IFC Exam Dumps - Investment Funds in Canada (IFC) Exam

Bonds are primarily traded in dealer markets (over-the-counter - OTC) rather than in organized auction exchanges like the major stock exchanges. In a dealer market, multiple dealers post prices at which they are willing to buy or sell securities, providing liquidity and making a profit from the bid-ask spread. The U.S. government bond market, for example, is a large over-the-counter dealer market. 

Current assets on a statement of financial position include items that are expected to be converted to cash or used within one year, such as cash, accounts receivable, and inventories. The feedback from the document states:

"Typical current asset accounts include cash, representing the total amount in all of the company’s deposit accounts; inventories, representing the finished and unfinished products which have not yet been sold; and accounts receivable."

Eligible dividends from a publicly-listed Canadian corporation would provide the most favourable tax treatment for Bernadette, who is in the top tax bracket. Eligible dividends are subject to a lower tax rate than other types of income because they qualify for the enhanced dividend tax credit. This credit is intended to reduce the double taxation of corporate income, which occurs when a corporation pays tax on its earnings and then distributes those earnings to its shareholders, who also pay tax on them. Dividends received from a large foreign corporation do not qualify for the dividend tax credit and are taxed at the same rate as interest income. Coupon payments from Government of Canada bonds are also fully taxable as interest income. Capital gains from a large Canadian corporation are taxed at a lower rate than interest income, but higher than eligible dividends, because only 50% of the gain is included in taxable income. References: Capital gains, interest and dividends: How they’re taxed in Canada, How Are Dividends Taxed in Canada?

The market value of a perpetual preferred share is calculated by dividing the annual dividend by the yield of similar shares. Annual dividend = $0.25 × 4 = $1.00. Price = $1.00 / 0.035 = $28.57. The feedback from the document states:

"The current market value of a perpetual preferred share is calculated by dividing the annual dividend in dollars by the annual yield currently offered on preferred shares of a similar level of risk. In this case, the share would be valued as: ($0.25 × 4) / 0.035 = $28.57."

The marginal tax rate is the percentage of tax that an individual pays on the last dollar of income earned in a given year. It is also the tax rate that applies to any additional income earned in that year. The marginal tax rate varies depending on the individual’s income level and tax bracket. For example, if an individual’s taxable income for the year is $50,000 and the tax rate for that income bracket is 20%, then the marginal tax rate is 20%. This means that the individual pays 20% tax on the last dollar of income earned, as well as on any additional income earned above $50,000.

References = Canadian Investment Funds Course, Unit 5: Types of Investments, Lesson 6: Taxation, Section 5.6.1: Income Tax 1; CIFC prepkit, Chapter 5: Types of Investments, Question 5.6.1 2

Mortgage funds have lower interest rate sensitivity than bond funds because mortgage rates change less frequently, and interest is paid monthly rather than semi-annually, reducing the impact of rate changes. The feedback from the document states:

"Interest rate sensitivity is expected to be lower for mortgage funds than for bond funds for two reasons. First, mortgage rates change much less frequently than interest rates on bonds… Second, mortgages by nature have less interest rate risk than bonds. The reason, in part, is that interest on mortgages is paid monthly, while interest on bonds is paid semi-annually."

Lenny would qualify for a partial OAS pension, because he meets the following criteria:

•He is 65 years old or older.

•He is a Canadian citizen or a legal resident at the time of his OAS pension application.

•He has resided in Canada for at least 10 years since the age of 18.

The amount of his partial OAS pension would be proportional to the number of years he has lived in Canada after the age of 18, divided by 40. For example, if he has lived in Canada for 15 years, he would receive 15/40 or 37.5% of the full OAS pension1

References = web search results from search_web(query="Old Age Security pension eligibility")