IFSE Institute CIFC Exam With Confidence Using Practice Dumps

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

The investment objective for the $10,000 currently sitting in Lucas’s RRSP is safety of principal, which means that he wants to preserve the value of his investment and avoid any loss of capital. Safety of principal is a suitable objective for Lucas because he plans to withdraw the money in two months for the LLP, which is a very short time horizon. He does not need to generate any income or growth from his investment, as he will use the money to pay for his education expenses. He also does not need to worry about tax-deferral, as the LLP allows him to withdraw money from his RRSP without paying any tax, as long as he meets the eligibility and repayment requirements1. Therefore, Lucas should invest his money in low-risk and liquid assets, such as money market securities or guaranteed investment certificates (GICs), that will protect his principal and ensure that he can access his funds when he needs them. References:

• Canadian Investment Funds Course (CIFC) Study Guide, Chapter 6: Registered Plans, Section 6.4: Lifelong Learning Plan (LLP), page 6-132
• Lifelong Learning Plan (LLP) - Canada.ca1

 Moving the DEF Bond Fund to the RRSP would be more tax-efficient than moving any of the other funds. This is because bond funds generate interest income, which is fully taxable at the investor’s marginal tax rate in a non-registered account. By moving the bond fund to an RRSP, Darryl can defer paying taxes on the interest income until he withdraws it from the RRSP. Moving the GHI Global Equity Fund to the RRSP (B) would not be tax-efficient, as global equity funds generate foreign income and dividends, which are subject to foreign withholding taxes in an RRSP. Moving $20,000 from each of the three funds to the RRSP © would not be tax-efficient, as it would trigger capital gains taxes on all three funds in proportion to their returns. Moving the ABC Canadian Equity Fund to the RRSP (D) would not be tax-efficient, as Canadian equity funds generate Canadian dividends, which are eligible for a dividend tax credit in a non-registered account. By moving the Canadian equity fund to an RRSP, Darryl would lose this tax advantage and pay taxes on the dividends at his marginal tax rate when he withdraws them from the RRSP. References: Canadian Investment Funds Course (CIFC) | IFSE Institute