CSC Volume 2 (Questions CH 17-19) Answers 2022

Sample Questions & Answers
CSC Volume 2 (2022)

Chapters 17 - 19
Question 1
Which is/are disadvantage(s) of a mutual fund?
i) Professional investment management is not infallible

ii) Unsuitable as an emergency reserve
iii) Loan collateral and margin eligibility
iv) Tax complications
a) I only
b) I & II only
c) I, II and IV
d) All of the above
Question 2
Which of the following statements concerning mutual funds is true?
a) Managed products always have a set maturity date

b) Managed products never have a set maturity date
c) Pooled accounts are usually structured as trusts or corporations
d) All of the above are True
Question 3
Which of the following is true regarding an open-ended fund?
a) It can continuously issue and redeem units

b) It cannot have a Dividend Reinvestment Plan (DRIP)
c) The fund may not invest in preferred shares
d) The shares trade on a stock exchange
Question 4
Self-Regulatory Organizations (SROs).
a) Work with provincial administrators to enforce the laws of that province

b) Are empowered to regulate their own members
c) Have the power to subpoena members
d) All of the Above
Question 5
Consider the following information. A mutual fund has total assets of $50 million. It has
outstanding liabilities of $8 million. It has 2 million units outstanding. An investor
decides to redeem his units, but he must pay a back-end-load charge of 5%. The
redemption price per unit is
a) $19.95
b) $21.00
c) $22.11
d) $25.25
NAVPS = (Total Assets – Total Liabilities) / # of Units Outstanding

($50,000,000 - $8,000,000) / 2,000,000 = $21.00
REDEMPTION PRICE is NAVPS – (NAVPS X Redemption Charge)
$21.00 – ($21.00 X 5%) = $19.95
Question 6
When funds are merged, their past performance measures may not reflect their true
performance because of:
a) Software products used
b) Survivor bias
c) The apples and oranges factor
d) Software products used
Question 7
Which of the following is a false statement regarding mutual funds?
a) Income tax statements are sent to all fund unit-holders
b) Investments in mutual funds are normally acceptable as collateral on bank loans
c) Mutual funds cannot be bought on margin
d) National Instrument 81-102 requires payment be made within three business days for a
redemption of shares
Question 8
Which of the following statements is NOT true regarding segregated contracts?
a) The beneficiary cannot be the owner
b) The owner cannot be the annuitant
c) The owner is also known as the contract holder
d) None of the above
Question 9
A closed-end fund has:
a) A fixed number of shares

b) A variable number of shares
c) Only OTC stocks
d) Some fixed and some variable number of shares
Question 10
Buyers and sellers are found in the open market for closed-ended mutual funds.
a) True
b) False
Question 11
Which of the following statements about ETFs is false?
a) ETFs are easy to trade

b) ETFs can be actively traded
c) ETFs can be short-sold
d) ETFs can only be passively traded
Question 12
A fund that tracks an index but trades like a stock is called:
a) An exchange-traded fund (ETF)

b) A hedge fund
c) A Closed-end fund
d) A private equity fund
Question 13
Which of the following statements regarding the restrictions on Mutual Fund Managers
is/are FALSE?
I. They can purchase no more than 10% of total securities of a single issuer
II. They are allowed to borrow for leveraged purchases
III. They are allowed to buy on margin or short sell
IV. There are limitations on private placement share purchases
a) I and IV
b) I, II, and III
c) II and III
d) II and IV
Question 14
The dollar amount, expressed as a percentage of the net asset value, that represents the
total expenses of operating a fund is known as the:
a) Expense ratio
b) Management expense ratio (MER)
c) Management fee ratio (MFR)
d) Operating cost ratio
Question 15
Trailer fees:
a) Are the same as back-end load charges

b) Are paid by a fund manager to the sales distributor
c) Have no conflict-of-interest potential
d) All of the above
Question 16
The identity of the fund’s auditors, transfer agent, and registrar must be contained in the:
a) Financial statements
b) Simplified prospectus
c) Tax status of the issuer
d) All of the above
Question 17
Using the following information, what is the NAVPS for the fund?
Market Value of the portfolio $22,000,000

Management fees to be paid $35,000
Other liabilities to be paid $12,500
Number of units outstanding 800,000
a) $24.50
b) $25.46
c) $26.89
d) $27.44
NAVPS= (Total Assets–Total Liabilities) ÷ Number of Units Outstanding
($22,000,000 - $35,000 - $12,500 = $21,952,500) ÷ 800,000 = $27.44

Question 18
Which of the following funds are listed from highest to lowest risk?
a) Dividend, bond, balanced, money market

*b) Real estate, equity, dividend, bond
c) Specialty, bond, balanced, money market
d) Balanced, real estate, dividend, bond
Question 19
Which of the following is an unacceptable sales practice?
a) Boasting the past performance of the fund

b) Sending out literature on how well the investment management team has done
*c) Quoting or promising a future price
d) All of the above
Question 20
If a fund reports a compound annual return of 6.5% and a MER of 2.5%, it has a gross
return (returns before fees) of approximately:
a) 4.00%
b) 6.50%
*c) 9.00%
d) 10.0%
6.5 + 2.5 = 9.00% (gross means before fees)

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Sample Questions & Answers

CSC Volume 2 (2022)

i) Professional investment management is not infallible

a) Managed products always have a set maturity date

a) It can continuously issue and redeem units

a) Work with provincial administrators to enforce the laws of that province

NAVPS = (Total Assets – Total Liabilities) / # of Units Outstanding

a) A fixed number of shares

a) ETFs are easy to trade

a) An exchange-traded fund (ETF)

a) Are the same as back-end load charges

Market Value of the portfolio $22,000,000

NAVPS= (Total Assets–Total Liabilities) ÷ Number of Units Outstanding

($22,000,000 - $35,000 - $12,500 = $21,952,500) ÷ 800,000 = $27.44

a) Dividend, bond, balanced, money market

a) Boasting the past performance of the fund

6.5 + 2.5 = 9.00% (gross means before fees)

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