CSC Mutual Funds and ETFs 3

Question 1

Which Canadian regulatory document replaced the mutual fund simplified prospectus with a shorter, standardized summary?

Accepted Answer

Fund Facts document

Answer

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.

Question 2

What distinguishes a 'passive' ETF strategy from an 'active' ETF strategy?

Accepted Answer

Passive ETFs track a predetermined index without active security selection

Answer

Passive ETFs replicate a benchmark index mechanically, while active ETFs rely on portfolio manager judgment to select securities in pursuit of outperformance.

Question 3

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?

Accepted Answer

$9,500

Answer

A 5% front-end load means $500 (5% of $10,000) is deducted as a sales commission, leaving $9,500 invested in the fund.

Question 4

Which of the following best describes a 'systematic withdrawal plan' (SWP) offered by mutual funds?

Accepted Answer

Regular redemption of a fixed dollar amount or number of units over time

Answer

A SWP allows investors to receive regular fixed payments by automatically redeeming fund units, commonly used to generate retirement income.

Question 5

Under the deferred sales charge (DSC) schedule, what typically happens if an investor redeems within the first year?

Accepted Answer

The highest redemption fee (e.g., 5-6%) applies

Answer

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.

CSC - Canadian Securities Course Practice Test

CSC - Canadian Securities Course Practice Test

CSC Mutual Funds and ETFs 3