A higher standard deviation means that the investment has a wider range of possible outcomes, which implies more uncertainty and risk. A lower standard deviation means that the investment has a narrower range of possible outcomes, which implies more stability and consistency.
B). A standard deviation greater than one indicates a higher level of volatility than the market. This statement is incorrect because the standard deviation of an investment is not directly comparable to the standard deviation of the market, unless they have the same mean return. The standard deviation of an investment only measures the absolute variation of the returns, not the relative variation to the market. A better measure of the relative volatility of an investment to the market is beta, which is the ratio of the covariance of the investment and the market to the variance of the market.
C). Measures the systematic risk of an investment relative to a benchmark index. This statement is incorrect because the standard deviation of an investment does not distinguish between the systematic risk and the unsystematic risk. The systematic risk is the risk that affects the entire market or a large segment of the market, such as inflation, interest rates, or political events. The unsystematic risk is the risk that affects a specific investment or a small group of investments, such as management decisions, product quality, or lawsuits. The standard deviation of an investment captures both types of risk, whereas the beta of an investment only captures the systematic risk.
D). Standard deviation is also referred to as beta. This statement is incorrect because standard deviation and beta are different measures of risk. Standard deviation measures the absolute variation of the returns of an investment, whereas beta measures the relative variation of the returns of an investment to the market.
Standard deviation is a measure of total risk, whereas beta is a measure of systematic risk.
NEW QUESTION # 51
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. balanced
- B. specialty
- C. asset allocation
- D. index
Answer: A
Explanation:
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.
References = Canadian Investment Funds Course, Unit 6: Mutual Funds, Lesson 1: Mutual Funds Overview, Section 6.1.3: Types of Mutual Funds 1; CIFC prepkit, Chapter 6: Mutual Funds, Question 6.1.3 2
NEW QUESTION # 52
Which document contains information regarding the Independent Review Committee compensation?
- A. Management Reports of Fund Performance
- B. Fund Facts
- C. Annual Information Form
- D. Simplified Prospectus
Answer: C
Explanation:
Explanation
The Annual Information Form (AIF) is a document that provides detailed information about a mutual fund, such as its history, structure, management, fees, expenses, risks, policies, and performance. The AIF also contains information regarding the Independent Review Committee (IRC) compensation, which is the amount of fees and expenses paid by the fund to the IRC members for their services. The IRC is a committee of independent individuals who oversee the fund manager's decisions on conflict of interest matters and act in the best interests of the fund and its investors12 References = web search results from search_web(query="Independent Review Committee compensation")12 and Canadian Investment Funds Course (CIFC) - Module 2: Investment Products - Section 2.2: Mutual Funds3
3: https://www.ifse.ca/wp-content/uploads/2021/08/CIFC-Module-2.pdf
NEW QUESTION # 53
What type of shares offer its shareholders the opportunity to receive additional dividends if the company's profit exceeds a stated level?
- A. Participating preferred shares
- B. Cumulative preferred shares
- C. Convertible preferred shares
- D. Redeemable preferred shares
Answer: A
NEW QUESTION # 54
Evan owns retractable preferred shares of Ingram Corp. Which statement CORRECTLY describes a key feature of Evan's shares?
- A. Offers Evan the opportunity to receive additional dividends if Ingram Corp's profit exceeds a stated level.
- B. Gives Evan the option to convert the Ingram Corp preferred shares into a fixed number of common shares at a predetermined price within a specified period.
- C. Allows Ingram Corp to buy back the preferred shares at a pre-determined price within a defined period.
- D. Entitles Evan to sell the shares back to Ingram Corp at a pre-determined price and time in the future.
Answer: C
Explanation:
Explanation
Retractable preferred shares are a type of preferred stock that lets the issuer force the redemption of the shares at a set price and time. The issuer can pay cash or common shares to the retractable preferred shareholders.
References = Retractable Preferred Shares: What it is, How it Works, Example, What are Retractable Preferred Shares? Definition, And How Does it Work? - CFAJournal, Retractable Preferred Shares | Example | Feature - Accountinguide
NEW QUESTION # 55
Based on your discussions with your client Sierra, you believe an asset allocation of 30% fixed income and
70% equities will help her achieve her long-term goals. What type of asset allocation strategy are you implementing?
- A. lifecycle
- B. optimal
- C. tactical
- D. strategic
Answer: D
Explanation:
Explanation
A strategic asset allocation strategy is one that involves setting target allocations for various asset classes based on the investor's risk tolerance, time horizon, and investment objectives, and rebalancing the portfolio periodically to maintain the original allocations. This strategy is compatible with a buy-and-hold approach and aims to achieve long-term goals by diversifying across different asset classes and markets. In this case, you are implementing a strategic asset allocation strategy for your client Sierra by assigning 30% of her portfolio to fixed income and 70% to equities, and planning to rebalance her portfolio when the actual allocations deviate significantly from the target allocations.
References: Canadian Investment Funds Course, Unit 7, Section 7.1
NEW QUESTION # 56
Terri, 30 years old, is the marketing manager at Provincial Winery with an average annual income of $60,000.
Her spouse Yvette, 28 years old, is a project manager with a telecommunications firm earning
$70,000 per year. You are helping them to organize their investments and are trying to assess their financial resources.
Which of the following is the best question to ask?
- A. What is your investment experience?
- B. Do you have pension plans at work?
- C. Do you have any children?
- D. When do you need the money?
Answer: B
Explanation:
Explanation
One of the steps in the Know Your Client (KYC) rule is to assess the client's financial resources, which include their income, assets, liabilities, and net worth. Asking about pension plans at work is a relevant question to determine the client's sources of income and potential retirement savings. Pension plans can also affect the client's risk tolerance and investment objectives, as they may provide a stable and guaranteed income in the future. Asking about children, money needs, and investment experience are also important questions, but they relate to other aspects of the KYC rule, such as personal circumstances, time horizon, and investment knowledge. References:
* Canadian Investment Funds Course (CIFC) Study Guide, Chapter 1: The Investment Funds Industry, Section 1.4: The Know Your Client (KYC) Rule, page 1-111
* Know Your Client (KYC) Definition - Investopedia
NEW QUESTION # 57
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