CIFC Dumps Updated Dec 10, 2024 Practice Test and 225 unique questions
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NEW QUESTION # 96
Which statement regarding the Fund Facts document is CORRECT?
- A. For leveraged accounts, the Fund Facts document is not required if the client has been provided with the Leverage Risk Disclosure document.
- B. The Fund Facts document must not contain performance data.
- C. Before accepting an order from a client, a Dealing Representative is expected to provide and explain the Fund Facts document.
- D. The Fund Facts document must be delivered to the client, electronically or in writing, within 5 days of the transaction date.
Answer: C
Explanation:
Explanation
The Fund Facts document is a summary disclosure document that highlights key information about a mutual fund or an exchange-traded fund (ETF), such as the performance history, investments, fees, and risks.
According to the Point of Sale (POS) disclosure rules, a Dealing Representative must provide and explain the Fund Facts document to the client before accepting an order to buy or switch a fund. This allows the client to make an informed investment decision and to know their rights.
References = Fund Facts | AMF - Autorite des marches financiers, Fund Facts/ETF Facts - Fidelity, Understanding Fund Facts | GetSmarterAboutMoney.ca, IFSE CIFC Module 2: The Investment Industry, page
2-16.
NEW QUESTION # 97
Which among the following plans includes a provision that places a maximum limit on the amount that can be withdrawn during a calendar year?
- A. Registered Retirement Income Fund (RRIF)
- B. Life Income Fund (LIF)
- C. Deferred Profit Sharing Plan (DPSP)
- D. Registered Retirement Savings Plan (RRSP)
Answer: B
Explanation:
Explanation
A LIF is a type of registered retirement income fund that is used to hold and pay out locked-in pension funds.
A LIF has both a minimum and a maximum withdrawal limit for each calendar year, which are determined by the federal or provincial pension legislation, the age of the annuitant, and the value of the fund. The minimum withdrawal limit is similar to that of a RRIF, but the maximum withdrawal limit is intended to ensure that the LIF provides income for the lifetime of the annuitant123 References = Canadian Investment Funds Course (CIFC) - Module 3: Registered Plans - Section 3.4: Life Income Fund (LIF)4 and web search results from search_web(query="maximum withdrawal limit for LIF RRSP RRIF DPSP")123
4: https://www.ifse.ca/wp-content/uploads/2021/08/CIFC-Module-3.pdf
NEW QUESTION # 98
What areas are addressed in the Client Relationship Model (CRM) regulation?
- A. client communications, regulatory reporting, and fraud prevention
- B. relationship disclosure, client communications, and client reporting
- C. ethics, proper conduct, and client reporting
- D. fraud prevention, relationship disclosure, and proper conduct
Answer: B
NEW QUESTION # 99
Lucas is 60 years old and continues to work. He presently is a plan holder of a registered retirement savings plan (RRSP). He is considering changing his RRSP to a registered retirement income fund (RRIF).
Which of the following statements is CORRECT?
- A. There is no minimum age to be an annuitant to a RRIF.
- B. Once he changes his RRSP to a RRIF, his unused total RRSP contribution room is lost.
- C. Minimal withdrawals are required to start in the current calendar year his RRIF was established.
- D. Investments that qualify as an eligible investment for a RRIF are different than for an RRSP.
Answer: B
Explanation:
Explanation
A registered retirement income fund (RRIF) is a type of registered plan that provides a stream of income in retirement. A RRIF can be created by converting an RRSP, but once the conversion is done, the plan holder can no longer make contributions to the RRSP or the RRIF. Therefore, any unused RRSP contribution room is lost after the conversion. The other statements are incorrect because:
A: There is a minimum age to be an annuitant to a RRIF, which is 71 years old. However, a plan holder can convert an RRSP to a RRIF at any age before 71.
C: Minimum withdrawals are required to start in the year following the year the RRIF was established, not in the current calendar year.
D: Investments that qualify as an eligible investment for a RRIF are the same as for an RRSP, such as mutual funds, stocks, bonds, GICs, etc. References:
Canadian Investment Funds Course (CIFC) Study Guide, Chapter 6: Registered Plans, Section 6.2:
Registered Retirement Income Fund (RRIF), page 6-81
Registered Retirement Income Fund (RRIF) - Canada.ca2
NEW QUESTION # 100
Sven owns preferred shares that give him the option to sell his holdings back to the issuing company at a predetermined price and within a specified time. What type of preferred shares does Sven own?
