Verified CIFC dumps Q&As - 100% Pass from PassTestking [Q95-Q115]

QUESTION 95
Every February, Reginald, a Dealing Representative, feels pressured by his Manager to generate new registered retirement savings plans (RRSP) and contributions to assist the branch in meeting broader business targets. Reginald is nearing the end of February, and he has a meeting with a new client, Orel. Orel wants to open a tax-free savings account (TFSA) to develop emergency savings because he does not want to worry about his withdrawals being taxed. Reginald suggests that if Orel were to contribute to an RRSP first, then the resulting tax savings could be used to fund a new emergency account.
In relation to account suitability, what can be said about Reginald’s advice?

Recommending an investment solution that addresses two needs is putting Reginald’s client’s interest first

Based on Orel’s stated need, recommending an RRSP contribution is unsuitable.

Reginald is putting the client’s interest first by informing Orel why he should change his purpose for investing.

By convincing Orel to contribute an RRSP, instead of a TFSA, Reginald has put his client’s interest first.

QUESTION 96
Louis is the portfolio manager for Quattro Fund. The mandate of the mutual fund is to invest in a combination of cash, fixed income, and equity securities; however, Louis has the ability to adjust the portfolio according to market conditions. If Louis feels that interest rates will fall, he could invest the whole portfolio in equities. If he feels the market is too high, he could take profits and sit totally in cash. What type of mutual fund is Quattro Fund?

Canadian equity fund

balanced fund

commodity pool

asset allocation fund

QUESTION 97
Which of the following characteristics about mortgage mutual funds is CORRECT?

typically monthly distributions of interest

if interest rates fall, the mutual fund’s net asset value per unit (NAVPU) will decline

suitable only for high risk investors

risk-free where the mortgages are National Housing Act (NHA) insured

QUESTION 98
During the calendar year, Firmansyah received a $1,800 eligible dividend from a large Canadian bank and a foreign, dividend from his The USD/CAD exchange rates is 1.3605.
Firmansyah’s federal marginal tax bracket is 29%. The enhanced dividend gross-up rate is 38% and the federal dividend tax credit rate for eligible dividends is 15%.
What federal tax liability will be due from the investment income?

$522.00

$348.00

$695.76

$870.00

Explanation
To calculate Firmansyah’s federal tax liability from the investment income, we need to follow these steps:
Step 1: Convert the foreign dividend from USD to CAD using the exchange rate given in the question.
The exchange rate is 1.3605 CAD per USD, which means that 1 USD is equivalent to 1.3605 CAD.
Therefore, Firmansyah’s foreign dividend in CAD is:
500×1.3605=680.25
Step 2: Calculate Firmansyah’s grossed-up dividend income from both sources. A grossed-up dividend income is the actual dividend received plus a percentage of the dividend that reflects the corporate tax paid by the issuer. The percentage varies depending on whether the dividend is eligible or non-eligible.
According to [this site], an eligible dividend is a dividend paid by a Canadian corporation that meets certain criteria, such as being listed on a designated stock exchange or being a subsidiary of such a corporation. A non-eligible dividend is a dividend that does not meet these criteria, such as a dividend paid by a foreign corporation or a small Canadian business corporation. The gross-up rate for eligible dividends in 2020 was 38%, while the gross-up rate for non-eligible dividends in 2020 was 15%.
Therefore, Firmansyah’s grossed-up dividend income from both sources is:
(1800+680.25)×(1+0.38)=3426.35
Step 3: Apply Firmansyah’s federal marginal tax rate to his grossed-up dividend income to get his federal tax before credits. A marginal tax rate is the percentage of tax applied to an additional dollar of income. According to [this site], Firmansyah’s federal marginal tax rate for 2020 was 29%, as his taxable income was between $150,473 and $214,368. Therefore, Firmansyah’s federal tax before credits is:
0.29×3426.35=993.64
Step 4: Subtract Firmansyah’s federal dividend tax credit from his federal tax before credits to get his net federal tax liability from the investment income. A dividend tax credit is a percentage of the grossed-up dividend income that reflects the corporate tax paid by the issuer and avoids double taxation.
The percentage varies depending on whether the dividend is eligible or non-eligible. According to [this site], the federal dividend tax credit rate for eligible dividends in 2020 was 15%, while the federal dividend tax credit rate for non-eligible dividends in 2020 was 9.03%. Therefore, Firmansyah’s federal dividend tax credit from both sources is:
(1800+680.25)×0.38×0.15=297.88
Step 5: Subtract Firmansyah’s federal dividend tax credit from his federal tax before credits to get his net federal tax liability from the investment income. This is the amount of federal income tax that Firmansyah has to pay or has overpaid from the investment income. Therefore, Firmansyah’s net federal tax liability from the investment income is:
993.64297.88=695.76
Hence, option C is correct. References: [Canadian Investment Funds Course (CIFC) | IFSE Institute],
[Dividend Tax Credit | TurboTax Canada Tips], [Federal Income Tax Rates for Canada – TurboTax Canada Tips], [Eligible Dividends | TurboTax Canada Tips]

QUESTION 99
Which of the following is a characteristic of a bond fund?

