IFC Products and Trading 4

Question 1

A 'deferred sales charge' (DSC) mutual fund means the investor:

Accepted Answer

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

Answer

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

Question 2

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

Accepted Answer

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

Answer

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

Question 3

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

Accepted Answer

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

Answer

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

Question 4

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

Accepted Answer

Holds both equities and fixed-income securities to manage risk

Answer

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

Question 5

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

Accepted Answer

ETNs provide direct ownership of the underlying assets

Answer

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

IFC - Investment Funds in Canada Practice Test