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
An ETF trading at $50.25 when its NAV is $50.00 is said to be trading at a:
Answer: Premium of $0.25
When an ETF's market price exceeds its NAV, it trades at a premium; authorized participants can arbitrage this by creating new units until the premium disappears.
Which of the following is a key risk specific to leveraged and inverse ETFs held for periods longer than one day?
Answer: Volatility decay (beta slippage)
Leveraged and inverse ETFs reset daily, causing volatility decay or beta slippage where compounded daily returns diverge significantly from the leveraged index return over time.
In Canada, which regulator oversees the registration and conduct of mutual fund dealers?
Answer: CIRO (formerly MFDA)
CIRO (Canadian Investment Regulatory Organization, formerly MFDA) regulates mutual fund dealers and their registered representatives in Canada.
A money market mutual fund primarily invests in which type of securities?
Answer: Short-term, high-quality debt instruments with maturities under 365 days
Money market funds invest in short-term, highly liquid, investment-grade debt instruments such as T-bills and commercial paper to preserve capital.
What is the significance of the 'portfolio turnover rate' disclosed in a mutual fund's MRFP?
Answer: It indicates how frequently the fund trades its portfolio, affecting transaction costs and tax efficiency
A high portfolio turnover rate means the fund trades frequently, generating higher transaction costs and potentially more taxable distributions for investors.
Which type of mutual fund structure is most commonly used in Canada, allowing continuous issuance and redemption of units at NAV?
Answer: Open-end fund
Open-end mutual funds continuously issue and redeem units at the current NAV, giving investors daily liquidity at a fair price based on underlying assets.
What is the role of a mutual fund's 'independent review committee' (IRC) under NI 81-107?
Answer: To review and provide recommendations on conflict-of-interest matters involving the fund manager
The IRC, required under NI 81-107, provides independent oversight by reviewing conflict-of-interest matters and making recommendations to protect unitholder interests.