Finance > QUESTIONS & ANSWERS > IFSE - CIFC - Unit 6 Test Questions & Answers (All)

IFSE - CIFC - Unit 6 Test Questions & Answers

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IFSE - CIFC - Unit 6 Test Questions & Answers Where and when was the first mutual fund created? - ANS - Netherlands late 1700s After the Netherlands, to which countries did mutual funds spread? - ANS - England, France, USA (1800s) When was the first open-end mutual fund created in the USA? - ANS - 1924 When was the first Canadian mutual fund established (CI Canadian Investment Fund)? - ANS - 1932 Which years in mutual fund history had huge economic downturns? - ANS - 2002 and 2008 Closed-end Mutual Fund - ANS - Fund with a set number of shares to be issued until more units are authorized and produced. Organized through an IPO. Does NOT reflect underlying NAVPU as it is subject to market conditions of supply and demand. May be listed on the stock exchange Open-end Mutual Fund - ANS - A fund for which the supply of shares is not fixed but can increase or decrease daily with purchases and redemptions of shares. Because these funds are bought and sold through the investment fund manager, price always reflects NAVPU The 5 benefits of mutual funds - ANS - 1. Liquidity 2. Professional management 3. Diversification 4. Low cost 5. Convenience 5 major types of mutual funds - ANS - 1. Money market funds 2. Fixed income funds (mortgage and bond) 3. Balanced funds 4. Equity funds 5. Specialty funds 5 types of income - ANS - 1. Interest 2. Canadian dividend 3. Capital Gains 4. Foreign non-business income 5. Return of capital (not considered income for tax purposes) Interest - ANS - - interest payments from fixed-income securities such as treasury bills and bonds - likelihood of payment is high especially from creditworthy issuers and frequency of payment is set out in the terms Canadian dividend - ANS - - profit from Canadian companies distributed to common and preferred shareholders - likelihood and frequency of payment is usually high with large, established companies Capital gains - ANS - - profit from the sale of a security for a higher price than its original purchase cost - only occurs when there is price appreciation Foreign non-business income - ANS - - interest or dividend payments from non-Canadian investments - likelihood and frequency of payment usually high with large, established issuers Return of capital - ANS - - return of investor's money - occurs when distributions exceed earnings in the mutual fund Money market fund - ANS - - safe investments that are typically used as a temporary place to deposit money - maturity can't exceed 180 days - pay interest on a monthly basis - fund price usually remains constant - include T-bills, banker's acceptances, commercial paper, provincial and municipal short-term paper - low risk Mortgage fund - ANS - - invest in m

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