Free CSI IFC Practice Exam with Questions & Answers | Set: 11

 If Ellen receives the National Child Benefit Supplement (NCBS), Jeff may be eligible for the Canada Learning Bond (CLB). The CLB is a grant of up to $2,000 that the Government of Canada deposits into a child’s RESP to help low-income families start saving for their child’s education2. The CLB does not require any contributions from the parents. To be eligible for the CLB, the child must have been born after December 31, 2003 and the family must receive the NCBS, which is part of the Canada Child Benefit3. The other statements are false. If Jeff qualifies for additional CESG, his CESG lifetime maximum increases to $7,200, not $10,000. If Jeff decides not to pursue a post-secondary education, he cannot keep the CESG; it must be returned to the government. George may open an RESP for Jeff and it will qualify to receive CESGs, as long as George is a resident of Canada and has a valid social insurance number. References: Unit 8: Retirement, Canada Learning Bond, [Canada Education Savings Grant], [RESP Withdrawals], [RESP Providers]

The federal tax on eligible Canadian dividends is calculated as follows:

First, the dividend amount is grossed up by 38%, which means multiplying it by 1.38. This is to account for the corporate tax that has already been paid by the company. Eleanora’s grossed-up dividend is $500 x 1.38 = $690.

Second, the grossed-up dividend is multiplied by the federal marginal tax rate to get the gross federal tax. Eleanora’s gross federal tax is $690 x 0.29 = $200.10.

Third, the grossed-up dividend is multiplied by the federal dividend tax credit rate to get the federal tax credit. This is to avoid double taxation of the dividend income. Eleanora’s federal tax credit is $690 x 0.1502 = $103.64.

Fourth, the federal tax credit is subtracted from the gross federal tax to get the net federal tax. Eleanora’s net federal tax is $200.10 - $103.64 = $96.46.

Therefore, Eleanora will pay $96.46 in federal tax on her dividend. References: How Dividends Are Taxed and Reported on Tax Returns - Investopedia, Dividend Tax Credit in Canada - TurboTax

The correct answer is D. More risk than a dividend fund, but less risk than an equity fund. The Investment Funds in Canada curriculum explains that mortgage funds invest primarily in residential and commercial mortgages, generating income from interest payments.

Mortgage funds carry credit risk, interest rate risk, and liquidity risk, making them riskier than traditional dividend or fixed-income funds, which often hold publicly traded securities. However, they are generally less volatile than equity funds, which are subject to broader market fluctuations and business risk.

Dividend funds typically invest in established companies with stable cash flows and are therefore less risky than mortgage funds. Equity funds expose investors to full market risk and price volatility, placing them at a higher risk level than mortgage funds.

The CIFC course places mortgage funds in the mid-risk spectrum, between income-oriented equity funds and growth-oriented equity funds. Therefore, Option D is the correct and fully CIFC-verified answer.

The question specifies that the fund’s objective is to “bet on the future movement of the market to increase returns.”

This is speculation, not hedging.

Under NI 81-102, conventional mutual funds may use derivatives, but only under restrictions (hedging, market entry/exit, or income enhancement). Speculative use must be disclosed in the prospectus.

Hedge funds and some alternative mutual funds can use derivatives for speculation with leverage.

Thus, Jeremy should note that this fund uses derivatives for speculation.

The marginal tax rate is the percentage of tax that an individual pays on the last dollar of income earned in a given year. It is also the tax rate that applies to any additional income earned in that year. The marginal tax rate varies depending on the individual’s income level and tax bracket. For example, if an individual’s taxable income for the year is $50,000 and the tax rate for that income bracket is 20%, then the marginal tax rate is 20%. This means that the individual pays 20% tax on the last dollar of income earned, as well as on any additional income earned above $50,000.

References = Canadian Investment Funds Course, Unit 5: Types of Investments, Lesson 6: Taxation, Section 5.6.1: Income Tax 1; CIFC prepkit, Chapter 5: Types of Investments, Question 5.6.1 2

One of the main reasons for holding bonds in a mutual fund portfolio is to generate regular interest income, which can be distributed to the investors as cash or reinvested in more units of the fund. Bonds are debt securities that pay a fixed or variable rate of interest, called the coupon, to the bondholders until the maturity date, when the principal amount is repaid. The interest income from bonds can provide a steady source of cash flow for the fund and its investors, especially in low-interest-rate environments or when other sources of income, such as dividends or capital gains, are scarce or uncertain

Unique risk, also known as firm-specific risk, is reduced through diversification, as it relates to volatility caused by information specific to individual securities. The feedback from the document states:

"If a security’s price is affected by new information, and if new information arrives frequently, then its price will tend to be volatile and so will the returns that it generates. This source of volatility is specific to a given security and is known as unique risk. Diversifying a portfolio reduces unique risk."

The S&P 500 is the appropriate benchmark for researching the largest listed public companies in the US market. The feedback from the document provides:

"Index: S&P 500, Description: The 500 largest publicly held companies that trade on U.S. markets, Performance uses: U.S. equity funds."

The correct answer is B. When legally required by the government or by law. Under privacy legislation discussed in Investment Funds in Canada, including PIPEDA, confidential client information may only be disclosed without consent when disclosure is legally required, such as in response to court orders, law enforcement investigations, or regulatory obligations under legislation like AML or FINTRAC rules.

Referrals to specialists require client consent, documentation alone does not remove the consent requirement, and regulatory organizations typically obtain information through the dealer, not directly from representatives without due process.

The CIFC curriculum clearly states that privacy obligations are fundamental and exceptions are narrow and law-based. Therefore, Option B is the correct answer.