CIFC Practice Test

Explanation: A commodity pool is a type of mutual fund that can invest in specified derivatives and forward contracts for commodities, such as grains, meats, metals, energy products, and coffee. A commodity pool allows investors to gain exposure to the commodity markets without having to buy or sell the physical commodities themselves. A commodity pool may also use leverage and hedging strategies to enhance returns and reduce risks. Therefore, B is the correct answer.

Explanation: Monetary policy is the process by which the central bank, in Canada’s case the Bank of Canada, influences the supply and demand of money in the economy, and thereby affects the level of interest rates, inflation, and economic activity. One of the main tools of monetary policy is the overnight rate, which is the interest rate that banks charge each other for short-term loans. The Bank of Canada sets a target for the overnight rate and adjusts it periodically to achieve its inflation target of 2%. By increasing or decreasing the overnight rate, the Bank of Canada affects the cost and availability of credit for consumers and businesses, and influences their spending and saving decisions. For example, if the Bank of Canada increases the overnight rate, it becomes more expensive to borrow money, which reduces the demand for loans and credit, and slows down economic growth and inflation. Conversely, if the Bank of Canada decreases the overnight rate, it becomes cheaper to borrow money, which increases the demand for loans and credit, and stimulates economic growth and inflation.

Explanation: 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.

Explanation: The bond fund should be contributed to Natasha’s RRSP from a tax efficiency perspective, because interest income from bonds is fully taxable at her marginal tax rate outside of an RRSP. By contributing the bond fund to her RRSP, Natasha can defer paying tax on the interest income until she withdraws it from her RRSP in retirement, when she may be in a lower tax bracket. The equity fund should be kept outside of her RRSP, because dividends and capital gains from equities receive preferential tax treatment compared to interest income. Dividends qualify for the dividend tax credit and capital gains are only 50% taxable. Furthermore, equities tend to have higher returns than bonds over the long term, which means that Natasha would have more after-tax income by keeping them outside of her RRSP.

Explanation: Your body language would be the most important to create an impressive first impression on your potential client. Body language is the non-verbal communication that includes your posture, gestures, facial expressions, eye contact, and physical distance. Body language can convey your confidence, enthusiasm, professionalism, and trustworthiness. According to research, body language accounts for 55% of the impact of a first impression, while tone of voice accounts for 38% and words account for only 7%. The other statements are less important than body language. Volume of your voice is part of your tone of voice, which can affect how your words are perceived by your potential client. However, volume alone is not enough to create an impressive first impression; you also need to consider your pitch, pace, and intonation. Your words are what you say to your potential client, which can include your introduction, your value proposition, and your questions. Your words are important to convey your message and establish rapport with your potential client. However, your words have less impact than your body language and tone of voice on your first impression. Tone of your voice is how you say your words, which can include your volume, pitch, pace, and intonation. Your tone of voice can influence how your potential client feels about you and your message. However, your tone of voice has less impact than your body language on your first impression.