IFSE – CIFC Unit 7 Questions and Answers 100% Correct

IFSE – CIFC Unit 7 Questions and Answers 100% Correct If a fund has a beta of 2, what is the expected outcome for the fund? It should outperform the market by 100%. What effect will a mutual fund distribution have on its price? The price per unit will decrease in value equivalent to the distribution. What type of analysis looks for insight into a company from their financial statements? fundamental -Fundamental analysis focuses on looking at the fundamentals of a company such as revenues, assets, profits, and competitive position. Fundamental analysts use a company's financial statements as a major source of information. However, they may also speak with its management, customers and suppliers to get a better picture of a company's situation. They also consider macroeconomic factors such as the economy, inflation and interest rates and how those factors could impact a company's earning potential. Heath, an equity analyst, is reviewing a company's financial statements to determine its profitability. Which statement would show a company's net profit or loss? income statement -A company's net profit or loss is shown on its income statement. On January 3, Connie Lynne purchases 100 units of Cornerstone Canadian Equity Fund with a net asset value per unit (NAVPU) of $10. Later that year, on December 15, the mutual fund's NAVPU moves to $11 and it makes a distribution of $1 per unit. Connie's distribution is automatically reinvested at a NAVPU of $10. What is the market value of Connie's investment on December 15 after the distribution and reinvestment? $1,100 1) Connie's original investment is $1,000, calculated as (100 units x $10 NAVPU). 2) total distribution is $100, calculated as (100 units x $1 per unit) 3) When the distribution is reinvested Connie receives 10 additional units, calculated as ($100 ÷ $10 NAVPU). 4) [(100 units + 10 units) x $10 NAVPU on December 15] Dana, a portfolio manager for a Canadian small capitalization fund, is analyzing the price-to-earnings ratio (P/E) for two mining companies. Richtree has a P/E ratio of 20 while Drake Gold's ratio is 10.85. What can Dana infer from the information? Investors are willing to pay $20 for every $1 of earnings of current income of Richtree. 1) A higher P/E ratio exhibits investor confidence in the company. Which investment management strategy relies on the belief that over time it is very hard to outperform the market? passive management Derek, 20 years old, is a keen investor. He has attended several seminars on investing and is eager to undertake investing as full-time activity. He is not clear about systematic risk and systemic risk. Which of the following statements best describe systematic risk? Unanticipated inflation is an example of systematic risk. What type of analysis is also known as charting? technical -Technical analysts rely heavily on charts to identify patterns or indicators to predict future price movements. What type of approach is Selene taking if she analyzes the macroeconomic environment, then the industry, then the individual companies? top-down -top-down approach begins with looking at the overall economy and current market trends to determine the industries, markets and/or countries that are expected to perform well. Then the portfolio manager narrows it down further to pick individual companies that they believe will outperform its competitors.