Practice Test GeeksIFC - Investment Funds in Canada Practice Test
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Products and Trading 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 'deferred sales charge' (DSC) mutual fund means the investor:

    Answer: Pays a redemption fee if units are sold within a specified time period

    DSC funds charge a redemption fee that decreases over time, incentivizing investors to hold units for the full schedule period before selling.

  2. Which statement about real estate investment trusts (REITs) trading in Canada is CORRECT?

    Answer: REITs trade on stock exchanges and must distribute most taxable income to unitholders

    Canadian REITs trade on the TSX and are required to distribute the majority of their taxable income to unitholders each year.

  3. What is the significance of the 'forward pricing' rule for mutual fund transactions in Canada?

    Answer: Orders are executed at the next calculated NAV after the order is received

    Forward pricing ensures mutual fund orders are processed at the NAV calculated after the order is received, preventing price manipulation.

  4. A 'balanced fund' differs from a pure equity fund in that it:

    Answer: Holds both equities and fixed-income securities to manage risk

    A balanced fund holds a mix of equities and bonds to provide growth potential while moderating volatility.

  5. Which of the following is NOT a characteristic of exchange-traded notes (ETNs)?

    Answer: ETNs provide direct ownership of the underlying assets

    ETNs are debt instruments issued by banks; investors do not own underlying assets and are exposed to the issuer's credit risk.

  6. Under Canadian rules, which entity is responsible for calculating a mutual fund's NAV?

    Answer: The fund's administrator or custodian, not the portfolio manager

    The fund administrator or custodian calculates NAV independently from the portfolio manager to ensure accuracy and prevent conflicts of interest.

  7. What does 'soft dollar' arrangement mean in Canadian fund trading?

    Answer: A broker provides research or other services in exchange for directing trades to that broker

    Soft dollar arrangements involve a fund manager directing brokerage business to a dealer in exchange for research or services, which regulators scrutinize for conflicts of interest.