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1. Patrick is a portfolio manager for the HyperTally Growth Fund. It has generated an annualized rate of return of 10% this past year. However, with the anticipation of very high inflation to soon occur, there is also an expectation of higher interest rates. Patrick is concerned about the future returns of existing stocks within the fund.

What may Patrick do to protect against the market value of the fund dropping?

2. What type of shares offer its shareholders the opportunity to receive additional dividends if the company’s profit exceeds a stated level?

3. On January 2nd of this year Evan purchased 500 preferred shares of Ingram Ltd. The preferred shares have a par value of $25 per share and a quarterly dividend of $0.98 per share. They also give Evan the option to sell the shares back to Ingram at par value any time from now until September 1st two years from now.

What type of preferred shares does Evan own?

4. Every February, Reginald, a Dealing Representative, feels pressured by his Manager to generate new registered retirement savings plans (RRSP) and contributions to assist the branch in meeting broader business targets. Reginald is nearing the end of February, and he has a meeting with a new client, Orel. Orel wants to open a tax-free savings account (TFSA) to develop emergency savings because he does not want to worry about his withdrawals being taxed. Reginald suggests that if Orel were to contribute to an RRSP first, then the resulting tax savings could be used to fund a new emergency account.

In relation to account suitability, what can be said about Reginald’s advice?

5. As a measurement of risk, which of the following statements about beta is TRUE?

6. Jasmine purchases a 1-year, $10,000 face value strip bond for $9,600.

At maturity, when Jasmine receives $10,000, which of the following statements is CORRECT?

7. Hamid, the portfolio manager of the Trabant Canadian Equity Fund is deciding on some new investments. He has identified a retirement residence company as well as a discount clothing retailer that both seem to have good prospects and appear undervalued.

What investment approach is Hamid using?

8. Jabir begins the registration process with his new dealer Prosper Wealth Inc. Jabir is excited about his new career and eager to start calling clients, opening new accounts, and selling investments.

Which of the following CORRECTLY describes when Jabir will be eligible to open new client accounts and sell investments?

9. Which statement about unused registered retirement savings plan (RRSP) contribution room is CORRECT?

10. Which of the following is a characteristic of a bond fund?

11. In a mutual fund dealer, who is the person responsible for establishing and maintaining compliance policies and procedures as well as monitoring and assessing compliance?

12. Bernadette has a high-paying job and is in the top tax bracket. She recently received a payment of $5 million upon the settlement of her uncle’s estate. Bernadette would like to invest her inheritance in financial products that would not only grow her money but is also income tax friendly.

Which of the following would provide the most favourable tax treatment?

13. Pacari is a Dealing Representative with Cavalry Investments, a mutual fund dealer. Pacari’s client, Darsha, is a long-time customer and an elderly widow. Darsha depended on her husband, for financial decisions before he passed. Pacari has also noticed that Darsha’s capacity seems to be declining over the years. Luckily, with Pacari’s help, Darsha has been managing her finances well. However, Darsha’s daughter has been getting involved recently and has even tried to enter trades without Darsha’s authorization. Pacari is particularly concerned about the last transaction for Darsha’s account: a very large redemption. Pacari fears that Darsha has become a victim of financial exploitation and he raises his concerns with his dealer Cavalry.

Which of the following statements about how Cavalry may proceed is CORRECT?

14. Natasha currently owns 2 mutual funds: a bond fund and a Canadian equity fund. She would like to use one of them as her registered retirement savings plan (RRSP) contribution for the year.

From a tax efficiency perspective, which mutual fund should she contribute?

15. Daisy is a Dealing Representative registered in the province of Saskatchewan only. Daisy’s client, Orville, a resident of Lloydminster, Saskatchewan is a retiree who presently has a $1,000,000 with her dealer, Easy Ride Financial. Orville is now planning to move to Vegreville, Alberta next month. Easy Ride Financial is registered in Alberta and Saskatchewan. Neither Easy Ride Financial nor Daisy have any clients who are resident in Alberta.

Which of the following should Daisy do if she wants to continue to service Orville’s account?

16. Which of the followings describes segregated funds?

17. What purpose does it serve for non-money market mutual funds to hold money market instruments?

18. 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 Equity Fund 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 this heavy exposure to equity funds and decides to rebalance his portfolio back to 60% of ABC Equity Fund and 40% 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?

19. The Mutual Fund Dealers Association of Canada (MFDA) has strict rules concerning conflicts of interest.

Which of the following is TRUE?

20. Jasmine received an inheritance from her grandmother of $10,000. She wants to invest her money wisely. She has seen in the news that a particular energy company is doing very well and has good prospects. She has also seen how volatile its share price has been in the last year. She knows the risks of the resource sector and wants to invest but is not comfortable with so much volatility.

Which of the following mutual fund benefits would address her concern?

21. Faruq is a Dealing Representative with Smart Planning Group, a mutual fund dealer. Faruq meets with his new client, Taline, and learns that she lives on a low, fixed income.

Taline tells Faruq that she wants to maximize her investment returns as high as possible to make up the difference. Taline also indicates that she cannot afford large investment losses because her income is low.

Which of the following CORRECTLY describes how Faruq should assess Taline’s risk profile?

22. Ellen and her only son Jeff live on the family farm with her father George. Jeff is five years old and Ellen has decided that it is time to start saving for Jeff’s post-secondary education. She has called you to ask about registered education savings plans (RESPs).

Which of the following statements is TRUE?

