Practice Test GeeksIFC - Investment Funds in Canada Practice Test
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Mutual Fund Types and Structures Flashcards

7 cards from real IFC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. A mutual fund structured as a corporation rather than a trust offers which potential advantage to investors?

    Answer: The ability to switch between fund classes without triggering an immediate taxable disposition

    Corporate-class mutual funds allow investors to switch between different fund mandates within the same corporation without immediately triggering a capital gain.

  2. Balanced funds are designed to provide investors with:

    Answer: A combination of income and capital appreciation by holding both equities and fixed income

    Balanced funds hold a mix of equities and fixed-income securities to provide both growth potential and income, with moderate risk.

  3. What is the primary purpose of a target-date fund (life-cycle fund)?

    Answer: To automatically shift from growth-oriented to income-oriented investments as a target date approaches

    Target-date funds gradually reduce equity exposure and increase fixed-income holdings as the investor's target date (e.g., retirement) approaches.

  4. Which type of mutual fund is most appropriate for an investor seeking exposure to commodity prices without directly owning physical commodities?

    Answer: Commodity fund

    Commodity funds invest in commodity-linked securities or derivatives, providing indirect exposure to commodity price movements.

  5. In a mutual fund limited partnership structure, limited partners:

    Answer: Are liable only up to the amount they have invested

    Limited partners in a mutual fund LP have liability limited to their capital contribution, while the general partner manages the fund.

  6. A specialty or sector fund concentrates its holdings in:

    Answer: A specific industry, sector, or geographic region

    Specialty funds focus on a particular sector (e.g., technology, healthcare) or region, resulting in higher concentration risk.

  7. Which of the following is a characteristic of an index fund?

    Answer: Passive replication of a specific market index with low turnover

    Index funds passively track a benchmark index, resulting in low portfolio turnover and typically lower management fees than actively managed funds.