- A. redeemable
- B. participating
- C. convertible
- D. retractable
Answer: D
NEW QUESTION # 101
Last year Peter's earned income from employment was $50,000.
Last year, after receiving a $2 per share in dividends from 500 shares in ABC Inc., a publicly-traded Canadian corporation, he sold his shares. The sale resulted in a capital gain of $15,000.
Based on the tax rates mentioned above, what is Peter's net federal tax liability for the year? (Round to 2 decimal places).
- A. $9,953.30
- B. $9,193.69
- C. $9,113.53
- D. $9,696.15
Answer: B
Explanation:
Explanation
To calculate Peter's net federal tax liability for the year, we need to follow these steps:
* Step 1: Calculate Peter's taxable income. This is the amount of income that is subject to federal income tax. It is equal to his earned income from employment plus his net capital gain plus his grossed-up dividend income. A net capital gain is 50% of the capital gain realized from selling an asset. A grossed-up dividend income is the actual dividend received plus a percentage of the dividend that reflects the corporate tax paid by the issuer. According to the image, the dividend gross-up rate is
15.02%. Therefore, Peter's taxable income is:
50000+0.5*15000+(500*2)*(1+0.1502)=68251.00
* Step 2: Apply the federal tax rates to Peter's taxable income according to the tax brackets shown in the image. The federal tax rates are progressive, meaning that higher income is taxed at higher rates.
Therefore, Peter's federal tax before credits is:
0.15*(485350)+0.205*(6825148535)=11293.69
* Step 3: Subtract the federal tax credits from Peter's federal tax before credits. A tax credit is an amount that reduces the tax payable by a taxpayer. There are two types of federal tax credits: non-refundable and refundable. Non-refundable tax credits can only reduce the tax payable to zero, but not below zero.
* Refundable tax credits can reduce the tax payable below zero, resulting in a refund to the taxpayer. In this question, we assume that Peter only has two non-refundable tax credits: the basic personal amount and the dividend tax credit. The basic personal amount is a fixed amount that every taxpayer can claim to reduce their taxable income. According to this site, the basic personal amount for 2021 is $13,808.
The dividend tax credit is a percentage of the grossed-up dividend income that reflects the corporate tax paid by the issuer and avoids double taxation. According to this site, the federal dividend tax credit rate for eligible dividends in 2021 is 15.0198%. Therefore, Peter's federal tax credits are:
0.15*13808+0.150198*(500*2)*0.1502=2100
* Step 4: Subtract Peter's federal tax credits from his federal tax before credits to get his net federal tax liability. This is the amount of federal income tax that Peter has to pay or has overpaid for the year.
Therefore, Peter's net federal tax liability is:
11293.692100=9193.69
Hence, option B is correct. References: Canadian Investment Funds Course (CIFC) | IFSE Institute, Federal Income Tax Rates for Canada - TurboTax Canada Tips, Capital Gains Tax in Canada | Wealthsimple, Dividend Tax Credit | TurboTax Canada Tips, Basic Personal Amount (BPA)
NEW QUESTION # 102
Which of the following is a rationale for a portfolio manager to use a passive portfolio management strategy?
- A. The manager wishes to create capital gains in the mutual fund by frequently buying and selling stocks
- B. The manager does not believe in using benchmarks.
- C. The manager believes that as the markets are fairly priced, it would be futile to look for mis-priced securities.
- D. The manager believes he or she can outperform the market with his or her stock picking skills.
Answer: C
NEW QUESTION # 103
Sarah and Kyle are a married couple. They are both 34 years of age and work as teachers. Their combined annual income is $130,000. They are able to save $800 each month. They own a home worth $340,000 with a
$120,000 mortgage. Since they work for the same employer, they have the same defined benefit pension plan.
Other than a tax-free savings account (TFSA) in Kyle's name with $5,000, they do not have any other assets.
They are avid sailors and want to save towards a purchase of a sailboat. For the type of sailboat they want, they estimate it should cost around $65,000. They want you to recommend an investment for their monthly savings to help them achieve their goal faster.
What question should you ask them next?
