IFSE Institute CIFC Exam With Confidence Using Practice Dumps

A treasury bill is a short-term debt instrument issued by the government at a discount from its face value and redeemed at par value at maturity. The difference between the purchase price and the face value is the interest income earned by the investor. Therefore, Megan treats the $1,800 difference as interest income for tax purposes. Interest income is fully taxable at the investor’s marginal tax rate in the year it is received. Megan does not report any capital gain, dividend, or return of capital from the treasury bill.

References: Canadian Investment Funds Course, Unit 5, Section 5.2

Monetary policy is the process by which the central bank, in Canada’s case the Bank of Canada, influences the supply and demand of money in the economy, and thereby affects the level of interest rates, inflation, and economic activity. One of the main tools of monetary policy is the overnight rate, which is the interest rate that banks charge each other for short-term loans. The Bank of Canada sets a target for the overnight rate and adjusts it periodically to achieve its inflation target of 2%. By increasing or decreasing the overnight rate, the Bank of Canada affects the cost and availability of credit for consumers and businesses, and influences their spending and saving decisions. For example, if the Bank of Canada increases the overnight rate, it becomes more expensive to borrow money, which reduces the demand for loans and credit, and slows down economic growth and inflation. Conversely, if the Bank of Canada decreases the overnight rate, it becomes cheaper to borrow money, which increases the demand for loans and credit, and stimulates economic growth and inflation.

References: Canadian Investment Funds Course, Chapter 1: The Canadian Financial Services Industry1

A is correct because mortgage mutual funds typically pay monthly distributions of interest to their investors, as they invest in mortgages that generate regular interest income. If interest rates fall, the mutual fund’s net asset value per unit (NAVPU) will increase (B), not decline, as the value of the existing mortgages in the fund will rise. Mortgage mutual funds are suitable for low to moderate risk investors ©, not only for high risk investors, as they provide stable income and capital preservation. Mortgage mutual funds are not risk-free (D), even if the mortgages are National Housing Act (NHA) insured, as they still face credit risk, interest rate risk, and liquidity risk. References: Investment Funds in Canada (IFC) | Canadian Securities Institute