Canadian Securities Course (CSC) Exam
2 with Complete Solutions
3 Types of Information - ANSWER-1. Weak: past information with current prices
2. Semi-strong: public information in current prices
3. Strong: all information in current prices, no advantages
* strong is. Passive approach, they will buy and hold
5 Competitve Forces - ANSWER-1. Threat of new entry : ease of entry, required capital,
opportunities, channels, regulatory factors, product difference
2. Competitive Rivalry : numbers of competition, strength, growth, unique products
3. Threat of substitute : pressure, similar products
4. Bargaining power of buyers : pressure for lower price, degree of influence, semsitivity
5. Bargaining power of suppliers: pressure for higher price for resources, costs will
effect profit margin or product quality
Active exchange traded - ANSWER-Traded when certain conditions.
But can't trade unless designated brokers know.
Risk of the discrepancy is high because it is only valued quaterly.
High MER but lower transparency than passive
Active investment strategy (portfolio) - ANSWER-Outperform a bench mark portfolio on
a risk adjusted basis.
* take into account all that effects the dollar value
Bottom Up - focus on individuals, build from best risk return
Top down - study broad macroeconomics than narrow down
Advisor standards - ANSWER-Ethical decision making (rules/morals) asses, commit,
carry out
Standards of conduct IIROC & MFDA
Duty of care, integrity, professionalism, compliance, confidentiality
Asset backed commercial paper - ANSWER-Commercial paper that is backed by a
specific pledge of assets. This is an exception to the normal case in which commercial
paper is unsecured.
ABS with a maturity <1yr
Minimize rollover risk (risk when refinancing debt), short assets to short fund
Asset backed securities - ANSWER-Represent a claim to a portion of a pool of assets
and the return is passed through to investors with different tranches having different
levels of risk and return.
,Transfer credit risk to institutional investors.
Secularization process : originator groups assets, originator sells to a special purpose
vehicle, issuer finances by selling ABS
Classes = tranches (own credit risk and rate of return)
Senior, mezzanine or junior
Asset class timing - ANSWER-Can improve returns by switching asset classes.
Most investors are unable to determine why a change in interest.
If bonds are the best option, lengthen, if stocks are the best option, aim for capital gains
Balanced funds - ANSWER-Stocks and bonds.
Safety, income, and capital appreciation.
Diversified.
Split between defensive and aggressive.
5-90% equities, 10-95% fixed income.
Market risk and interest rate risk.
Beta - ANSWER-Links risk of portfolio to the market, very volatile.
Capital Structure - ANSWER-Distribution of debt and equity
* common shares suitable for a high debt load
CONSIDER large debt, retractable securities, convertible securities (low pe), oustanding
warrants/options (increased common shares outstanding)
Cateories of investing in ETF'S - ANSWER-General investing risk, etf specific risk, and
etf derivative specific risk.
Chart/Technical Analysis - ANSWER-Support level : bottom price (sense value)
unwilling to sell if the holder. S DOWN D UP
Resistance level : top price willing to sell but unwilling to buy. S UP D DOWN
Reversl Pattern : trend reverses
Continuation Pattern : pause in trend 3w to 6m (zig zag motion)
Closed end funds - ANSWER-Like open-ended mutual funds, these are collections of
securities managed by a professional investment advisor. Unlike open-end mutual
funds, their shares are traded on a stock exchange like ordinary stocks.
Pooled, and sell a fixed number of shares for capital. Lower MER than mutual funds.
Listed on exchange with commission.
Usually trade at a discount. Preferred shares, foreign, income producing securities.
Interval/closed end discretionary - buy back flexibility
Advantages : diversification, can short, don't need reserves, gains/interest goes directly
to investors
, Disadvantages: don't trade at NAVPS, less liquid, unit holders responsible to reinvest,
foreign dividends not eligible.
Commodity exchange traded funds - ANSWER-Physical based : invest directly with
gold/silver, closely matches the spot price.
Futures based : invest in the future with a underlying money market portfolio. Rolling
over contracts will result in a roll yield loss.
Equity based : invest in listed companies with research, exploration, development or are
refined.
Commodity funds - ANSWER-Physical commodities or derivatives
Concentration Risk - ANSWER-Small number of holdings make up a disproportionate
amount of the overall ETF value. Will be more sensitive to moves.
Low diversification, and unsystematic risk.
Higher than the 10% limit, maybe switch to individual securities
Consumer Discretionary - ANSWER-Automobiles, apparel, consumer services, media,
and retailing
Consumer staples GIC - ANSWER-Food, beverages, tobacco, household/personal
products
Containgo market - ANSWER-Normal futures market. Will be priced higher to effect
underlying commodities.
Backwardation is the opposite of containgo
Correlation - ANSWER-A measure of the relationship between two variables. Relation
within a portfolio.
Same industries- high correlation
If stock prices move in the same direction = +1 (doesn't reduce risk)
If stock prices move in the opposite directions = -1 (no variability, no risk, maximum
gain)
High beta is cylical, low beta if defensive
Covered call exchange traded funds - ANSWER-Use long term strategies for equities
and options. High yield and low volatility.
