IFIC Mock Exam Q&A
Question 1
Dickson is interested in a high-risk, high-return investment
strategy that involves concentrated portfolios with strong gains
in earnings or stock prices. Which investment philosophy should
Dickson consider?
A) Sector Rotation.
B) Value Investing.
C) Momentum Investing.
D) GARP.
Extracted from Chapter 15:
Momentum investing is a strategy designed to take advantage of ongoing
market trends. It involves purchasing securities that are rising in value and
selling them when they show signs of a downturn. Momentum investors
operate under the belief that stocks that have performed well historically are
likely to continue doing so, and the same applies to those that have
underperformed.
While this strategy can offer the potential for significant returns, it also carries
a greater level of risk compared to other investment approaches. Therefore,
it's essential for Emma to manage these risks thoughtfully and to consider her
overall investment goals and risk tolerance when applying this strategy.
Question 2
Ken is considering withdrawing funds from his RRSP to finance a
home renovation project. What consequence is he likely to face
regarding taxation?
A) Reduced tax liability due to the purpose of the withdrawal.
B) Income tax on the withdrawn amount in the year of withdrawal.
, C) Capital gains tax on the withdrawn amount.
D) No tax implications as long as the funds are used for home
improvement.
Extracted from Chapter 6:
Withdrawals from RRSPs are subject to income tax in the year they are taken
out, regardless of the intended use. Betty should carefully assess the potential
tax consequences before proceeding with the withdrawal.
Question 3
Which of the following represents an implicit cost related to
Principal-Protected Notes (PPNs)?
A) Early redemption fees.
B) Commissions.
C) Performance averaging formulas.
D) Management fees.
Extracted from Chapter 13:
Performance averaging formulas are an example of an implicit cost associated
with Principal Protected Notes (PPNs). These formulas determine the final
payout based on the average performance of the underlying asset throughout
the duration of the note, which can either increase or decrease the returns for
investors. In contrast, other costs are considered explicit.
Question 4
A mutual fund sales representative recommending a high-risk
investment to a retiree with a low risk tolerance, in order to meet
a personal sales target, primarily violates which type of
responsibility?
A) Ethical Responsibility.
B) Professional Responsibility.
C) Legal Responsibility.
Question 1
Dickson is interested in a high-risk, high-return investment
strategy that involves concentrated portfolios with strong gains
in earnings or stock prices. Which investment philosophy should
Dickson consider?
A) Sector Rotation.
B) Value Investing.
C) Momentum Investing.
D) GARP.
Extracted from Chapter 15:
Momentum investing is a strategy designed to take advantage of ongoing
market trends. It involves purchasing securities that are rising in value and
selling them when they show signs of a downturn. Momentum investors
operate under the belief that stocks that have performed well historically are
likely to continue doing so, and the same applies to those that have
underperformed.
While this strategy can offer the potential for significant returns, it also carries
a greater level of risk compared to other investment approaches. Therefore,
it's essential for Emma to manage these risks thoughtfully and to consider her
overall investment goals and risk tolerance when applying this strategy.
Question 2
Ken is considering withdrawing funds from his RRSP to finance a
home renovation project. What consequence is he likely to face
regarding taxation?
A) Reduced tax liability due to the purpose of the withdrawal.
B) Income tax on the withdrawn amount in the year of withdrawal.
, C) Capital gains tax on the withdrawn amount.
D) No tax implications as long as the funds are used for home
improvement.
Extracted from Chapter 6:
Withdrawals from RRSPs are subject to income tax in the year they are taken
out, regardless of the intended use. Betty should carefully assess the potential
tax consequences before proceeding with the withdrawal.
Question 3
Which of the following represents an implicit cost related to
Principal-Protected Notes (PPNs)?
A) Early redemption fees.
B) Commissions.
C) Performance averaging formulas.
D) Management fees.
Extracted from Chapter 13:
Performance averaging formulas are an example of an implicit cost associated
with Principal Protected Notes (PPNs). These formulas determine the final
payout based on the average performance of the underlying asset throughout
the duration of the note, which can either increase or decrease the returns for
investors. In contrast, other costs are considered explicit.
Question 4
A mutual fund sales representative recommending a high-risk
investment to a retiree with a low risk tolerance, in order to meet
a personal sales target, primarily violates which type of
responsibility?
A) Ethical Responsibility.
B) Professional Responsibility.
C) Legal Responsibility.
