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CSI IFC Exam Questions
Investment Funds in Canada (Page 10 )

Updated On: 28-Feb-2026
Page 10 of 99
PDF with 486 Questions

What items are typically classified as current assets on the statement of financial position?

  1. Cash, accounts receivable, and retained earnings
  2. Cash, accrued charges, and accounts receivable
  3. Cash, accounts receivable, and inventories
  4. Cash, inventories, and depreciation

Answer(s): C

Explanation:

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."


Reference:

Chapter 9 ­ Understanding Financial StatementsLearning Domain: Understanding Investment Products and Portfolios



You wish to sell a perpetual preferred share with a par value of $25.00, which pays a quarterly dividend of $0.25. If other preferred shares of similar quality are currently yielding 3.5%, what price should you expect to receive for your share?

  1. $30.35
  2. $25.00
  3. $28.57
  4. $14.29

Answer(s): C

Explanation:

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."


Reference:

Chapter 7 ­ Types of Investment Products and How They Are TradedLearning Domain:
Understanding Investment Products and Portfolios



Which statement best describes one of the main differences between short and long transactions?

  1. In a long transaction, the investor must pay the broker the cost of repurchasing the shares
  2. Short transactions are more common than long transactions
  3. Short sales must result in a decline in the price of the stock that is sold short
  4. Investors using long transactions anticipate a price increase in the security

Answer(s): D

Explanation:

Long transactions involve buying a security with the expectation that its price will increase, while short transactions involve borrowing and selling a security with the hope of buying it back at a lower price. The feedback from the document states:

"Short transactions are a common feature of the capital markets, although not as common as long transactions ­ the transactions taken by investors who anticipate a price increase in the security. Investors who short sell stocks must first borrow the shares. They must also declare their short transactions."


Reference:

Chapter 7 ­ Types of Investment Products and How They Are TradedLearning Domain:
Understanding Investment Products and Portfolios



Sonya, a mutual fund manager for Drake Financial, has had a stellar year in managing their Canadian equity portfolio and has outperformed the benchmark by over 200 basis points. She is now concerned that within the last couple of months of this calendar year, the Canadian equity market is due for a 10 to 15% pullback.
Which investment strategy would be most appropriate for her to implement for the last couple of months of the year to offset the market correction?

  1. Buy put options on the iShares S&P/TSX 60 Index Fund
  2. Buy call options on the iShares S&P/TSX 60 Index Fund
  3. Increase her equity exposure to the consumer staples sector
  4. Reduce her equity exposure to the energy sector

Answer(s): A

Explanation:

To protect against a market decline, purchasing put options on an index fund like the iShares S&P/TSX 60 allows the portfolio to offset losses by gaining value if the market falls. The feedback from the document states:

"A fund manager may have experienced a rapid growth in the value of her portfolio, but is concerned that the market may fall. To protect herself against a fall in value, she purchases put options on the iShares S&P/TSX 60 Index Fund (i60s). If the market declines, the fall in value of the portfolio is offset by an increase in the value of the put options."


Reference:

Chapter 7 ­ Types of Investment Products and How They Are TradedLearning Domain:
Understanding Investment Products and Portfolios



Which statement about market risk is true?

  1. Market risk is measured by the standard deviation
  2. Market risk is cancelled out by diversification
  3. Market risk is greater than the sum of the risks of all stocks
  4. Market risk can result from changes in inflation and interest rates

Answer(s): D

Explanation:

Market risk, or systematic risk, arises from factors affecting the entire market, such as changes in inflation or interest rates, and cannot be fully eliminated through diversification. The feedback from the document states:

"Once a portfolio becomes well diversified, the only remaining risk to be concerned about is market risk. Market risk is defined as the variability of a stock or a portfolio in relation to the market as a whole. The process of diversification cancels out much firm-specific risk, so market risk is less than the total risk you would calculate if you looked at each stock separately. Market risk is also referred to as systematic risk and arises from such things as inflation, the business cycle, and interest rates."


Reference:

Chapter 8 ­ Constructing Investment PortfoliosLearning Domain: Understanding Investment Products and Portfolios






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