CIFC Types of Investment Funds 4

Question 1

An investor purchases units in an open-end mutual fund. How is the purchase price determined?

Accepted Answer

At the fund's net asset value per unit (NAVPU) calculated at the end of the trading day

Answer

At the market price quoted on a stock exchange

Answer

At a negotiated price between buyer and fund manager

Answer

At the previous day's closing market price plus a fixed spread

Question 2

Which of the following best describes a target-date fund?

Accepted Answer

A fund that gradually shifts its asset allocation from growth-oriented to conservative as it approaches a target retirement date

Answer

A fund that only invests in fixed-income securities maturing on a specific date

Answer

A fund that locks up investor capital until a specified date before redemption

Answer

A fund that tracks an index and rebalances on a specific calendar date annually

Question 3

What is the key difference between a T-SWP (tax-efficient systematic withdrawal plan) and a regular SWP?

Accepted Answer

A T-SWP returns a portion of capital with each payment, potentially reducing tax compared to fully income-based withdrawals

Answer

A T-SWP reinvests all distributions while a regular SWP redeems units

Answer

A T-SWP is only available in registered accounts such as RRSPs

Answer

A T-SWP guarantees the investor will never run out of money

Question 4

Which statement about real estate investment trusts (REITs) is CORRECT?

Accepted Answer

REITs pool investor capital to invest in income-producing real estate and are typically traded on stock exchanges

Answer

REITs are mutual funds that exclusively hold residential mortgage bonds

Answer

REITs are restricted to institutional investors and cannot be sold to retail clients

Answer

REITs guarantee a fixed monthly distribution regardless of rental income

Question 5

A 'clone fund' in the Canadian mutual fund industry refers to:

Accepted Answer

A fund that duplicates another fund's portfolio exactly using derivatives to gain foreign exposure

Answer

A second series of a fund issued under a different fee structure

Answer

A fund that mirrors a competitor's fund by holding identical securities

Answer

A replica fund created when two fund companies merge

Question 6

Which type of mutual fund is MOST appropriate for an investor seeking monthly income with relatively low risk?

Accepted Answer

Dividend or income fund holding blue-chip dividend-paying stocks and bonds

Answer

Small-cap equity fund

Answer

Emerging markets fund

Answer

Commodities fund

Question 7

Under CIFC standards, a fund with a management expense ratio (MER) of 2.5% means:

Accepted Answer

The annual cost of running the fund is 2.5% of the fund's average net assets, charged to investors

Answer

The fund returned 2.5% last year net of all fees

Answer

Investors pay an additional 2.5% sales commission when purchasing units

Answer

The fund manager earns a 2.5% performance bonus if the fund outperforms its benchmark