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Jasmine realizes interest income of $400 because she bought a strip bond, which is a bond that has its principal and coupon payments separated and sold individually. Jasmine bought the principal-stripped bond, also known as a zero-coupon bond, which pays no interest until maturity. The difference between the purchase price and the face value at maturity is considered interest income and is taxable in the year it is received. References: Strip Bonds: Definition, How They Work, Returns, and Example

The Home Buyers’ Plan (HBP) is a program that allows eligible first-time home buyers to withdraw up to $35,000 from their registered retirement savings plans (RRSPs) to buy or build a qualifying home without paying any tax on the withdrawal. The withdrawn amount must be repaid to the RRSP over a period of up to 15 years, starting from the second year after the withdrawal. If the required repayment for a year is not made, it is added to the taxpayer’s income and subject to tax. Therefore, option B describes a feature of the HBP. The other options are not correct descriptions of the HBP. Option A is false because to qualify as a first-time home buyer, you or your spouse must not have owned and lived in another home as your principal place of residence during the four-year period before the date of withdrawal. Option C is false because a qualifying home must be purchased or built before October 1 of the year following the year of withdrawal. Option D is false because if you have a spouse or common-law partner, each of you can withdraw up to $35,000 from your RRSPs, not $50,000. References: [Home Buyers’ Plan (HBP)], [Home Buyers’ Plan (HBP) - Canada.ca], [Home Buyers’ Plan (HBP) | GetSmarterAboutMoney.ca]

The net asset value per unit (NAVPU) of a mutual fund is calculated by dividing the net asset value (NAV) of the fund by the number of outstanding units. The NAV is the difference between the total assets and total liabilities of the fund. Current assets and current liabilities are not relevant for the NAVPU calculation. Therefore, Great Lengths Equity Fund’s NAVPU is ($135 million - $10 million) / 11 million = $11.36. References: Canadian Investment Funds Course (CIFC) | IFSE Institute, Unit 8, Lesson 1

 Retractable preferred shares are those that give the holder the option to sell them back to the issuer at a predetermined price and date. This is the case for Evan, who can sell his shares back to Ingram at par value any time from now until September 1st two years from now. References: Canadian Investment Funds Course (CIFC) | IFSE Institute

The statement that is correct about Maalik’s identification requirements is option A. According to Section 7 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), registered firms and individuals must report any suspicious transactions or attempted transactions to FINTRAC, which is Canada’s financial intelligence unit that collects, analyzes, and discloses information related to money laundering and terrorist financing activities. A suspicious transaction or attempted transaction is one that there are reasonable grounds to suspect that it is related to a money laundering or terrorist financing offence. Therefore, if Maalik determines that there is anything suspicious about John’s transaction, he must report the matter to his dealer, who must report it to FINTRAC within 30 days of making the determination. The other statements are not correct about Maalik’s identification requirements. Option B is false because Maalik does not need to report John as a PEFP to his dealer; rather, he must take reasonable measures to determine whether John is a PEFP or a family member or close associate of a PEFP, and if so, he must obtain senior management approval before opening an account for John, take enhanced measures to verify John’s identity, and conduct enhanced ongoing monitoring of John’s account activity. Option C is false because Maalik does not need to collect personal information about John and report it to his dealer if John wants to make a large cash deposit; rather, he must verify John’s identity using an original, valid, and current document or information from a reliable source, keep a record of John’s name and address and the date and amount of the deposit, and report any large cash transactions of $10,000 or more in Canadian currency or its equivalent to FINTRAC within 15 days of receiving the cash. Option D is false because Maalik does not need to report the attempt to his dealer if John attempts to make a suspicious deposit; rather, he must report the attempt directly to FINTRAC within 30 days of detecting the suspicion, regardless of whether the transaction was completed or not. References: [FINTRAC - Home], [FINTRAC - Reporting], [FINTRAC - Guideline 2: Suspicious Transactions], [FINTRAC - Guideline 6A: Record Keeping and Client Identification for Financial Entities]

Diversification is the mutual fund benefit that would address Jasmine’s concern about volatility. Diversification means spreading investments across different asset classes, sectors, regions, and companies to reduce risk and volatility. A mutual fund provides diversification by pooling money from many investors and investing in a portfolio of securities that meet the fund’s investment objective and strategy. By investing in a mutual fund, Jasmine can gain exposure to the energy sector without putting all her money in one company. She can also benefit from the professional management and research of the fund manager, who can select and monitor the best securities for the fund. References: Mutual Funds, Diversification

A put option is a contract that gives the buyer the right, but not the obligation, to sell an underlying stock at a specified price (the strike price) within a specified time period (the expiration date). The seller of a put option is obligated to buy the stock if the buyer exercises the option. Patrick can purchase put options for the fund’s existing assets, which means he can lock in a minimum selling price for his stocks in case the market value drops below the strike price. This way, he can protect against potential losses and hedge his portfolio against market risk. References: What Is a Put Option and How to Use It With Example - Investopedia, How to Hedge With Stock Index Futures - Investopedia

Cavalry can place a temporary hold on Darsha’s account to temporarily disallow the redemption if they have reasonable grounds to believe that Darsha is being financially exploited or that she lacks mental capacity to make financial decisions. This is in accordance with the guidance issued by the Mutual Fund Dealers Association of Canada (MFDA) on how to deal with vulnerable clients. A temporary hold can be placed for up to 15 business days, which can be extended for another 15 business days if necessary. During this time, Cavalry must conduct an internal review of the matter and contact Darsha and any trusted contact person or legal representative to resolve the situation. Cavalry cannot place a permanent hold on Darsha’s account without her consent or a court order. Cavalry is not required to place a temporary hold on Darsha’s account, but it is an option available to them to protect their client’s interests. References: What We Heard Report: Financial Crimes and Harms Against Seniors, MFDA Bulletin #0859-P - Guidance on Vulnerable Clients

According to the MFDA Rules, a Dealing Representative must not accept any purchase orders from a client until the Branch Manager or other designated person has reviewed and approved the New Client Application Form (NCAF) for the client. This is to ensure that the Dealing Representative has obtained and verified all the necessary information about the client, such as identity, investment objectives, risk tolerance, financial situation, and suitability of investments. The review and approval of the NCAF must be completed before any trades are executed for the client, unless there are exceptional circumstances that justify a delay. In this case, Quintin should have waited for Lupita’s approval of the NCAF before placing the purchase order for Reginald.

References: 1: MFDA Rules as at December 31, 2021 - MFDA 2 (Rule 2.2.4)

The current yield on a bond is the annual interest payment divided by the current market price of the bond. In this case, the annual interest payment is 7% of the face value, which is $700. The current market price of the bond is $9,230. Therefore, the current yield is:

9230700​×100%=7.58%

The current yield is different from the coupon rate, which is the annual interest payment divided by the face value of the bond. The coupon rate does not change over the life of the bond, but the current yield changes as the market price of the bond fluctuates. References:

Canadian Investment Funds Course (CIFC) Study Guide, Chapter 5: Fixed-Income Securities, Section 5.2: Bond Pricing and Yield, page 5-61

Current Yield Definition - Investopedia2