IFC Mutual Fund Types and Structures 2

Question 1

Which type of mutual fund continuously issues and redeems units at the current net asset value per unit (NAVPU)?

Accepted Answer

Open-end fund

Answer

Open-end mutual funds continuously issue new units and redeem existing units at the daily calculated NAVPU.

Question 2

A labour-sponsored investment fund (LSIF) is designed primarily to invest in:

Accepted Answer

Small and medium-sized businesses

Answer

LSIFs are structured to provide venture capital to small and medium-sized Canadian businesses and offer tax credits to investors.

Question 3

What distinguishes a clone fund from a standard mutual fund?

Accepted Answer

It mirrors the performance of a foreign fund using derivatives

Answer

Clone funds replicate the returns of a foreign fund by using derivative contracts while technically remaining a Canadian fund.

Question 4

Under a mutual fund trust structure, unitholders are treated as:

Accepted Answer

Beneficiaries of the trust

Answer

In a mutual fund trust, investors are beneficiaries who hold units representing their proportionate interest in the trust's assets.

Question 5

Which of the following best describes a money market mutual fund?

Accepted Answer

It holds short-term, high-quality debt instruments to preserve capital

Answer

Money market funds invest in short-term, highly liquid instruments such as T-bills and commercial paper to maintain capital stability.

IFC - Investment Funds in Canada Practice Test