IFC Leak Questions

 An exchange-traded fund (ETF) is a type of pooled investment security that operates much like a mutual fund. Typically, ETFs will track a particular index, sector, commodity, or other assets, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can. ETFs have lower management expense ratios (MERs) compared to mutual funds because they are passively managed and do not incur high costs for research, analysis, and portfolio rebalancing. Therefore, this statement is true about ETFs. References: Exchange-Traded Fund (ETF) Explanation With Pros and Cons - Investopedia, The Best ETFs - Exchange Traded Funds Rankings | US News Investing

The management expense ratio (MER) is the percentage of a fund’s assets that is paid to the fund manager for operating and managing the fund. A higher MER means that more of the fund’s returns are eaten up by fees, leaving less for the investors. Therefore, Fontaine Equity Fund’s higher MER of 2.99% contributes to its lower 5-year annualized return of 11.25%, compared to Chamberlain Equity Fund’s MER of 2.57% and 5-year annualized return of 13.42%. Therefore, D is the correct answer. , Management Expense Ratio (MER): Definition and How It Works - Investopedia

The element of the Know Your Client (KYC) information that Malik has been able to learn is Charlotte’s risk preference. KYC information is a collection of personal and financial information that registered firms and individuals must obtain from their clients before providing any investment advice or services. KYC information helps registered firms and individuals understand their clients’ needs, goals, risk tolerance, time horizon, and personal circumstances, as well as comply with regulatory obligations such as suitability, disclosure, and reporting. One of the components of KYC information is risk preference, which is a measure of how much risk an investor is willing to take on in their portfolio. It reflects the investor’s attitude, personality, and emotional factors that influence their investment decisions. Risk preference can be classified into three categories: risk-seeking, risk-averse, or risk-neutral. Based on Charlotte’s statement that she does not know much about trading ETFs, but she wants to invest in ETFs, and that she feels fortunate to have this money and that she’s not worried about losing it because she never planned on having any of it, Malik can infer that Charlotte has a high-risk preference or a risk-seeking attitude. This means that Charlotte is willing to take on more risk in exchange for higher potential returns, even if it means losing some or all of her money. Therefore, option C is correct regarding what element of KYC information Malik has been able to learn. The other options are not correct regarding what element of KYC information Malik has been able to learn. Option A is false because risk profile is not an element of KYC information; rather, it is an outcome of KYC information that summarizes the investor’s overall suitability for different types of investments based on their KYC information. Option B is false because risk capacity is not an element of KYC information; rather, it is a measure of how much risk an investor can afford to take on in their portfolio based on their financial situation and goals. Option D is false because risk tolerance is not an element of KYC information; rather, it is a measure of how much risk an investor can handle in their portfolio without losing sleep or changing their plans. References: [Know Your Client (KYC) | IFIC], [Know Your Client (KYC) | GetSmarterAboutMoney.ca], [Risk Preference | Investopedia]

Your client, James, would like to work beyond the normal retirement age. He comes to you for advice on his registered retirement savings plan (RRSP).What are the rules regarding terminating an RRSP?

James must terminate the plan by the end of the year he turns 65.

James must terminate the plan by the end of the year he turns 67.

James must terminate the plan by the end of the year he turns 70.

James must terminate the plan by the end of the year he turns 71.

Answer: D

According to the Canadian Investment Funds Course, an RRSP is a retirement savings plan that allows individuals to defer taxes on their contributions and investment income until they withdraw the funds. However, an RRSP cannot be held indefinitely and must be terminated by the end of the year the annuitant turns 71. At that point, the annuitant has three options to withdraw the funds from the RRSP:

Make a lump-sum withdrawal, which is subject to withholding tax and income tax.

Convert the RRSP to a registered retirement income fund (RRIF), which provides a steady stream of income with a minimum amount that must be withdrawn each year.

Purchase an annuity, which offers a guaranteed income for life or for a specified period.

 Retractable preferred shares are those that give the holder the option to sell them back to the issuer at a predetermined price and date. This is the case for Evan, who can sell his shares back to Ingram at par value any time from now until September 1st two years from now.