23. Sean purchases 500 units of Penn Canadian Equity Fund when the net asset value per unit (NAVPU) is $16.70. On December 15, the mutual fund’s NAVPU is $21. On December 16, the mutual fund declares a distribution of $1.25 per unit. Sean’s distribution is immediately reinvested and he purchases additional units of the mutual fund.

Which of the following statements about the effect of the distribution is correct?

24. Which of the following best describes implied needs of your clients?

25. Which of the following statements about registered education savings plans (RESPs) is CORRECT?

26. Saheed is a retiree who is considering splitting his pension income with his wife, Minu.

Which of the following outcomes may occur if he shares his pension benefits?

27. Your clients, Jessica and Ken, want to buy a house next year. You recommend a money market fund.

How do you think a money market fund will help Jessica and Ken reach their goal?

28. Pierre wants to discuss the merits of a specific mutual fund with his Dealing Representative, Simone. There are no trailer fees associated with this fund. Simone is familiar with the mutual fund that Pierre is referring to, which is not offered by her dealer. They schedule an appointment to further discuss his investment portfolio.

Which behaviour from Simone is ethical?

29. Dakota is a Dealing Representative with Harvest Wealth Inc., a mutual fund dealer. Dakota starts a marketing campaign to contact prospective new clients and increase sales with existing clients.

Which of the following CORRECTLY describes activities that Dakota can engage in under her marketing campaign?

30. You are meeting a potential client, William, for the first time. He is a high net worth individual and you are keen to get his business.

Which of the following would you consider the most important to create an impressive first impression on your potential client?

31. Xerxes, 45 years old, is a successful architect, having an annual income of $185,000. He has around $10,000 in his non-registered account, which he is looking to invest in a tax-efficient manner.

From the following options, which would be the most tax-efficient?

32. You are collecting know your client (KYC) information for your new client, Yael. She has recently accepted an early retirement package from her employer and has $100,000 to invest. She is looking for an investment that will provide income to help pay her ongoing monthly expenses. Without this extra income, she would have trouble paying her bills. From your discussions, Yael understands that markets fluctuate and says she is comfortable with high risk.

Which of the following would be a suitable investment?

33. What does a normal yield curve look like?

34. Frederic recently sold his units in a US dollar (USD) denominated mutual fund. He wants to convert the proceeds back to Canadian dollars (CAD).

If he received proceeds of $1,200 USD from the sale and the exchange rate is $1 CAD for $0.99 USD, how much will Frederic receive in Canadian dollars?

35. Stan, a portfolio manager, is looking at two steel companies as potential investments. Truesteel Inc.

has a current ratio of 2:1 while Strongco Ltd. has a current ratio of 0.8:1.

What could this information indicate?

36. Maxine is a portfolio manager who 15 years ago, purchased 100 shares of Never2Tacky, a social media corporation for Aspirations Global Technology Fund. She purchased the stock when it was trading at $10. Last year, the peak market price was $120. Presently, it is trading at $99. News agencies are now reporting that additional regulations regarding social media companies are about to be agreed upon by G7 countries. Maxine is concerned the market value of Never2Tacky is going to drop. She buys a put option with an exercise price of $95 with an expiry of 9 months.

What type of strategy is Maxine using?

37. Nelson is a Dealing Representative with True Wealth Advisors Inc., a mutual fund dealer. Nelson follows proper procedures related to his firm’s Relationship Disclosure Information (RDI).

Which of the following CORRECTLY describes how Nelson is permitted to evidence that he satisfied his RDI obligation?

38. What role do investment dealers play in the Canadian and global financial markets?

39. Jonathan is a Dealing Representative who has just finished an appointment with his new client, Shirley. Jonathan has concluded that Shirley has a low-risk profile but wants to establish additional savings of $500,000. During their discussion, Shirley emphasizes she wants investments that are also tax efficient. Jonathan learned that currently Shirley has no registered retirement savings plan (RRSP) and tax-free savings account (TFSA) contribution room due to using those opportunities by investmenting elsewhere.

What variable is a PRIMARY consideration for Jonathan when making an investment recommendation?

40. Which of the following statements is TRUE about the movement of business cycles in the Canadian economy?

41. Sheldon is a 25 year old graphic designer. He has just started working and saves regularly. Apart from his regular salary he also earns extra money from freelancing after office hours and during weekends.

His earnings from his freelance work are sufficient for meeting his living expenses. He saves the entire amount of his salary. He has heard about lifecycle funds but has come to you for additional information.

Which of the following statement about lifecycle funds is TRUE?

42. 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).

43. Which among the following BEST describes a company’s income statement?

44. Ai Fen has recently become registered to sell mutual funds with Acadian Eastern Financial, a mutual fund dealer. Ai Fen determined that with her background of being a Chartered Financial Analyst, she can help people understand the nature of investing more easily than others in her field.

Which registration category will need to be prominently noted on Ai Fen’s business card to comply with the “holding out rule”?

45. Which of the following statements regarding mutual fund fees is correct?

46. Portia is a Dealing Representative with Highview Wealth Inc., a mutual fund dealer. Portia recommends the Stature Growth Fund to her client Clive.

Which of the following CORRECTLY describes what Portia must do in order to satisfy her obligations under the Client Relationship Model (CRM) and Client Focused Reforms (CFR)?

47. 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?

48. Which of the following statements describes a feature of the Home Buyers’ Plan (HBP)?

49. 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?

50. One of your clients, Harry, has heard that he can defer paying tax on capital gains. He wants to know if what he has heard is correct and if so, how to defer paying taxes on capital gains.

What would you tell Harry?