IFC Practice Questions

Sonya, a mutual fund manager for Drake Financial, has had a stellar year in managing their Canadian equity portfolio and has outperformed the benchmark by over 200 basis points. She is now concerned that within the last couple of months of this calendar year, the Canadian equity market is due for a 10 to 15% pullback. Which investment strategy would be most appropriate for her to implement for the last couple of months of the year to offset the market correction?

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?

You are meeting a new client, Steven, and you are trying to determine his level of understanding of different investments. Which question would give you the most information regarding your client's familiarity with investing?

Michael had invested in several mutual funds, most of which have appreciated in value. He is not sure if he needs to report the gain as capital gains when he files his income tax return.

What would you tell Michael?

During the calendar year, Firmansyah received a $1,800 eligible dividend from a large Canadian bank and a foreign, dividend from his The USD/CAD exchange rates is 1.3605.

Firmansyah’s federal marginal tax bracket is 29%. The enhanced dividend gross-up rate is 38% and the federal dividend tax credit rate for eligible dividends is 15%.

What federal tax liability will be due from the investment income?

Your client Gerard is 30 years old and plans to retire at age 65. He has a mutual fund portfolio of $40,000 in which he invests $1,500 monthly. Gerard's objective is to use these funds to meet the 20% down payment requirement to buy a house for $650,000.

What is Gerard's investment time horizon not considering market fluctuations?

David had $10,000 in his investment account with Dynamic Investments, a mutual funds dealer. On June 28, David wants to buy 500 units in ABC Canadian Dividend Fund that has a Net Asset Value Per Unit (NAVPU) of $14.10. His friend Robert suggests that he may get a better price if he used the strategy of dollar-cost averaging. David then instructs his Dealing Representative to place a purchase order for 100 units on the first of every month starting July 1st for the next 5 months.

The orders are executed at the following NAVPUs.

July 01, $14.00

Aug. 01, $14.50

Sep. 01, $15.00

Oct. 01, $14.25

Nov. 01, $16.50

Did David get a better purchase price following the dollar-cost averaging strategy compared to making a lump-sum purchase of 500 shares on Jun 28, 20xx?

Sagira is a Compliance Officer with WealthPath Investments Inc., a registered mutual fund dealer. Sagira routinely answers inquiries from the firm's Dealing Representatives and offers guidance.

Which of the following statements would Sagira likely agree is a permitted activity for Dealing Representatives to have with clients?

A risk-averse investor is meeting with their advisor to discuss investment solutions. Traditionally, the investor has considered GICs only, but they are open to considering other alternatives. To what emotional bias is the investor most susceptible?

What bias would be considered an emotional behavioural bias?