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CSI IFC Exam Questions
Investment Funds in Canada (Page 5 )

Updated On: 28-Feb-2026
Page 5 of 99
PDF with 486 Questions

Your client earns $100,000 from employment and $10,000 from investments each year. Her bills total $95,000 annually.
What is her discretionary income?

  1. $5,000
  2. $20,000
  3. $15,000
  4. $10,000

Answer(s): C

Explanation:

Discretionary income is the amount left after subtracting expenses from total income, available for savings or investments. Total income = $100,000 (employment) + $10,000 (investments) = $110,000. Subtracting $95,000 in bills gives $110,000 - $95,000 = $15,000. The feedback from the document states:

"Discretionary income eligible for savings and investments is the difference between the amount of money coming in from employment and other sources and the amount of money going out to pay bills. In this example, $100,000 + $10,000 - $95,000 = $15,000."


Reference:

Chapter 4 ­ Getting to know the clientLearning Domain: The Know Your Client Communication Process



What bias results in investors valuing an asset that they own over an asset that another individual owns?

  1. Representativeness
  2. Endowment
  3. Risk aversion
  4. Status Quo

Answer(s): B

Explanation:

Endowment bias leads investors to overvalue assets they own compared to similar assets they do not own. The feedback from the document states:

"People who are subject to endowment bias place more value on an asset they hold property rights to than on an asset they do not hold property rights to."


Reference:

Chapter 5 ­ Behavioural FinanceLearning Domain: The Know Your Client Communication Process



What response would a loss-averse investor be most likely to choose in selecting a preferred investment return scenario?

  1. An assured loss of $750
  2. A 75% chance of losing $1,000, and a 25% chance of losing nothing
  3. A 25% chance of gaining $2,000, and a 75% chance of losing nothing
  4. A 5% chance of gaining $1,500, and a 95% chance of losing $800

Answer(s): C

Explanation:

Loss-averse investors prioritize minimizing potential losses over maximizing gains. The option with a 25% chance of gaining $2,000 and a 75% chance of losing nothing has the lowest loss potential, making it the preferred choice. The feedback from the document states:

"The loss-averse investor will choose a lower potential of loss over a more rational choice. In this example, a 25% chance of gaining $2,000 and a 75% chance of losing nothing has the lowest possible loss potential, and will typically be the statement selected by the loss-averse investor."


Reference:

Chapter 5 ­ Behavioural FinanceLearning Domain: The Know Your Client Communication Process



What bias would influence an investor's decision to continue to hold an unprofitable investment despite little likelihood of an improvement in the investment's value?

  1. Representativeness
  2. Loss aversion
  3. Status quo
  4. Cognitive dissonance

Answer(s): B

Explanation:

Loss aversion bias causes investors to hold onto unprofitable investments due to a stronger desire to avoid losses than to seek gains. The feedback from the document states:

"Loss aversion bias states that people generally feel a stronger impulse to avoid losses than to acquire gains. Loss aversion can prevent people from unloading unprofitable investments, even when they see little to no prospect of a turnaround."


Reference:

Chapter 5 ­ Behavioural FinanceLearning Domain: The Know Your Client Communication Process



Joanne's earned income last year was $45,000 and her pension adjustment was $2,500. She has $2,000 in carry-forward registered retirement savings plan (RRSP) room for the current taxation year.
What is Joanne's maximum tax-deductible RRSP contribution amount for the current year?

  1. $12,600
  2. $5,600
  3. $7,600
  4. $8,100

Answer(s): C

Explanation:

The maximum tax-deductible RRSP contribution is calculated as 18% of the previous year's earned income, minus the pension adjustment, plus any carry-forward contribution room. In this case:

(18% × $45,000) = $8,100

$8,100 - $2,500 (pension adjustment) + $2,000 (carry-forward) = $7,600.

The feedback from the document confirms:

"Joanne's tax-deductible RRSP contribution room would be calculated as (18% × $45,000) - $2,500 + $2,000 = $7,600."


Reference:

Chapter 6 ­ Tax and Retirement PlanningLearning Domain: The Know Your Client Communication Process






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