Pearson IFC New Attempt

Trailer fees are ongoing fees that are paid by mutual fund managers to mutual fund dealers for providing ongoing services to their clients who hold units of their funds. Trailer fees are calculated as a percentage of the value of assets under management (AUM) of the clients who hold units of the fund. Trailer fees are paid out of the management fee that is charged by the mutual fund manager to cover the costs of operating and administering the fund. Therefore, option C is correct regarding mutual fund fees. The other options are incorrect. Option A is false because redemptions are not made from units held by investors to pay trailer fees; rather, trailer fees are paid out of the management fee that is deducted from the net asset value (NAV) of the fund. Option B is false because trailer fees are not only paid to mutual fund dealers when a purchase is made; rather, trailer fees are paid on an ongoing basis as long as the clients hold units of the fund. Option D is false because trading commissions are not paid from the management fee; rather, trading commissions are paid from the trading expense ratio (TER) that reflects the costs of buying and selling securities within the fund. References: [Mutual Fund Fees Explained | Wealthsimple], [Mutual Fund Fees | GetSmarterAboutMoney.ca], [Understanding Mutual Fund Fees | Investopedia]

 B is correct because assessing historical differences in the rate of return per unit of risk of similar mutual funds helps a Dealing Representative to compare the performance and risk-adjusted returns of different mutual funds and select the most suitable one for a client’s risk tolerance and investment objectives. Comparing historical rates of return between different types of mutual funds (A) does not account for the risk involved in each type of fund. Referencing the fund code for each mutual fund that is being compared © does not provide any information about the fund’s characteristics, features, or suitability. The rights a client has if there is a desire to cancel the purchased mutual fund (D) are not relevant for determining a suitable mutual fund for a client.

Bonds and debentures are both types of debt instruments that can be issued by corporations or governments to raise capital. However, they differ in the way they are secured. Bonds are backed by the specific assets of the issuer, such as property, equipment, or inventory. This means that if the issuer defaults on the bond payments, the bondholders have a claim on those assets and can sell them to recover their money. Debentures, on the other hand, are not secured by any real assets or collateral. They are only backed by the general creditworthiness and reputation of the issuer. This means that if the issuer defaults on the debenture payments, the debenture holders have no recourse to any specific assets and have to rely on the issuer’s ability to pay from its future earnings or liquidation proceeds.

Canadian Investment Funds Course, Unit 5, Section 5.1

Back-end load funds often have a decreasing redemption fee (deferred sales charge) schedule, which reduces the longer the investor holds the fund. The feedback from the document states:

"Fund sponsors use a decreasing redemption fee (deferred sales charges) schedule to recover their costs from investors who opt out of the fund early. In most cases, redemption fees on a back-end load fund decrease the longer the investor holds the fund."