FREE IFC Risk Management Questions and Answers

Question 1

What does suitability mean?

Accepted Answer

Recommendations are appropriate for the client’s unique situation and investment objectives.

Answer

Understanding the personal and financial knowledge of the client.

Answer

Recommendations are not based on the personal and financial knowledge of the client.

Answer

The investor’s major concerns are addressed.

Question 2

Which organization regulates mutual and investment funds?

Accepted Answer

Securities commissions.

Answer

Investment Industry Regulatory Organization of Canada.

Answer

Bourse de Montreal.

Answer

Mutual Fund Dealers Association.

Question 3

What stage in the business cycle typically has increasing wages, rising inflation, rising interest rates with slowing sales, and decreasing business investment?

Accepted Answer

Peak

Answer

Trough

Answer

Expansion

Answer

Recovery

Question 4

Based on the financial planning pyramid, what security would be appropriate for a very aggressive investor?

Accepted Answer

Over the Counter (OTC) Securities

Answer

Foreign stocks

Answer

Commodities

Answer

Tax shelters

Question 5

Your client earns $100,000 from employment and $10,000 from investments each year. Her bills total $95,000 annually. What is her discretionary income?

Accepted Answer

$15,000

Answer

$10,000

Answer

$20,000

Answer

$5,000

Question 6

What bias results in investors valuing an asset that they own over an asset that another individual owns?

Accepted Answer

Endowment

Answer

Representativeness

Answer

Risk aversion

Answer

Status Quo

Question 7

What response would a loss-averse investor be most likely to choose in selecting a preferred investment return scenario?

Accepted Answer

A 25% chance of gaining $2,000, and a 75% chance of losing nothing.

Answer

A 75% chance of losing $1,000, and a 25% chance of losing nothing.

Answer

An assured loss of $750.

Answer

A 5% chance of gaining $1,500, and a 95% chance of losing $800.

Question 8

What bias would influence an investor’s decision to continue to hold an unprofitable investment despite little likelihood of an improvement in the investment’s value?

Accepted Answer

Loss aversion

Answer

Representativeness

Answer

Availability

Answer

Status quo

Question 9

Joanne’s earned income last year was $45,000 and her pension adjustment was $2,500. She has $2,000 in carry forward registered retirement savings plan (RRSP) room for the current taxation year. What is Joanne’s maximum tax-deductible RRSP contribution amount for the current year?

Accepted Answer

$7,600

Answer

$12,600

Answer

$8,100

Answer

$5,600

Question 10

Rebecca, an investor in a 40% marginal tax bracket, receives $1,200 in Canadian dividends eligible for the dividend tax credit. What is the dividend tax credit that applies to this income?

Accepted Answer

$248.73

Answer

$480

Answer

$662.40

Answer

$1,200