- A. How would you feel if you lost part of your money in the short-term?
- B. How much do you make individually each year?
- C. What is your net worth?
- D. What is your investment objective for these savings?
Answer: D
NEW QUESTION # 104
Iliana owns 1,000 participating preferred shares in the First Canadian Bank. Which of the following features are characteristic of her investment?
- A. Iliana can convert her preferred shares to common shares at a fixed price and within a specified time period.
- B. Iliana has the right to purchase more preferred shares in the company before common shareholders.
- C. Iliana is able to vote at the annual general meeting and elect members of the board of directors.
- D. Iliana has a right to share in the bank's net profits over and above the specified dividend rate.
Answer: C
NEW QUESTION # 105
You have been researching Canadian equity mutual funds for a new client. You come across the following information.
What can you conclude from this information?
- A. Fontaine Equity Fund's higher MER contributes to its lower 5-year annualized return.
- B. Fontaine Equity Fund has a lower risk level since its Sharpe Ratio is lower.
- C. Fontaine Equity Fund is a better fund because it has a higher quartile ranking.
- D. Chamberlain Equity Fund has lower volatility since its 5-year annualized return is higher.
Answer: A
Explanation:
Explanation
The management expense ratio (MER) is the percentage of a fund's assets that is paid to the fund manager for operating and managing the fund. A higher MER means that more of the fund's returns are eaten up by fees, leaving less for the investors. Therefore, Fontaine Equity Fund's higher MER of 2.99% contributes to its lower
5-year annualized return of 11.25%, compared to Chamberlain Equity Fund's MER of 2.57% and 5-year annualized return of 13.42%. Therefore, D is the correct answer. References: Canadian Investment Funds Course (CIFC) | IFSE Institute, Management Expense Ratio (MER): Definition and How It Works - Investopedia
NEW QUESTION # 106
Marta is turning 71 years old this year. She will have to convert her registered retirement savings plan (RRSP) to a registered retirement income fund (RRIF). Which of the following statements is TRUE?
- A. When she converts her RRSP to a RRIF, she will incur a tax liability.
- B. She will be subject to annual maximum withdrawal limits.
- C. She will be able to continue contributing to her RRIF and be subject to the same annual limits as her RRSP.
- D. She does not have to withdraw the minimum amount this year.
Answer: D
Explanation:
Explanation
The statement that is true about Marta's situation is option D. A registered retirement income fund (RRIF) is a type of registered account that provides income in retirement by converting savings from an RRSP or other sources. A RRIF holder must withdraw a minimum amount from their RRIF each year, starting from the year after they open their RRIF. The minimum amount is calculated based on a percentage factor set by the Canada Revenue Agency (CRA) and the value of the RRIF at the beginning of each year. However, due to the COVID-19 pandemic, the CRA has reduced the required minimum withdrawals from RRIFs by 25% for 2020 and 2021. Therefore, Marta does not have to withdraw the minimum amount this year if she chooses to take advantage of this temporary measure. Therefore, option D is true about Marta's situation. The other statements are not true about Marta's situation. Option A is false because she will not be able to continue contributing to her RRIF and be subject to the same annual limits as her RRSP; rather, she will not be able to make any further contributions to her RRIF once she converts her RRSP to a RRIF. Option B is false because she will not incur a tax liability when she converts her RRSP to a RRIF; rather, she will only pay tax on the amount that she withdraws from her RRIF each year. Option C is false because she will not be subject to annual maximum withdrawal limits; rather, she will be able to withdraw any amount from her RRIF as long as she meets the minimum withdrawal requirement. References: [Registered Retirement Income Fund (RRIF) | GetSmarterAboutMoney.ca], [Making RRIF withdrawals | GetSmarterAboutMoney.ca], [RRIF minimum withdrawal factors], [RRIFs: Temporary 25% reduction in minimum withdrawals for 2020 and 2021]
NEW QUESTION # 107
Your client, Rinaldo, wants to know more about the fees associated with his mutual funds. What can you tell him about a mutual fund's management expense ratio (MER)?
- A. Mutual funds are required to calculate the MER on a daily basis.
- B. Trailer and brokerage fees are charged separately from the MER.
- C. Mutual fund performance is not impacted by the MER since rates of return are published net of fees.