Income from a bond fund will primarily be interest but may also be capital gains

Bond funds are very low risk because they never go down in value.

If interest rates rise the value of a bond fund will also tend to rise.

Securities regulation specifies that bond funds must invest in investment grade bonds.

QUESTION 100
Douglas, aged 73, won a lottery prize of $100,000 last week. Today he contacted Vincent, his Dealing Representative, with instructions to contribute the winnings to his registered retirement income fund (RRIF) account.
Which of the following statement about RRIF is CORRECT?

Deposits to RRIFs cannot be withdrawn for 5 years.

Deposits into RRIFs are not permitted.

Deposits to a RRIF entitle Douglas to a tax deduction.

Withdrawals from a non-qualifying RRIF are not taxable.

QUESTION 101
During the calendar year, Firmansyah received a $1,800 eligible dividend from a large Canadian bank and a foreign, dividend from his The USD/CAD exchange rates is 1.3605.
Firmansyah’s federal marginal tax bracket is 29%. The enhanced dividend gross-up rate is 38% and the federal dividend tax credit rate for eligible dividends is 15%.
What federal tax liability will be due from the investment income?

$522.00

$348.00

$695.76

$870.00

Explanation
To calculate Firmansyah’s federal tax liability from the investment income, we need to follow these steps:
* Step 1: Convert the foreign dividend from USD to CAD using the exchange rate given in the question.
The exchange rate is 1.3605 CAD per USD, which means that 1 USD is equivalent to 1.3605 CAD.
Therefore, Firmansyah’s foreign dividend in CAD is:
500*1.3605=680.25
* Step 2: Calculate Firmansyah’s grossed-up dividend income from both sources. A grossed-up dividend income is the actual dividend received plus a percentage of the dividend that reflects the corporate tax paid by the issuer. The percentage varies depending on whether the dividend is eligible or non-eligible.
According to [this site], an eligible dividend is a dividend paid by a Canadian corporation that meets certain criteria, such as being listed on a designated stock exchange or being a subsidiary of such a corporation. A non-eligible dividend is a dividend that does not meet these criteria, such as a dividend paid by a foreign corporation or a small Canadian business corporation. The gross-up rate for eligible dividends in 2020 was 38%, while the gross-up rate for non-eligible dividends in 2020 was 15%.
Therefore, Firmansyah’s grossed-up dividend income from both sources is:
(1800+680.25)*(1+0.38)=3426.35
* Step 3: Apply Firmansyah’s federal marginal tax rate to his grossed-up dividend income to get his federal tax before credits. A marginal tax rate is the percentage of tax applied to an additional dollar of income. According to [this site], Firmansyah’s federal marginal tax rate for 2020 was 29%, as his taxable income was between $150,473 and $214,368. Therefore, Firmansyah’s federal tax before credits is:
0.29*3426.35=993.64
* Step 4: Subtract Firmansyah’s federal dividend tax credit from his federal tax before credits to get his net federal tax liability from the investment income. A dividend tax credit is a percentage of the grossed-up dividend income that reflects the corporate tax paid by the issuer and avoids double taxation.
The percentage varies depending on whether the dividend is eligible or non-eligible. According to [this site], the federal dividend tax credit rate for eligible dividends in 2020 was 15%, while the federal dividend tax credit rate for non-eligible dividends in 2020 was 9.03%. Therefore, Firmansyah’s federal dividend tax credit from both sources is:
(1800+680.25)*0.38*0.15=297.88
* Step 5: Subtract Firmansyah’s federal dividend tax credit from his federal tax before credits to get his net federal tax liability from the investment income. This is the amount of federal income tax that Firmansyah has to pay or has overpaid from the investment income. Therefore, Firmansyah’s net federal tax liability from the investment income is:
993.64297.88=695.76
Hence, option C is correct. References: [Canadian Investment Funds Course (CIFC) | IFSE Institute],
[Dividend Tax Credit | TurboTax Canada Tips], [Federal Income Tax Rates for Canada – TurboTax Canada Tips], [Eligible Dividends | TurboTax Canada Tips]

QUESTION 102
Your clients, Jessica and Ken, want to buy a house next year. You recommend a money market fund. How do you think a money market fund will help Jessica and Ken reach their goal?

Money market funds are safe investments because their net asset value per unit does not usually fluctuate.

Money market funds provide high returns without risking the capital invested.

Money market funds pay income weekly which can be automatically reinvested.

Money market funds provide investors a guaranteed fixed rate of return.

QUESTION 103
Which of the followings describes segregated funds?

Segregated funds have high returns, high management fees, and cannot be redeemed until the maturity date of the contract.

Segregated funds flow through capital losses to investors because the investors are the owners of the underlying fund.

Segregated funds offer some protection of the capital invested but there is an added cost for the protection.

Segregated funds are subject to securities regulation because they are distributed by mutual fund dealing representatives.

QUESTION 104
Which information is typically included in the Letter of Engagement?

Client’s responsibilities

Process for complaints

Investment Objective

Payee for deposits

QUESTION 105
At 4:00 p.m. Eastern Time on July 6, the following information is collected for the Marigold Canadian Dividend Fund:

What is the net asset value per unit NAVPU for the Marigold Canadian Dividend Fund for July 6?

