Question 1

When purchasing a mutual fund, what is the correct way to determine the number of units purchased if theorder was entered today at 2:30 p.m. ET?

Options :

A : Use today's NAV

B : Use the 2:30 p.m. ET NAV

C : Use the average of today's and yesterday's NAV

D : Use yesterday's NAV

Answer: A

Question 2

10 years ago, Felipe opened a registered retirement savings plan (RRSP) account and purchased a mutualfund. The mutual fund purchased included a 7-year deferred sales charge (DSC). At the time of making hisinvestment, him and his Dealing Representative agreed that he had a 25-year growth objective. Since Felipeknew that he was not planning to use his investment until he retired, he was notconcerned about the DSC. Although the rate of return did vary from year-to-year, he never noticed his mutualfund having a drop in value. This gave Felipe more confidence in the investment. As a result, he has nevermade any changes to his investment.What category of Know Your Client (KYC) information has been given?

Options :

A : Financial circumstances

B : Investment experience

C : Risk profile

D : Personal circumstances

Answer: B

Question 3

Pierre buys a call option on a stock. What is the implication of this transaction?

Options :

A : Pierre has the right to buy the stock if he exercises the option.

B : Pierre is obligated to sell the stock if the option is exercised.

C : Pierre has the right to sell the stock if he exercises the option.

D : Pierre is obligated to buy the stock if the option is exercised.

Answer: A

Question 4

Recently interest rates have gone up. Your customer, Mr. Corelli, has asked you how this will affect the valueof his mortgage fund. What is the best response to give to Mr. Corelli?

Options :

A : The mortgage fund will not be affected because the rise in interest rates will affect only new mortgages

B : The value of the mortgage fund will go down because new mortgages will pay higher interest thanthose in the fund

C : The mortgage fund will not be affected because mortgages do not react to changes in interest rates theway bonds do

D : The value of the mortgage fund should go up because mortgages will now be earning higher interest

Answer: B

Question 5

Danica is looking for a mutual fund to hold in her non-registered account that provides a regular stream ofincome with potential for capital growth. She is having difficulty distinguishing between bond funds anddividend funds. Which of the following statements is TRUE?

Options :

A : The return of dividend funds relies only on interest rates; whereas with bond funds, the return alsodepends on the general direction of stock markets.

B : When interest rates rise, the net asset value per unit (NAVPU) of bond funds decreases; whereas withdividend funds it rises.

C : Bond funds receive fixed interest payments from most of their investments.

D : Bond fund distributions receive more favorable tax treatment than that of dividend funds.

Answer: C

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