CSC - Canadian Securities Course Mutual Funds and ETFs Questions and Answers

Question 1

An investor is comparing two Canadian equity mutual funds.
Fund A has a gross annual return of 8% and a Management Expense Ratio (MER) of 2.25%.
Fund B has a gross annual return of 7.5% and an MER of 1.10%.
Assuming all other factors are equal, what would be the approximate net return for the investor in each fund?

Accepted Answer

Fund A: 5.75%, Fund B: 6.40%

Answer

Fund A: 7.50%, Fund B: 7.40%

Answer

Fund A: 8.00%, Fund B: 7.50%

Answer

The net return cannot be determined from the information provided.

Question 2

Which of the following statements BEST describes a key difference in how Exchange-Traded Funds (ETFs) and open-end mutual funds are priced and traded?

Accepted Answer

ETFs trade on a stock exchange and their prices can fluctuate throughout the day, whereas mutual funds are priced once daily at the close of business.

Answer

Mutual funds can be bought and sold at any time during the trading day, while ETFs are only priced at the end of the day.

Answer

Both ETFs and mutual funds are priced continuously throughout the trading day based on supply and demand.

Answer

The price of a mutual fund is determined by its board of directors, while the price of an ETF is determined by the market.

Question 3

Within the structure of a mutual fund, which entity is primarily responsible for holding the fund's cash and securities in safekeeping to protect the assets of the investors?

Accepted Answer

The Custodian

Answer

The Fund Manager

Answer

The Auditor

Answer

The Distributor

Question 4

An investor wants to gain exposure to the S&P/TSX Composite Index. Their primary goals are to achieve returns that closely track the index performance and to minimize annual investment costs. Which of the following investment products is MOST suitable for this investor?

Accepted Answer

A passive index-tracking ETF

Answer

An actively managed Canadian equity fund

Answer

A Canadian balanced fund

Answer

A labour-sponsored venture capital corporation

Question 5

At what point is the Net Asset Value Per Share (NAVPS) of a Canadian mutual fund typically calculated and used for processing all buy and sell orders for that day?

Accepted Answer

At the close of business, typically 4:00 p.m. ET

Answer

At the opening of the stock market (9:30 a.m. ET)

Answer

Continuously throughout the trading day

Answer

Once per week on Friday

Question 6

An investor believes that the technology sector is overvalued and expects it to decline significantly in the near future. To profit from this belief, the investor purchases shares of an inverse ETF that tracks a major technology index. What must happen for this investor's strategy to be successful?

Accepted Answer

The value of the underlying technology index must fall.

Answer

The technology index must remain stable with low volatility.

Answer

The value of the underlying technology index must rise.

Answer

The trading volume of the inverse ETF must increase.