Question 1

What type of investment income from Canadian sources will generally be fully taxed?

Options :

A : Capital gain.

B : Interest income.

C : Business income.

D : Dividend income.

Answer: B

Question 2

JKL Corp. is evaluating a new issue of preferred shares with a credit rating one notch below its existing preferred shares. If JKL’s preferred dividend coverage ratio is 2:1 and the equity cushion is shrinking, how would this affect the investment quality of the new preferred shares?

Options :

A : The new issue’s lower rating is offset by the company’s history of dividend payments.

B : The new shares’ quality is unaffected as long as the coverage ratio remains above 2:1.

C : The stable coverage ratio ensures that the new shares are still a good investment.

D : The lower rating and shrinking equity cushion suggest higher risk and lower investment quality.

Answer: D

Question 3

Which of the following statements is FALSE?

Options :

A : Alternative mutual funds can have maximum exposure of 10% of fund NAV to any one OTC derivative counterparty,

B : Ability for fund manager to receive reimbursement of organizational costs from the fund is prohibited for conventional mutual funds.

C : Conventional mutual funds can have maximum aggregate borrowing and short selling of 25% of fund NAV at any time,

D : For Alternative mutual funds, there is normally no redemption deferral time period (however, prospectus normally allows for redemption deferral should manager deem appropriate in period(s) of market turmoil).

Answer: D

Question 4

When a company issues a number of common shares, some of which are held by institutional investors, what are the institutional investors' shares known as?

Options :

A : Market capitalization shares.

B : Outstanding shares.

C : issued shares

D : Public float shares.

Answer: D

Question 5

Why might a mutual fund investor be required to report capital gains on their tax return even if they have not sold any of their mutual fund shares?

Options :

A : Because capital gains are only reported if the investor sells the shares.

B : Because the fund manager’s internal transactions result in capital gains that are passed to investors.

C : Because capital gains are automatically reinvested and thus not reported until sale.

D : Because the investor must pay taxes on unrealized capital gains.

Answer: B

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