$7.19

$7.65

$8.25

$9.27

QUESTION 106
Beatrice is looking for comprehensive information regarding the analysis of financial statements and fund management expenses as it relates to her current mutual fund investment.
Which document would provide the information she is looking for?

Annual Information Form

Fund Facts

Simplified Prospectus

Management Reports of Fund Performance

QUESTION 107
Karen’s know your client (KYC) profile corresponds to someone who has a long time horizon, is comfortable with risk and volatility, and is primarily interested in growth. She watches the daily movements of the Toronto Stock Exchange (TSX) and wants a mutual fund that will closely match what she sees.
What kind of mutual fund would be BEST for her?

Canadian small capitalization equity fund

Canadian equity index fund

Canadian dividend fund

Canadian bond fund

QUESTION 108
Daisy is a Dealing Representative registered in the province of Saskatchewan only. Daisy’s client, Orville, a resident of Lloydminster, Saskatchewan is a retiree who presently has a $1,000,000 with her dealer, Easy Ride Financial. Orville is now planning to move to Vegreville, Alberta next month. Easy Ride Financial is registered in Alberta and Saskatchewan. Neither Easy Ride Financial nor Daisy have any clients who are resident in Alberta.
Which of the following should Daisy do if she wants to continue to service Orville’s account?

Daisy will need to forfeit her registration in Saskatchewan if she wants to be registered in Alberta to keep Orville as a client.

Register with a different mutual fund dealer that is registered in Alberta so she can keep Orville as a client.

Daisy could seek permission from her dealer to request a client mobility exemption with the Alberta Securities Commission.

Request approval from the Mutual Fund Dealers Association of Canada to be eligible to be a registered Dealing Representative in Alberta

QUESTION 109
Greg is a Dealing Representative. As a part of his business building activity, Greg prepares several messages to post on his website and Facebook page. Which statement CORRECTLY describes this situation?

Posting a sales communication to a website is prohibited by the Personal Information Protection and Electronic Documents Act (PIPEDA).

Posting messages to Facebook is prohibited by Canada’s Anti-Spam Law (CASL).

Greg’s messages must be approved by his dealer before he can publish or issue the communication.

Greg must not discuss the investment performance, rankings, or ratings of a fund in his communication.

QUESTION 110
One of your clients, Harry, has heard that he can defer paying tax on capital gains. He wants to know if what he has heard is correct and if so, how to defer paying taxes on capital gains.
What would you tell Harry?

He should hold profitable investments as long as possible.

He should invest in mutual funds just before the dividend paying date to pick up the dividend.

Harry should buy and sell investments actively.

He should hold unprofitable investments as long as possible.

QUESTION 111
What does a normal yield curve look like?

slopes upward to the left

is flat and has no slope

slopes down to the right

slopes upward to the right

QUESTION 112
Danica is looking for a mutual fund to hold in her non-registered account that provides a regular stream of income with potential for capital growth. She is having difficulty distinguishing between bond funds and dividend funds. Which of the following statements is TRUE?

The return of dividend funds relies only on interest rates; whereas with bond funds, the return also depends on the general direction of stock markets.

When interest rates rise, the net asset value per unit (NAVPU) of bond funds decreases; whereas with dividend funds it rises.

Bond funds receive fixed interest payments from most of their investments.

Bond fund distributions receive more favorable tax treatment than that of dividend funds.

QUESTION 113
Your client, Cosmo, recently inherited $50,000 from his uncle. He wants to use this money towards his retirement savings. Cosmo is a 50-year old, self-employed carpenter and he earns on average $65,000 per year. He has a registered retirement savings plan (RRSP) with the bank worth $425,000 and a tax-free savings account (TFSA) worth $46,000. He started saving when he was 25 years old and has always made his own investment decisions. His money is mostly invested in balanced funds. He feels most comfortable with these types of mutual funds since they offer potential investment growth but without being too aggressive. Cosmo has no other assets.
What additional information do you need about Cosmo to fulfill your know your client obligation?

time horizon

income and net worth

risk tolerance

investment objectives

QUESTION 114
When comparing mutual funds, what information would help a Dealing Representative determine a suitable mutual fund for a client?

Comparing historical rates of return between different types of mutual funds.

Assessing historical differences in the rate of return per unit of risk of similar mutual funds.

Referencing the fund code for each mutual fund that is being compared.

The rights a client has if there is a desire to cancel the purchased mutual fund.

QUESTION 115
Saheed is a retiree who is considering splitting his pension income with his wife, Minu.
Which of the following outcomes may occur if he shares his pension benefits?

Whether the couple saves on income tax will be dependent on Minu’s marginal tax rate.

Minu will be exposed to a pension adjustment (PA) if she receives income from his pension.

This is a form of tax evasion and is therefore considered illegal based on income tax legislation.

Regardless of how much income each person reports, the total amount of income taxes will not change.

Exam Practice Questions

Verified CIFC dumps Q&As – 100% Pass from PassTestking [Q95-Q115]

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