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IFC Practice Questions

Investment Funds in Canada (IFC) Exam

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Total Questions : 486

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Question # 41

Pippa purchased a 15-year bond with a face value of $5,000 and a 7% coupon rate at the time of issuance. The bond is due to mature later this year. The general interest rate climate remained stable for the first 13 years of the bond's term. However, especially over the past 18 months, both inflation and general interest rates have increased more than expected.

What is Pippa likely to experience from her bond?

Options:

A.  

With the unanticipated rise in inflation, Pippa will benefit from a higher real rate of return as well.

B.  

Due to inflation, Pippa will experience a capital loss once her bond reaches maturity.

C.  

The return of investment capital will have lower purchasing power than prior to investing.

D.  

With capital appreciation at 7% annually, Pippa's capital gain will be reduced by inflation at maturity.

Discussion 0
Question # 42

Douglas, aged 73, won a lottery prize of $100,000 last week. Today he contacted Vincent, his Dealing Representative, with instructions to contribute the winnings to his registered retirement income fund (RRIF) account.

Which of the following statement about RRIF is CORRECT?

Options:

A.  

Deposits to RRIFs cannot be withdrawn for 5 years.

B.  

Deposits into RRIFs are not permitted.

C.  

Deposits to a RRIF entitle Douglas to a tax deduction.

D.  

Withdrawals from a non-qualifying RRIF are not taxable.

Discussion 0
Question # 43

Eleanora receives a $500 eligible Canadian dividend from her mutual fund. Her federal marginal tax rate for the year is 29%. Assuming the enhanced gross-up of 38% and a federal dividend tax credit of 15.02%, how much federal tax will she pay on her dividend?

Options:

A.  

$69.90

B.  

$189.16

C.  

$96.46

D.  

$115.40

Discussion 0
Question # 44

What response would a loss-averse investor be most likely to choose in selecting a preferred investment return scenario?

Options:

A.  

An assured loss of $750

B.  

A 75% chance of losing $1,000, and a 25% chance of losing nothing

C.  

A 25% chance of gaining $2,000, and a 75% chance of losing nothing

D.  

A 5% chance of gaining $1,500, and a 95% chance of losing $800

Discussion 0
Question # 45

Khuyen is a Dealing Representative for Stark Contrast Investments. Her dealer has relationships with 20 different mutual fund families. This gave her the flexibility to sell two different types of funds from two

different fund families to her client, Bao. $5,000 was invested in the Blue Moon Global Balanced fund and an additional $5,000 was invested in the Orange Sun Asset Allocation fund. Khuyen has been

reviewing the performance of both funds and has determined that Bao would be better off being fully invested in the Blue Moon Global Balance fund. Bao had previously signed a Limited Authorization Form

(LAF) for Khuyen, so she goes ahead and does not worry about consulting with Bao before making the change.

What type of activity has Khuyen performed?

Options:

A.  

Top-down management

B.  

Churning

C.  

Discretionary trading

D.  

Value investing

Discussion 0
Question # 46

Exchange traded funds (ETFs) that track an index and index mutual funds have many similarities. However, what is a major difference between these two products?

Options:

A.  

While ETFs are prone to tracking errors, index funds are perfectly aligned with their underlying index.

B.  

ETFs can be purchased continuously throughout the trading day while index funds can only be bought or sold at the end of the day.

C.  

The market price of ETFs always matches the underlying basket of securities while there can be a discrepancy in pricing index funds.

D.  

ETFs do not have management fees since they are exchange traded while index funds do incur such fees.

Discussion 0
Question # 47

Based on return and performance, which fund should be recommended?

Options:

A.  

DEF

B.  

GHI

C.  

ABC

D.  

JKL

Discussion 0
Question # 48

Which exchange in Canada deals exclusively with financial and equity futures and options?

Options:

A.  

The Montreal Exchange

B.  

The Toronto Stock Exchange

C.  

Canadian Securities Exchange

D.  

The TSX Venture Exchange

Discussion 0
Question # 49

Why is it important that an investor receive a copy of the Fund Facts document when buying a mutual fund?

Options:

A.  

The investor can verify that his statutory rights have been respected

B.  

The investor can verify that the fund has not misstated any material facts

C.  

The investor can verify that the fund’s stated investment objectives and risk profile match his own

D.  

The investor can verify that the fund manager is adhering to the fund’s stated investment objectives

Discussion 0
Question # 50

What information can be found from a simplified prospectus instead of Fund Facts?

Options:

A.  

Costs associated with mutual fund investing.

B.  

A summary of the top 10 investment holdings.

C.  

The investment strategies that are being used or proposed to be used.

D.  

Investor rights regarding cancelling an order.

Discussion 0
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