Question 1

One of your clients, Rakesh, had a portfolio composed of 60% ABC Equity Fund and 40% ABC Bond Fund.Since equities were performing much better than fixed income, he had increased his holdings in ABC EquityFund to 70% and had reduced his holding in ABC Bond Fund to 30% of his portfolio.After benefitting the growth in his ABC Equity Fund for over 2 years, Rakesh is uncomfortable with thisheavy exposure to equity funds and decides to rebalance his portfolio back to 60% of ABC Equity Fund and40% of ABC Bond Fund.He instructs you to switch 10% of the portfolio from the ABC Equity Fund to the ABC Bond Fund.Which of the following statements is CORRECT?

Options :

A : Rakesh will not be subjected to a switch fee if it is outlined in the prospectus.

B : Rakesh will not be subjected to a switch fee if his equity fund is a no-load fund.

C : Rakesh will not be subjected to a switch fee if his original units were purchased with a sales charge.

D : Rakesh will not be subjected to a switch fee if his equity fund is a low-load fund.

Answer: A

Question 2

What risk type is prevalent regardless of the level of portfolio diversification or hedging?

Options :

A : Market

B : Default

C : Unique

D : Inflation

Answer: A

Question 3

Which of the following statements about your mutual fund registration is CORRECT?

Options :

A : You can sell mutual funds anywhere in Canada as long as you are registered with one of the provincialor territorial securities commissions.

B : Your online application must be reviewed and approved by your mutual fund dealer before you canbegin to sell mutual funds.

C : You must renew your registration through the online NRD system every two years.

D : You must inform the regulatory authorities of any material or significant changes to your personalcircumstances.

Answer: D

Question 4

What is a key difference between marketable government bonds and treasury bills?

Options :

A : Treasury bills do not pay any coupon interest, while marketable bonds do

B : Marketable government bonds may be sold at a discount while Treasury bills are sold at a premium

C : Treasury bills trade in the over-the-counter market, while marketable bonds trade on the exchange

D : Marketable government bonds actively trade in the secondary market while Treasury bills can only bebought from and sold to the government

Answer: A

Question 5

Your client has very limited investment knowledge and is confused about what is meant by "marginal taxrate". What do you tell him?

Options :

A : It is the tax rate applied to the next dollar earned.

B : It is the tax rate used in calculating taxable capital gains.

C : It is an amount resulting from dividing your total tax liability by your taxable income for the year.

D : It is the number used to gross-up Canadian dividend income.

Answer: A

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