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CISI Investment Funds in Canada (IFC) Exam Sample Questions (Q118-Q123):
NEW QUESTION # 118
What value are withdrawals under a ratio withdrawal plan based upon?
- A. Average of start and year-end portfolio value
- B. Value at inception of plan
- C. Current portfolio value
- D. End of year portfolio value
Answer: C
Explanation:
Comprehensive and Detailed Explanation From Exact Extract:
Withdrawals under a ratio withdrawal plan are based on the current portfolio value, ensuring the fund is never fully depleted unless a 100% payout ratio is used. The feedback from the document states:
"Under a ratio withdrawal plan, the ratio is always based on the current portfolio value. Technically, this means that clients will never fully exhaust their mutual fund investment under this type of plan. Only in the unrealistic situation of a 100% payout ratio would the fund be completely paid out." Reference:Chapter 16 - Mutual Fund Fees and ServicesLearning Domain:Evaluating and Selecting Mutual Funds
NEW QUESTION # 119
Marc asks his new client for copies of his mortgage documents. Which Know Your Client component is Marc researching?
- A. Financial circumstances
- B. Investment knowledge
- C. Financial goals and objectives
- D. Personal circumstances
Answer: A
Explanation:
Comprehensive and Detailed Explanation From Exact Extract:
Financial circumstances are a critical component of the Know Your Client (KYC) process, as they determine the client's ability to commit savings to investments and the level of risk they can assume. Mortgage documents provide insights into the client's debt and obligations, which are essential for assessing financial circumstances. The feedback from the document states:
"Financial circumstances are an important consideration in judging the suitability of investments, because they determine the amount of savings clients can commit to investing and the level of risk they can assume.
Marc's client's mortgage document will give Marc valuable insights into the level of debt and mortgage obligations his client has, helping in evaluating the client's financial circumstances." Reference:Chapter 1 - The Role of the Mutual Fund Sales RepresentativeLearning Domain:An Introduction to the Mutual Funds Marketplace
NEW QUESTION # 120
When can an individual legally start selling mutual funds?
- A. Upon completion of continuing education requirements
- B. Upon receipt of notification of registration from the securities administrator
- C. Upon filing a registration application and paying the required registration fee
- D. Upon successful completion of the proficiency examination
Answer: B
Explanation:
Comprehensive and Detailed Explanation From Exact Extract:
An individual can legally sell mutual funds only after receiving notification of registration from the securities administrator, not merely after completing exams or filing applications. The feedback from the document states:
"Despite receiving notification of successful completion of the required proficiency examination, filing a registration application and paying the required fee, an individual is not officially registered to sell mutual funds until notice has been received from the applicable securities administrator." Reference:Chapter 17 - Mutual Fund Dealer RegulationLearning Domain:Ethics, Compliance and Mutual Fund Regulations
NEW QUESTION # 121
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. Entitles Evan to sell the shares back to Ingram Corp at a pre-determined price and time in the future.
- D. Allows Ingram Corp to buy back the preferred shares at a pre-determined price within a defined period.
Answer: D
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 # 122
Your client, Cosmo, recently inherited $50,000 from his uncle. He wants to use this money towards his retirement savings. Cosmo is a 50-year old, self-employed carpenter and he earns on average $65,000 per year. He has a registered retirement savings plan (RRSP) with the bank worth $425,000 and a tax-free savings account (TFSA) worth $46,000. He started saving when he was 25 years old and has always made his own investment decisions. His money is mostly invested in balanced funds. He feels most comfortable with these types of mutual funds since they offer potential investment growth but without being too aggressive. Cosmo has no other assets.
What additional information do you need about Cosmo to fulfill your know your client obligation?
- A. investment objectives
- B. time horizon
- C. risk tolerance
- D. income and net worth
Answer: C
Explanation:
To fulfill the know your client (KYC) obligation, an advisor must collect and document information about the client's personal and financial situation, investment objectives, risk tolerance, and investment knowledge. The KYC rule is a regulatory requirement that ensures that the advisor understands the client's needs and goals, and provides suitable recommendations that match the client's profile. In this case, Cosmo has provided some information about his personal and financial situation, such as his age, occupation, income, assets, and inheritance. He has also given some indication of his investment objectives, such as saving for retirement, and his investment knowledge, such as making his own investment decisions and preferring balanced funds.
However, he has not disclosed his risk tolerance, which is his willingness and ability to accept fluctuations in the value of his investments. Risk tolerance is an important factor that affects the choice of investment strategies and products. Therefore, to complete the KYC process, the advisor needs to obtain additional information about Cosmo's risk tolerance. 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 - Investopedia2
NEW QUESTION # 123
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