- D. The MER reflects the percentage of each dollar of fund assets that is used to pay for management services.
Answer: D
Explanation:
Explanation
C is correct because the management expense ratio (MER) reflects the percentage of each dollar of fund assets that is used to pay for management services and operating expenses of a mutual fund. The MER includes various fees and expenses, such as management fees, administration fees, trailer fees, audit fees, legal fees, and taxes. The MER reduces the return of the fund, as it is deducted from the fund's income and capital gains before they are distributed to investors. Mutual funds are not required to calculate the MER on a daily basis (A), but rather on an annual basis. Trailer and brokerage fees are included in the MER (B), not charged separately. Mutual fund performance is impacted by the MER (D), as it lowers the net return of the fund. Rates of return are published net of fees, but they do not reflect the impact of the MER on the fund's performance.
References: Canadian Investment Funds Course (CIFC) | IFSE Institute
NEW QUESTION # 108
Which investor's needs would be BEST met with an income trust?
- A. Gary wants to invest in a product which provides a consistent cash flow of interest, royalties, and lease payments passed along to unitholders.
- B. Leanne wants a product that employs alternative strategies such as leverage and short selling to amplify returns.
- C. Phil wants to invest in a product where the performance is linked to that of an underlying asset and the issuer is obligated to repay his principal at maturity.
- D. Tina wants a product that guarantees the return of at least 75% of her capital upon maturity of the contract or upon her death.
Answer: A
Explanation:
Explanation
An income trust is an investment trust that holds income-producing assets, such as debt instruments, royalty interests, or real properties. It can be structured as either a personal investment fund or a commercial trust with publicly traded closed-end fund shares. The main attraction of income trusts, in addition to certain tax preferences for some investors, is their stated goal of paying out consistent cash flows for investors, which is especially attractive when cash yields on bonds are low12 References = Canadian Investment Funds Course (CIFC) - Module 2: Investment Products - Section 2.3:
Income Trusts3 and web search results from search_web(query="income trust")12
3: https://www.ifse.ca/wp-content/uploads/2021/08/CIFC-Module-2.pdf
NEW QUESTION # 109
Thomas, a resident of Ontario, is a full-time university student. He does food delivery to supplement his income. During the school year, he works on weekends and works full-time during his summer break.
Thomas' pensionable earnings were $16,000 for the year. How much must Thomas contribute to CPP when CPP contribution rate is 5.95%?
- A. $0
- B. $743.75
- C. $1,425.00
- D. $912.00
Answer: B
Explanation:
Explanation
Thomas must contribute to CPP based on his pensionable earnings, which are his income from employment or self-employment that are subject to CPP. However, he can deduct a basic exemption amount from his pensionable earnings, which is $3,500 for the year. Therefore, his contributory earnings are:
16,0003,500=12,500
The CPP contribution rate is 5.95% for employees and self-employed workers. Therefore, Thomas must contribute:
12,500×5.95%=743.75
References:
Canadian Investment Funds Course (CIFC) Study Guide, Chapter 6: Registered Plans, Section 6.3:
Canada Pension Plan (CPP), page 6-101
Canada Pension Plan - How much could you receive - Canada.ca2
NEW QUESTION # 110
When comparing mutual funds, what information would help a Dealing Representative determine a suitable mutual fund for a client?
- A. Referencing the fund code for each mutual fund that is being compared.
- B. The rights a client has if there is a desire to cancel the purchased mutual fund.
- C. Assessing historical differences in the rate of return per unit of risk of similar mutual funds.
- D. Comparing historical rates of return between different types of mutual funds.
Answer: C
Explanation:
Explanation
B is correct because assessing historical differences in the rate of return per unit of risk of similar mutual funds helps a Dealing Representative to compare the performance and risk-adjusted returns of different mutual funds and select the most suitable one for a client's risk tolerance and investment objectives. Comparing historical rates of return between different types of mutual funds (A) does not account for the risk involved in each type of fund. Referencing the fund code for each mutual fund that is being compared does not provide any information about the fund's characteristics, features, or suitability. The rights a client has if there is a desire to cancel the purchased mutual fund (D) are not relevant for determining a suitable mutual fund for a client. References: Canadian Investment Funds Course (CIFC) | IFSE Institute
NEW QUESTION # 111
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