14

Samir purchased shares of a chartered bank for $85 a share. The shares paid a dividend of $2.50 each year. The dividends were reinvested. After 5 years Samir sold the shares for $92 each. What was his effective annual return?

Points: 1

1.60%

3.41%

4.45%

17.05%

15

Which investment embodies both default and interest rate risk (ie. its price can change in response to changes in interest rates)?

Points: 1

Long-term bonds

Money market mutual fund

Common shares

Guaranteed investment certificates (GICs)

16

At this time, you have all of your money invested in a single Canadian chartered bank stock. How can you best build a more diversified portfolio?

I. Buy other bank stocks

II. Buy stocks in other sectors or industries

III. Buy bonds

Points: 1

II and III, only

I, II and III

I and II, only

I and III, only

17

In order for the asset allocation of a portfolio to be termed "aggressive", which asset class is most predominant?

Points: 1

Real estate

Common shares or stocks

Short-term liquid assets

Government bonds

18

Which affect your asset allocation decision?

I. Stage in life

II. Degree of risk tolerance

III. Your forecast of economic conditions

Points: 1

I and II, only

II and III, only

I and III, only

I, II and III

19

What are the advantages of investing in mutual funds? I. Economies of scale II. Diversification III. Marketability IV. Ease in record keeping

Points: 1

I, II, III and IV

I and IV, only

I, II and III, only

II, III and IV, only

20

You plan to sell mutual fund XYZ after holding it for 2 years. You purchased 1,000 shares at $25 and earned 10% return, compounded monthly. The fund has a front-end load fund of 2%.

What is the value of your investment after 2 years?

Points: 1

$30,510

$29,900

$31,235

$28,999

21

Your mutual fund's annual return is 8%. It has a Management Expense Ratio (MER) of 2.5% with a front-end load of 2%.

Which statement is correct?

Points: 1

1. The 8% annual return is reported after deducting the 2% front-end load.
2. The 8% annual return is reported after deducting the 2.5% MER.
3. The 8% annual return is reported before deducting the 2% front-end load.
4. The 8% annual return is reported before deducting the 2.5% MER.