CSC Exam 2 – Sample Questions

1. Debra wants to purchase a mutual fund to hold for 10 years. The risk premium on the mutual fund is 7.5% and the T-Bill rate is 1.5%. What would Debra expect as a rate of return on her mutual fund investment?
A.
B.
C.
D.
2. Grace, age 55, wants to retire at age 65. Her financial goal is to have $500,000 in her registered retirement savings plan (RRSP) by that time. She has $250,000 saved in her RRSP so far and is concerned she won’t be able to reach her goal; her RRSP monies earn 4% annually. If Grace were to make a one-time investment today in order to reach her retirement savings goal, how much money will she need to invest?
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B.
C.
D.
3. Which trading system is designed to prevent human errors in security trading, settlement and record-keeping activities?
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B.
C.
D.
4. Cash flow to total debt outstanding ratio is a critical metric to give the investor insight into:
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B.
C.
D.
5. A benchmark index’s performance last year was 8% with a volatility of 6%. What fund is most likely being managed by a closet indexer?
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B.
C.
D.
6. Which statements below represent advantages of investing in mutual funds?
      1. Professional active management that can provide good and consistent returns
      2. Investors can gain broad diversification without incurring high trading or administrative costs
      3. They have lower fees on average
      4. Investors have more control over the tax consequences of owning the funds
A.
B.
C.
D.
7. An investor purchases a $1,000 five-year bond for $960.  At the end of the calendar year, the investor notices that the bond is now trading at $980. What are the tax consequences for the investor of this change in value?
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B.
C.
D.
8. A head-and-shoulders bottom usually signals:
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B.
C.
D.
9. Due to strong equity performance, a $1,000,000 portfolio with a strategic asset mix of 10% cash/30% fixed income/60% equity and a dynamic asset allocation strategy has changed composition to 10% cash/20% fixed income/70% equity. Which transactions would be required to bring the portfolio back towards its strategic asset mix?
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B.
C.
D.
10. The managers of ABC Hedge Fund use proprietary trading strategies to exploit currency opportunities. Which type of hedge fund is the ABC hedge fund likely be?
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B.
C.
D.