Question 1

Portia is a Dealing Representative with Highview Wealth Inc., a mutual fund dealer. Portia recommends the Stature Growth Fund to her client Clive. Which of the following CORRECTLY describes what Portia must do in order to satisfy her obligations under the Client Relationship Model (CRM) and Client Focused Reforms (CFR)?

Options :

A : Portia must calculate the net asset value per unit (NAVPU) and report it to Clive in the trade confirmation

B :

Portia must mark the trade as “unsolicited” if Clive wants to proceed with the trade and it is not suitable for him

C :

Portia must disclose the costs, expenses, and ongoing fees associated with the investment prior to the trade.

D :

Portia must provide Clive with the pre-trade disclosure to address any material conflicts of interest with the trade

Answer: C

Question 2

Leira has a marginal tax rate of 45% and may deduct $5,000 in registered retirement savings plan (RRSP) contributions on her income tax return. If she decides to use her available deduction and assuming this does not reduce her taxable income to a lower tax bracket, by how much will it reduce her tax payable?

Options :

A : $5,000

B : $4,500

C : $2,250

D : $0

Answer: C

Question 3

Faruq is a Dealing Representative with Smart Planning Group, a mutual fund dealer. Faruq meets with his new client, Taline, and learns that she lives on a low, fixed income. Taline tells Faruq that she wants to maximize her investment returns as high as possible to make up the difference. Taline also indicates that she cannot afford large investment losses because her income is low. Which of the following CORRECTLY describes how Faruq should assess Taline’s risk profile?

Options :

A :

Taline’s risk profile should be “high” because she is willing to accept risk in order to maximize her investment returns.

B :

Faruq should override the risk that Taline is able to accept because her return expectations cannot otherwise be met.

C : Faruq should assess Taline’s risk profile based on the higher of her: (1) risk tolerance and (2) risk capacity

D :

Taline’s risk profile should be “low” because her risk capacity is low and she cannot afford large investment losses.

Answer: D

Question 4

Your client has very limited investment knowledge and is confused about what is meant by "marginal tax rate". What do you tell him?

Options :

A : It is the tax rate applied to the next dollar earned.

B : It is the tax rate used in calculating taxable capital gains.

C : It is an amount resulting from dividing your total tax liability by your taxable income for the year.

D : It is the number used to gross-up Canadian dividend income.

Answer: A

Question 5

Saheed is a retiree who is considering splitting his pension income with his wife, Minu. Which of the following outcomes may occur if he shares his pension benefits?

Options :

A : Whether the couple saves on income tax will be dependent on Minu’s marginal tax rate.

B : Minu will be exposed to a pension adjustment (PA) if she receives income from his pension

C : This is a form of tax evasion and is therefore considered illegal based on income tax legislation

D : Regardless of how much income each person reports, the total amount of income taxes will not change.

Answer: A

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