Question 1

When reviewing a company's balance sheets, what ratio best determines whether their borrowing is excessive?

Options :

A : The cash flow from operations / total debt ratio.

B : The debt / equity ratio.

C : The interest coverage ratio.

D : The price / earnings ratio.

Answer: B

Question 2

David is reviewing a simplified prospectus and is particularly interested in one of the funds. The investmentobjective stated for this fund is to provide dividend income, capital preservation, and some potential forcapital gains. What fund is David interested in?

Options :

A : Mortgage fund

B : Preferred dividend fund

C : Equity growth fund

D : Bond fund

Answer: B

Question 3

Why is it important to include ethical decision-making as a Standard of Conduct?

Options :

A : Ensures conformity with externally established standards.

B : Enables CIRO to regulate the actions and behaviours of registered individuals.

C : Provides flexibility so registrants can use their own judgement.

D : Allows the security industry to operate with the trust and confidence of the public.

Answer: D

Question 4

Ian is 25, employed, and has no dependents. He has no current financial or family obligations. He has askedfor your recommendation for investing a $50,000 inheritance. What asset allocation would typically suit aninvestor with Ian’s characteristics?

Options :

A : 10% in a bond fund, 80% in equity funds, 10% in a money market fund

B : 10% in equity funds, 70% in a bond fund, 20% in a money market fund

C : 35% in equity, 25% in a money market fund, 60% in a bond fund

D : 50% in equity funds, 20% in a bond fund, and 30% in a money market fund

Answer: A

Question 5

What best describes why mortgage funds generally have less sensitivity to changes in interest rates than bond funds?

Options :

A : Many mortgage funds also hold T-bills and mortgage-backed securities, which are less volatile

B : Interest on mortgages is usually paid monthly, while interest on bonds is typically paid semi-annually

C : Mortgage funds are highly diversified, often holding over 10,000 individual mortgages

D : Most mortgages held in mortgage funds are either NHA-insured or privately insured

Answer: B

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