Practice Test GeeksIFC - Investment Funds in Canada Practice Test
← All IFC Flashcard Decks

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.

Read the first 7 Mutual Fund Types and Structures flashcards as text

  1. A principal-protected note (PPN) linked to a mutual fund primarily guarantees:

    Answer: Return of the original invested principal at maturity

    PPNs guarantee the return of the investor's principal at maturity, with any additional return linked to the performance of the underlying fund.

  2. Segregated funds differ from mutual funds primarily because they:

    Answer: Are insurance products that offer maturity and death benefit guarantees

    Segregated funds are issued by insurance companies and include contractual guarantees on maturity and death benefits not available in standard mutual funds.

  3. An investor comparing a front-end load fund to a no-load fund would find that the key difference is:

    Answer: Front-end load funds charge a sales commission at purchase that reduces the initial investment amount

    Front-end load funds deduct a sales commission from the investor's initial purchase, reducing the amount actually invested in the fund.

  4. What is the role of a custodian in a mutual fund structure?

    Answer: To hold the fund's assets safely and separately from the fund manager's own assets

    The custodian (typically a bank or trust company) holds the fund's securities in safekeeping, ensuring investor assets are protected from fund manager insolvency.

  5. A deferred sales charge (DSC) schedule typically means that:

    Answer: A redemption fee is charged if units are sold within a specified holding period

    DSC funds charge a declining redemption fee if the investor sells units before a set number of years have passed, typically starting around 5–6%.

  6. Which type of mutual fund is most likely to distribute interest income rather than capital gains or dividends?

    Answer: Bond or fixed-income fund

    Bond funds primarily earn interest income from their fixed-income holdings and pass this income to unitholders as interest distributions.

  7. A mutual fund's simplified prospectus is required to be provided to investors:

    Answer: Before or at the time of purchase

    Securities regulations require that a simplified prospectus be delivered to investors before or at the same time as they purchase mutual fund units.