IFSE EXAM 22

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School

George Brown College Canada *

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Course

4502

Subject

Finance

Date

Apr 26, 2024

Type

pdf

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Uploaded by KidRiverApe4

4/22/24, 4:02 AM IFSE Institute Canadian Investment Funds Course - CIFC Exam Questions [2024] https://www.pass4test.com/CIFC-exam-questions.html 1/6 (/) (https://mylivechat.com/chatnoscript.aspx?HCCID=66608068) Cart (/cart.php) My Orders (/member.php?ac=myorder) Limited Time Discount Offer! 15% Off - Ends in 02:03:23 - Use Discount Coupon Code P4TCOM2024 IFSE Institute Canadian Investment Funds Course - CIFC Exam Questions QUESTION NO: 126 Which of the following is a conﬂict of interest that should be AVOIDED? Hide answers/explanation Home (/) Products (/allproducts.php) Certifications (/certifications.php) Free Demo (/samples.php) Guarantee (/page_guarantee.html) How to pay? (/page_howtopay.html) F.A.Q (/page_faqs.html) A. Arilla's client, Gwen, wants to co-invest with Arilla in units of a real estate limited partnership. B. Davu's client, Ester, wants him to refer her to an accountant to help her with filing her tax return. C. Fred's client, Hildie, wants to buy a life insurance policy and Fred is dually licensed as an Insurance Agent. D. Jamal's client, Laila, wants to buy the Focus Canadian Growth Fund that pays Jamal trailer fees. Chat now

4/22/24, 4:02 AM IFSE Institute Canadian Investment Funds Course - CIFC Exam Questions [2024] https://www.pass4test.com/CIFC-exam-questions.html 2/6 Correct Answer: A Explanation A conﬂict of interest is a situation in which a person's personal interests conﬂict with their professional duties or responsibilities. A conﬂict of interest should be avoided or disclosed to prevent harm to the client or the registrant. In this case, Arilla's client, Gwen, wants to co-invest with Arilla in units of a real estate limited partnership. This is a conﬂict of interest because Arilla may have a personal interest in the investment that could inﬂuence her advice to Gwen or affect her ability to act in Gwen's best interest. For example, Arilla may benefit from the investment at Gwen's expense, or she may have access to information that Gwen does not have. Therefore, this is a conﬂict of interest that should be avoided by Arilla. She should decline Gwen's offer and explain that it would compromise her professional obligations and fiduciary duty to Gwen. References: Canadian Investment Funds Course, Unit 2, Section 2.3 QUESTION NO: 127 Davis invested in a tactical asset allocation fund in his non-registered investment account. Distributions from the mutual fund are paid directly to Davis and not reinvested. Assuming a federal marginal tax rate of 26%, dividend gross-up rate of 38% and federal dividend tax credit rate of 15%, which type of distribution would result in the lowest amount of tax payable? Hide answers/explanation Correct Answer: C Explanation An eligible dividend is a type of dividend that is paid by a Canadian corporation that meets certain criteria and is eligible for the enhanced dividend tax credit. The dividend tax credit reduces the amount of tax payable on dividends by providing a credit against the tax liability. An eligible dividend has a higher gross-up rate and a higher dividend tax credit rate than a non-eligible dividend, which means that it results in a lower effective tax rate. A capital dividend is a type of dividend that is paid from the capital gains realized by a corporation and is tax-free to the shareholder. However, a tactical asset allocation fund is unlikely to pay capital dividends, as they are usually reserved for private corporations. A capital gain is the profit from selling an asset at a higher price than its purchase price. Only 50% of the capital gain is taxable, which means that it has a lower effective tax rate than interest income, which A. Capital Dividend B. Capital Gain C. Eligible Dividend D. Interest Chat now

4/22/24, 4:02 AM IFSE Institute Canadian Investment Funds Course - CIFC Exam Questions [2024] https://www.pass4test.com/CIFC-exam-questions.html 3/6 is fully taxable. However, a capital gain distribution from a mutual fund is not the same as a capital gain from selling the mutual fund units. A capital gain distribution is paid when the fund realizes a capital gain from selling its underlying assets, and it is taxable in the year it is received, regardless of whether the shareholder sells the fund units or not. Therefore, it does not benefit from the deferral of tax that occurs when the shareholder sells the fund units at a later date. An interest distribution is paid when the fund earns interest income from its underlying assets, such as bonds or money market instruments. Interest income is fully taxable at the marginal tax rate, which means that it has the highest effective tax rate among the four types of distributions. To compare the amount of tax payable for each type of distribution, we can use the following formula: Tax=(Distribution*Grossup)*MarginalTaxRate(Distribution*Grossup)*DividendTaxCreditRate For simplicity, we assume that Davis receives $100 of each type of distribution and that he does not have any other income or deductions. We also ignore any provincial taxes or credits. Using the formula, we can calculate the tax payable for each type of distribution as follows: * Capital Dividend: Tax=(100*0)*0.26(100*0)*0=0 * Capital Gain: Tax=(100*0.5)*0.26(100*0.5)*0=13 * Eligible Dividend: Tax=(100*1.38)*0.26(100*1.38)*0.15=10.14 * Interest: Tax=(100*1)*0.26(100*1)*0=26 Therefore, an eligible dividend would result in the lowest amount of tax payable, followed by a capital gain, a capital dividend, and an interest distribution. References: * Canadian Investment Funds Course (CIFC) Study Guide, Chapter 7: Taxation, Section 7.2: Taxation of Investment Income, page 7-41 * Eligible Dividends Definition - Investopedia2 * Capital Dividend Definition - Investopedia3 * Capital Gain Distribution Definition - Investopedia4 QUESTION NO: 128 Yesterday, Mariana who is new to investing and purchased mutual funds for the very first time. She shared her excitement with her good friend, Julius. However, after Julius learned about her investment, he admits that he had a bad experience with mutual fund investing and that he lost money. Mariana regrets not talking to Julius prior to making her decision. Her feelings of enthusiasm have changed to fear. She is wondering if it is too late to change her mind and cancel her purchase order. Which statement regarding the right of withdrawal is CORRECT? A. The right of withdrawal for investors can be different depending on which province (or territory) the fund was purchased within. B. The Canadian Securities Administrators (CSA) created legislation that addresses the right of withdrawal for investors. C. The Mutual Fund Dealers Association of Canada (MFDA) have written conduct rules regarding the right of withdrawal. D. Mariana has to wait two business after her purchase order has been settled to exercise the right of withdrawal. Chat now

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