CIFC Exam Dumps : Canadian Investment Funds Course Exam

The current yield of a bond is the annual interest payment divided by the current market price of the bond. The annual interest payment is the coupon rate multiplied by the par value of the bond. In this case, the annual interest payment is:

6.75%×10,000=675

The current market price of the bond is $9,200. Therefore, the current yield is:

9200675​×100%=7.34%

The current yield is higher than the coupon rate because the bond is selling at a discount, meaning that its market price is lower than its par value. This implies that the bond is offering a higher return than the prevailing market interest rate. However, the current yield does not take into account the capital gain or loss that will occur when the bond matures or is sold. A more accurate measure of the bond’s return is the yield to maturity (YTM), which is the annualized rate of return that accounts for both the interest payments and the price change of the bond over its remaining term.

References:

• Canadian Investment Funds Course (CIFC) Study Guide, Chapter 5: Fixed-Income Securities, Section 5.2: Bond Pricing and Yield, page 5-61
• Current Yield Definition - Investopedia2

 B is correct because capital gains distributions from a mutual fund trust are reported annually on a T3 slip, which shows the amount and type of income received from the trust. Capital gains from mutual fund trusts are not deferred until the investor exits the mutual fund (A), as they are realized and distributed by the trust every year. Capital gains distributions are considered a disposition and are therefore taxable ©, as they increase the investor’s adjusted cost base (ACB) and reduce the capital gain or increase the capital loss when the investor sells the mutual fund units. Capital gains from mutual fund distributions are 50% taxable (D), not 100%, as only half of the capital gain is included in the investor’s taxable income. References: Canadian Investment Funds Course (CIFC) | IFSE Institute

 A life income fund (LIF) is a type of registered retirement income fund (RRIF) that can be used to hold locked-in pension funds as well as other assets for an eventual payout as retirement income. A LIF cannot be withdrawn in a lump sum and has minimum and maximum withdrawal amounts each year. A LIF can only be funded by transferring money from a locked-in retirement account (LIRA) or another LIF. Therefore, D is the correct answer. References: Life Income Fund (LIF): Definition and How Withdrawals Work - Investopedia, Retraite Québec - Characteristics of an LIF