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

The question specifies that the fund’s objective is to “bet on the future movement of the market to increase returns.”

This is speculation, not hedging.

Under NI 81-102, conventional mutual funds may use derivatives, but only under restrictions (hedging, market entry/exit, or income enhancement). Speculative use must be disclosed in the prospectus.

Hedge funds and some alternative mutual funds can use derivatives for speculation with leverage.

Thus, Jeremy should note that this fund uses derivatives for speculation.

One of the steps in the Know Your Client (KYC) rule is to assess the client’s financial resources, which include their income, assets, liabilities, and net worth. Asking about pension plans at work is a relevant question to determine the client’s sources of income and potential retirement savings. Pension plans can also affect the client’s risk tolerance and investment objectives, as they may provide a stable and guaranteed income in the future. Asking about children, money needs, and investment experience are also important questions, but they relate to other aspects of the KYC rule, such as personal circumstances, time horizon, and investment knowledge. References:

Canadian Investment Funds Course (CIFC) Study Guide, Chapter 1: The Investment Funds Industry, Section 1.4: The Know Your Client (KYC) Rule, page 1-111

Know Your Client (KYC) Definition - Investopedia

A company’s retained earnings statement is a financial statement that shows how the company’s net income is distributed between dividends paid to shareholders and retained earnings, which are the amount of profit that is reinvested in the company. Retained earnings are part of the company’s equity, and they reflect the accumulated earnings that the company has generated over its history, minus any dividends or distributions. Retained earnings can be used by the company for various purposes, such as expanding its operations, developing new products, paying off debt, or buying back shares1

References = Canadian Investment Funds Course, Unit 5: Types of Investments, Lesson 3: Equity Securities, Section 5.3.4: Financial Statements

The value of John’s investment on December 31 of this year can be calculated by multiplying the number of units he holds by the net asset value per unit (NAVPU) on that date. Since John invested $500 on January 3 and $500 on July 1, he holds a total of 125.6 units (62.8 units from the first investment and 62.8 units from the second investment). Therefore, the value of his investment on December 31 will be 125.6 units x $9.55 NAVPU = $1,256.

Canadian Investment Funds Course, Chapter 2: Mutual Funds1

Canadian preferred share funds distribute income in the form of eligible Canadian dividends, which are tax-advantaged through the dividend tax credit.

In contrast:

U.S. preferred dividends are taxed as foreign income, fully taxable without credits.

Mortgage and bond funds generate interest income, which is fully taxable at the investor’s marginal rate.

Therefore, the most tax-advantaged distribution comes from a Canadian preferred share fund.

Research and the CSC curriculum stress that asset allocation is the single most important factor in determining portfolio performance, more than market timing or security selection.

Proper asset mix (equities, fixed income, cash) accounts for most portfolio success or failure.

Implicit costs of principal protected notes include performance participation caps, which limit the potential returns and are not always explicitly disclosed. The feedback from the document states:

"Implicit costs include fees borne by investors that may or may not be immediately visible and that may or may not be openly disclosed in the documents. Of the items listed, three are explicit costs, and only Performance Participation Caps are an implicit cost."

A yield curve is a graphical representation of the relationship between the interest rates (or yields) and the term to maturity of different fixed income securities, such as bonds or debentures. A normal yield curve is upward sloping, meaning that the interest rates increase as the term to maturity increases. This is because investors typically demand higher compensation for lending their money for longer periods of time, as they face more uncertainty and risk. Therefore, a normal yield curve implies that short term rates are lower than long term rates.

Canadian Investment Funds Course, Unit 5, Section 5.2