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CSI CSC2 Exam Questions
Canadian Securities Course 2 (Page 4 )

Updated On: 28-Feb-2026
Page 4 of 38
PDF with 185 Questions

What must happen for a redemption to be processed from a mutual fund?

  1. Payment for redeemed securities must be within two business days after the NAVPS is determined.
  2. Mutual funds representatives must submit the order within two business days of when the order is received from the client.
  3. The offering price of the mutual fund must be calculated.
  4. The client redeeming the mutual fund must receive a Fund facts document.

Answer(s): A

Explanation:

When a mutual fund redemption is processed, the fund must calculate the Net Asset Value per Share (NAVPS) to determine the redemption price. The Canadian Securities Administrators (CSA) regulations mandate that payment for redeemed securities be made within two business days following the calculation of NAVPS, ensuring prompt transactions while protecting investor interests.


Reference:

CSC Volume 2, Chapter 17: "Mutual Funds: Structure and Regulation," details the process and timing for mutual fund redemptions, including regulatory requirements.



What is the key objective for investors in alternative strategy funds?

  1. To match the performance of a reference index.
  2. To maximize risk-adjusted returns.
  3. To achieve absolute returns
  4. To exceed the current rate of inflation.

Answer(s): C

Explanation:

Alternative strategy funds aim to achieve absolute returns, focusing on positive returns under various market conditions rather than comparing performance to a benchmark index. These strategies often include hedge funds and alternative mutual funds, using techniques like leverage, short selling, and derivatives to manage risk and enhance returns. The goal is not necessarily to outperform an index (as in option A) or match inflation rates (option D) but to deliver consistent positive returns.

Reference

CSC Volume 2, Chapter 21: Alternative Investments: Strategies and Performance, p. 21-3 to 21-24.



Which ratio gauges a company's ability to repay its debts using funds generated from operating activities?

  1. Cash flow-to-total debt
  2. Interest coverage.
  3. Asset coverage.
  4. Debt-to-equity

Answer(s): A

Explanation:

The cash flow-to-total debt ratio assesses a company's ability to repay its debts using cash generated from its operating activities. It is calculated by dividing operating cash flow by total debt. A higher ratio indicates better capacity to cover debts. This metric is crucial for evaluating financial health and understanding a firm's liquidity position. Other ratios listed have different focuses:

Interest coverage (B) measures a company's ability to pay interest with operating income.

Asset coverage (C) measures the protection provided to creditors.

Debt-to-equity (D) evaluates capital structure but not immediate debt repayment ability.

Reference

CSC Volume 2, Chapter 14: Company Analysis - Risk Analysis Ratios, p. 14-12 to 14-16.



Who generally executes portfolio strategy within a buy-side firm?

  1. Portfolio manager.
  2. Head of fixed income
  3. Investment advisor.
  4. Trader

Answer(s): A

Explanation:

Within a buy-side firm, the portfolio manager is responsible for executing the portfolio strategy. They oversee investment decisions, asset allocation, and security selection based on the investment mandate and client objectives. Other roles:

Head of fixed income (B) specializes in fixed-income securities rather than overall strategy.

Investment advisor (C) interacts with clients, focusing on advice rather than execution.

Trader (D) carries out transactions but does not set the portfolio strategy.

Reference

CSC Volume 2, Chapter 27: Working with the Institutional Client - The Buy-Side Portfolio Manager, p.
27-8.



Which type of commodity ETF is most suitable for an investor seeking to gain exposure to the spot price of a commodity?

  1. Physical-based
  2. Swap-based
  3. Futures-based.
  4. Equity-based

Answer(s): A

Explanation:

Commodity Exchange-Traded Funds (ETFs) provide investors with exposure to commodities such as gold, oil, and agricultural products. The most suitable type of commodity ETF for gaining exposure to the spot price of a commodity is the Physical-based ETF because it involves direct ownership or storage of the commodity. For instance, gold ETFs backed by physical gold store bullion in vaults.

1. Physical-based ETFs
These ETFs hold the actual commodity in physical form, which ensures a close tracking of the spot price. Physical gold ETFs, for example, store gold bars and adjust the NAV (Net Asset Value) based on the current spot price. This eliminates discrepancies caused by futures contracts or swaps, making them ideal for tracking spot prices.

2. Swap-based ETFs
These rely on derivative agreements (swaps) to replicate the price movements of a commodity.
While cost-effective, they do not hold the actual commodity, and their performance may slightly deviate from the spot price due to tracking errors or counterparty risks.

3. Futures-based ETFs
These use futures contracts to gain exposure. However, futures contracts come with complexities such as contango and backwardation, which can cause performance differences from the spot price over time.

4. Equity-based ETFs
These invest in shares of companies involved in the commodity sector (e.g., mining or energy companies). Their performance is influenced by company-specific factors and broader equity market trends, making them unsuitable for tracking spot prices.

Reference from CSC Study Documents:

Exchange-Traded Funds, Chapter 19, Volume 2: Discusses the characteristics and structure of ETFs, including commodity-based ETFs and their classification.

Risks related to tracking error and direct ownership of assets are highlighted under ETF types in Section 19.






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