Thomas, a resident of Ontario, is a full-time university student. He does food delivery to supplement his income. During the school year, he works on weekends and works full-time during his summer break.Thomas' pensionable earnings were $16,000 for the year. How much must Thomas contribute to CPP when CPP contribution rate is 5.95%?
Answer(s): B
Thomas must contribute to CPP based on his pensionable earnings, which are his income from employment or self-employment that are subject to CPP. However, he can deduct a basic exemption amount from his pensionable earnings, which is $3,500 for the year. Therefore, his contributory earnings are:16,000-3,500=12,500The CPP contribution rate is 5.95% for employees and self-employed workers. Therefore, Thomas must contribute:12,500×5.95%=743.75Canadian Investment Funds Course (CIFC) Study Guide, Chapter 6: Registered Plans, Section 6.3:Canada Pension Plan (CPP), page 6-101Canada Pension Plan - How much could you receive - Canada.ca2
Sonya meets with her client Elijah to review different investment approaches that could be offered to help him reach his financial goals. Part of that discussion included Sonya mentioning factors such as inflation, interest rates, and rates of return. Which stage of the Strategic Investment Planning (SIP) process does this describe?
The Strategic Investment Planning (SIP) process is a four-step process that helps advisors to create and deliver customized investment plans for their clients. The four steps are:Clarify Client Status, Problems and Opportunities: This step involves gathering information about the client's personal and financial situation, goals, risk tolerance, and investment knowledge. The advisor also identifies the client's problems and opportunities, such as tax issues, estate planning needs, or market trends.Identify Strategies and Present the Plan: This step involves analyzing the information collected in the previous step and developing strategies to address the client's problems and opportunities. The advisor also presents the plan to the client, explaining the rationale, benefits, costs, and risks of the proposed strategies. This is the stage where Sonya mentions factors such as inflation, interest rates, and rates of return, as they are relevant to the investment approaches she is offering to Elijah.Implement the Plan: This step involves executing the agreed-upon strategies with the client's consent. The advisor also ensures that the necessary documentation and transactions are completed.Monitor and Update: This step involves reviewing the performance of the plan and making adjustments as needed. The advisor also communicates with the client regularly and updates the plan according to any changes in the client's situation or goals.Canadian Investment Funds Course (CIFC) Study Guide, Chapter 2: The Sales Process, Section 2.3: The Strategic Investment Planning (SIP) Process, page 2-81Strategic Investment Planning Process - IFSE Institute2
Derek submits an order to sell 300 units of the Evergreen Canadian Mortgage Fund at 8:00 p.m. EST on Friday, January 6. His proceeds will be based on the net asset value per unit (NAVPU) for which day (assume no holidays)?
Mutual fund orders placed after the market closes are processed using the next business day's net asset value per unit (NAVPU). Since Derek submitted his sell order at 8:00 p.m. EST on Friday, January 6 (after the close of the markets), his proceeds will be based on the NAVPU for Monday, January 9, the next business day.
This information is consistent with the standard practice for mutual fund transactions as outlined in the Canadian Investment Funds Course (CIFC). The CIFC materials provided by IFSE Institute (https://www.ifse.ca/courselist/canadian-investment-funds-course-cifc/ and https://www.ifse.ca/resources/) cover the procedures and timings related to mutual fund transactions.
If an investor was looking for an investment with a risk equal to that of the market, which factor would she want in an investment?
Answer(s): D
Beta is a measure of the systematic risk of an investment, which is the risk that is related to the movements of the market as a whole. Beta compares the volatility of an investment to the volatility of the market. A beta of 1 means that the investment has the same level of risk as the market, and it tends to move in the same direction and magnitude as the market. A beta of 0 means that the investment has no correlation with the market, and it is unaffected by market fluctuations. A beta greater than 1 means that the investment is more risky than the market, and it tends to amplify the market movements. A beta less than 1 means that the investment is less risky than the market, and it tends to dampen the market movements. Therefore, if an investor was looking for an investment with a risk equal to that of the market, she would want a beta of 1.
Canadian Investment Funds Course (CIFC) Study Guide, Chapter 4: Mutual Funds, Section 4.5: Risk and Return of Mutual Funds, page 4-231Beta Definition - Investopedia2
Khuyen is a Dealing Representative for Stark Contrast Investments. Her dealer has relationships with 20 different mutual fund families. This gave her the flexibility to sell two different types of funds from two different fund families to her client, Bao. $5,000 was invested in the Blue Moon Global Balanced fund and an additional $5,000 was invested in the Orange Sun Asset Allocation fund. Khuyen has been reviewing the performance of both funds and has determined that Bao would be better off being fully invested in the Blue Moon Global Balance fund. Bao had previously signed a Limited Authorization Form(LAF) for Khuyen, so she goes ahead and does not worry about consulting with Bao before making the change.What type of activity has Khuyen performed?
Answer(s): C
Discretionary trading is a type of trading activity where the advisor makes investment decisions on behalf of the client without obtaining the client's prior consent for each transaction. Discretionary trading is only allowed if the client has signed a discretionary management agreement with the advisor and the advisor is registered as a portfolio manager. A limited authorization form (LAF) does not grant the advisor the authority to engage in discretionary trading. A LAF only allows the advisor to execute trades that are initiated by the client, such as pre-authorized contributions or withdrawals. Therefore, Khuyen has performed discretionary trading by switching Bao's funds without consulting him, which is a violation of her registrant responsibilities and ethical standards.
Canadian Investment Funds Course (CIFC) Study Guide, Chapter 2: The Sales Process, Section 2.4:Ethics and Compliance, page 2-161Discretionary Trading Definition - Investopedia2
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