Management constraints - focus on the strategy
Fixed vs variable payments - consistent cash flow, can deplete capital if not enough
income to cover
Fees - high MER and trading expenses, costs directly related are competitive
2 with Complete Solutions
3 Types of Information - ANSWER-1. Weak: past information with current prices
2. Semi-strong: public information in current prices
3. Strong: all information in current prices, no advantages
* strong is. Passive approach, they will buy and hold
5 Competitve Forces - ANSWER-1. Threat of new entry : ease of entry, required capital,
opportunities, channels, regulatory factors, product difference
2. Competitive Rivalry : numbers of competition, strength, growth, unique products
3. Threat of substitute : pressure, similar products
4. Bargaining power of buyers : pressure for lower price, degree of influence, semsitivity
5. Bargaining power of suppliers: pressure for higher price for resources, costs will
effect profit margin or product quality
Active exchange traded - ANSWER-Traded when certain conditions.
But can't trade unless designated brokers know.
Risk of the discrepancy is high because it is only valued quaterly.
High MER but lower transparency than passive
Active investment strategy (portfolio) - ANSWER-Outperform a bench mark portfolio on
a risk adjusted basis.
* take into account all that effects the dollar value
Bottom Up - focus on individuals, build from best risk return
Top down - study broad macroeconomics than narrow down
Advisor standards - ANSWER-Ethical decision making (rules/morals) asses, commit,
carry out
Standards of conduct IIROC & MFDA
Duty of care, integrity, professionalism, compliance, confidentiality
Asset backed commercial paper - ANSWER-Commercial paper that is backed by a
specific pledge of assets. This is an exception to the normal case in which commercial
paper is unsecured.
ABS with a maturity <1yr
Minimize rollover risk (risk when refinancing debt), short assets to short fund
Asset backed securities - ANSWER-Represent a claim to a portion of a pool of assets
and the return is passed through to investors with different tranches having different
levels of risk and return.
,Transfer credit risk to institutional investors.
Secularization process : originator groups assets, originator sells to a special purpose
vehicle, issuer finances by selling ABS
Classes = tranches (own credit risk and rate of return)
Senior, mezzanine or junior
Asset class timing - ANSWER-Can improve returns by switching asset classes.
Most investors are unable to determine why a change in interest.
If bonds are the best option, lengthen, if stocks are the best option, aim for capital gains
Balanced funds - ANSWER-Stocks and bonds.
Safety, income, and capital appreciation.
Diversified.
Split between defensive and aggressive.
5-90% equities, 10-95% fixed income.
Market risk and interest rate risk.
Beta - ANSWER-Links risk of portfolio to the market, very volatile.
Capital Structure - ANSWER-Distribution of debt and equity
* common shares suitable for a high debt load
CONSIDER large debt, retractable securities, convertible securities (low pe), oustanding
warrants/options (increased common shares outstanding)
Cateories of investing in ETF'S - ANSWER-General investing risk, etf specific risk, and
etf derivative specific risk.
Chart/Technical Analysis - ANSWER-Support level : bottom price (sense value)
unwilling to sell if the holder. S DOWN D UP
Resistance level : top price willing to sell but unwilling to buy. S UP D DOWN
Reversl Pattern : trend reverses
Continuation Pattern : pause in trend 3w to 6m (zig zag motion)
Closed end funds - ANSWER-Like open-ended mutual funds, these are collections of
securities managed by a professional investment advisor. Unlike open-end mutual
funds, their shares are traded on a stock exchange like ordinary stocks.
Pooled, and sell a fixed number of shares for capital. Lower MER than mutual funds.
Listed on exchange with commission.
Usually trade at a discount. Preferred shares, foreign, income producing securities.
Interval/closed end discretionary - buy back flexibility
Advantages : diversification, can short, don't need reserves, gains/interest goes directly
to investors
, Disadvantages: don't trade at NAVPS, less liquid, unit holders responsible to reinvest,
foreign dividends not eligible.
Commodity exchange traded funds - ANSWER-Physical based : invest directly with
gold/silver, closely matches the spot price.
Futures based : invest in the future with a underlying money market portfolio. Rolling
over contracts will result in a roll yield loss.
Equity based : invest in listed companies with research, exploration, development or are
refined.
Commodity funds - ANSWER-Physical commodities or derivatives
Concentration Risk - ANSWER-Small number of holdings make up a disproportionate
amount of the overall ETF value. Will be more sensitive to moves.
Low diversification, and unsystematic risk.
Higher than the 10% limit, maybe switch to individual securities
Consumer Discretionary - ANSWER-Automobiles, apparel, consumer services, media,
and retailing
Consumer staples GIC - ANSWER-Food, beverages, tobacco, household/personal
products
Containgo market - ANSWER-Normal futures market. Will be priced higher to effect
underlying commodities.
Backwardation is the opposite of containgo
Correlation - ANSWER-A measure of the relationship between two variables. Relation
within a portfolio.
Same industries- high correlation
If stock prices move in the same direction = +1 (doesn't reduce risk)
If stock prices move in the opposite directions = -1 (no variability, no risk, maximum
gain)
High beta is cylical, low beta if defensive
Covered call exchange traded funds - ANSWER-Use long term strategies for equities
and options. High yield and low volatility.
Management constraints - focus on the strategy
Fixed vs variable payments - consistent cash flow, can deplete capital if not enough
income to cover
Fees - high MER and trading expenses, costs directly related are competitive
