Pass the CSI Canadian Investment Funds IFC Questions and answers with CertsForce

A treasury bill is a short-term debt instrument issued by the government at a discount from its face value and redeemed at par value at maturity. The difference between the purchase price and the face value is the interest income earned by the investor. Therefore, Megan treats the $1,800 difference as interest income for tax purposes. Interest income is fully taxable at the investor’s marginal tax rate in the year it is received. Megan does not report any capital gain, dividend, or return of capital from the treasury bill.

Canadian Investment Funds Course, Unit 5, Section 5.2

Contractionary monetary policy is used when the economy is overheating or facing inflationary pressure.

The Bank of Canada increases interest rates, which leads to reduced borrowing and lending.

This action decreases the money supply in circulation and reduces the availability of credit to consumers and businesses.

Therefore, the correct effect of contractionary monetary policy is that it reduces both money supply and credit in the economy.

A put option is a contract that gives the buyer the right, but not the obligation, to sell a set number of shares of an underlying asset at a set price within a specified time frame. The buyer of a put option expects the price of the underlying asset to fall below the strike price before the expiration date. Therefore, A is the correct answer. References: Put Option: What It Is, How It Works, and How to Trade Them, Put: What It Is and How It Works in Investing, With Examples, Put Options: Definition, Overview, and Example

A is correct because mortgage mutual funds typically pay monthly distributions of interest to their investors, as they invest in mortgages that generate regular interest income. If interest rates fall, the mutual fund’s net asset value per unit (NAVPU) will increase (B), not decline, as the value of the existing mortgages in the fund will rise. Mortgage mutual funds are suitable for low to moderate risk investors ©, not only for high risk investors, as they provide stable income and capital preservation. Mortgage mutual funds are not risk-free (D), even if the mortgages are National Housing Act (NHA) insured, as they still face credit risk, interest rate risk, and liquidity risk.

A is correct because retractable preferred shares are a type of preferred shares that give the holder the option to sell the shares back to the issuer at a predetermined price and within a specified time. This feature provides the holder with more flexibility and protection against interest rate fluctuations. Participating preferred shares (B) are a type of preferred shares that give the holder the right to receive additional dividends if the issuer’s earnings exceed a certain level. Convertible preferred shares © are a type of preferred shares that give the holder the option to convert the shares into common shares of the issuer at a predetermined ratio and price. Redeemable preferred shares (D) are a type of preferred shares that give the issuer the option to buy back the shares from the holder at a predetermined price and within a specified time.

Direct use of capital savings involves investing in tangible projects or assets, such as constructing infrastructure or facilities. Building a new factory is a direct application of capital savings. The feedback from the document states:

"Capital savings are used directly by, for example, a couple investing their savings in a home; a government investing in a new highway or hospital; or a domestic or foreign company paying start-up costs for a plant to produce a new product."

Strategic asset allocation involves selecting a long-term asset mix, monitoring it, and rebalancing as needed to maintain the desired allocation. The feedback from the document states:

"When a portfolio manager develops a strategy to maximize portfolio returns, he or she does so with a particular asset mix or allocation in mind… This base policy mix is called the strategic asset allocation. This is the long-term mix that will be adhered to by monitoring and, when necessary, rebalancing."

This is the net asset value per unit (NAVPU) for the Marigold Canadian Dividend Fund for July 6. The NAVPU is calculated by dividing the net asset value (NAV) of the fund by the number of units outstanding. In this case, the NAVPU is $8.25 ($45,668,900 / 5,564,443).

The NAV is the value of a fund’s assets minus the value of its liabilities. The value of assets is the value of all the securities in the portfolio, plus any cash and cash equivalents, plus any accrued income for the day. The value of liabilities is the value of all short-term and long-term liabilities, plus any accrued expenses for the day. The NAV is usually expressed on a per-share or per-unit basis, which is the NAVPU.

The NAVPU is the price at which investors can buy or sell units of the fund. It is determined at the end of each trading day based on the closing market prices of the portfolio’s securities. The NAVPU can change daily depending on the performance of the securities in the fund and the fund’s expenses.