Mutual Funds and ETFs Flashcards
7 cards from real CSC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Mutual Funds and ETFs flashcards as text
Which Canadian regulatory document replaced the mutual fund simplified prospectus with a shorter, standardized summary?
Answer: Fund Facts document
The Fund Facts document is the two-page plain-language summary that replaced the simplified prospectus as the primary point-of-sale disclosure for mutual funds.
What distinguishes a 'passive' ETF strategy from an 'active' ETF strategy?
Answer: Passive ETFs track a predetermined index without active security selection
Passive ETFs replicate a benchmark index mechanically, while active ETFs rely on portfolio manager judgment to select securities in pursuit of outperformance.
An investor buys mutual fund units at a 5% front-end load. On a $10,000 investment, how much is actually invested in the fund?
Answer: $9,500
A 5% front-end load means $500 (5% of $10,000) is deducted as a sales commission, leaving $9,500 invested in the fund.
Which of the following best describes a 'systematic withdrawal plan' (SWP) offered by mutual funds?
Answer: Regular redemption of a fixed dollar amount or number of units over time
A SWP allows investors to receive regular fixed payments by automatically redeeming fund units, commonly used to generate retirement income.
Under the deferred sales charge (DSC) schedule, what typically happens if an investor redeems within the first year?
Answer: The highest redemption fee (e.g., 5-6%) applies
DSC schedules front-load redemption fees, typically 5-6% in the first year, declining to zero over 6-7 years to recoup the advisor's upfront commission.
Which Canadian National Instrument primarily governs the operations and disclosure requirements of mutual funds?
Answer: NI 81-102
National Instrument 81-102 sets out the investment restrictions, operational requirements, and sales practices applicable to Canadian mutual funds.
What is the key difference between a mutual fund's 'distribution yield' and its 'total return'?
Answer: Distribution yield reflects only income paid out; total return includes price appreciation and reinvested distributions
Distribution yield shows only income distributed to unitholders, while total return captures all sources of gain including price appreciation and reinvested distributions.