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CSC VOLUME ONE: Chapters 1 – 3, Test
- Which of the following statements do you disagree with?
a) Capital is mobile and sensitive. b) When capital is scarce, it becomes more expensive. c) An example of direct investing is government building a new hospital. d) Buying stocks is an example of direct investing while buying corporate bonds is an example of indirect investing.
- Which of the following statements do you agree with in respect to private equity?
a) It is less risky than investment in public equity. b) Institutions are forbidden from private equity investing. c) The asset class, “private equity” includes both debt and equity. d) Private equity investments tend to be more liquid than public equity.
- When stock trading takes place on the secondary market…
a) an investor is buying shares from another investor. b) an investor is buying shares from the issuing company. c) the issuing company is buying shares from an investor. d) trading in stocks does not take place on the secondary market.
- A market maker has posted a bid-offer of $15.00 – $15.25 for an oil and gas company, ENR Energy. This would tell the market that…
a) if you want to buy the stock right now you must pay $15.00 and if you want to sell the stock right now you will receive $15.25. b) if you want to buy the stock right now you should pay between $15. and $15.24 and if you want to sell the stock right now you will receive between $15.01 and $15.24. c) if you want to buy the stock right now you must pay $15.25 and if you want to sell the stock right now you will receive $15.00. d) market makers are not responsible for posting bid-offers.
- A liquid market implies all of the following except …
a) frequent sales. b) long trading hours. c) small price fluctuations from sale to sale. d) narrow price spread between bid and offering price.
- On what exchange in Canada are income trusts most likely to trade?
a) TSX Venture b) Montreal Exchange c) ICE Futures Canada d) Toronto Stock Exchange
- Almost all bonds and debentures are sold through…
a) dealer markets. b) auction markets. c) Bonds are sold through dealer markets. Debentures are sold through auction markets. d) Bonds are sold through auction markets. Debentures are sold through dealer markets.
- The two major types of markets where stocks trade are…
a) dealer markets and listed markets. b) dealer markets and auction markets. c) listed markets and unlisted markets. d) unlisted markets and over-the-counter markets.
- Which body regulates the trading activity of alternative trading systems (ATSs)?
a) SEC. b) OSFI. c) IIROC. d) The trading activity of ATSs is not subject to regulation.
- CanDeal was established to facilitate trading in…
a) bonds. b) options. c) derivatives. d) mutual funds.
- The three categories of firms in the Canadian investment marketplace are…
a) retail, wholesale, and integrated. b) retail, wholesale, and institutional. c) retail, institutional, and integrated. d) institutional, boutiques, and integrated.
- The portfolio management team is understood to be part of the…
a) front office. b) middle office. c) back office. d) The portfolio management team is a stand-alone division unto itself.
- Ms. Xu had $1,250,000 in an Investment Account and $700,000 in her RRSP account. According to CIPF guidelines, she would be covered for…
a) $1,000,000 in her Investment Account. b) $1,000,000 in her Investment Account or $700,000 in her RRSP account. c) $1,000,000 in her Investment Account and $700,000 in her RRSP account. d) $1,250,000 in her Investment Account and $700,000 in her RRSP account.
- The general principle underlying Canadian Securities legislation is...
a) caveat emptor – Let the buyer beware! b) full, true, and plain disclosure of all pertinent facts. c) approval of the investment merits of each class of securities. d) providing investors the ability to sue if their investment dealer loses them money.
- Front running is…
a) another name for insider trading. b) short-selling without declaring the short sale. c) profitable trading based on enhanced analysis. d) whereby a registrant trades ahead of a known client.
- Continuous public disclosure requirements include all of the following provisions except …
a) comparative audited financial statements must be filed within 120 days of financial year-end for companies listed on the TSX Venture Exchange. b) comparative audited financial statement must be filed within 90 days of financial year-end for senior issuers listed on the TSX. c) comparative unaudited financial statements must be filed within 60 days of the end of each of the first three quarters of the financial year for companies listed on the TSX Venture Exchange. d) comparative audited financial statements must be filed within 45 days of the end of each of the first three quarters of the financial year for senior issuers listed on the TSX.
- A client, Ms. Huang, was contacted by her Investment Advisor on Monday April 10 th^ and convinced to purchase an IPO issued under full prospectus requirements. On Tuesday April 11th, Ms. Huang received the final prospectus in the mail and called her Investment Advisor, thanking him for it. On Thursday morning – without looking at the document – she called back, attempting to cancel the trade. Which of the following best describes Ms. Huang’s options?
a) She would not be protected under the Right of Withdrawal because it was over 48 hours since she placed the trade to purchase the securities. b) She would not be protected under the Right of Rescission because she did not read the prospectus. c) She would be protected under the Right of Withdrawal because it was less than 48 hours since she received the final prospectus. d) She would be protected under the Right of Rescission as long as she examined the final prospectus and found that there was at least one material misrepresentation.
- What is a “proxy”?
a) An absentee ballot. b) A power of attorney. c) A nominee owner form. d) A beneficial owner form.
- XYZ Company currently holds 15% of the voting shares of DEF Company. What additional percent of the voting shares must it look to purchase in order to be bound by takeover bid provisions?
a) 5% b) 20% c) 35% d) 85%
- Mr. Jones is a Director at XYLON Incorporated. He has regularly filed the extent of his direct and indirect holdings. Then he decides to sell 10,000 shares to raise money for the down-payment of a vacation house in the United States. In order to comply with insider reporting, he must…
a) report the change the same day. b) report the change within three calendar days of the trade. c) report the change within five calendar days of the trade. d) Directors of companies are not subject to insider reporting rules.
CSC VOLUME ONE: Chapters 1 – 3, Test
- Which of the following best describes the relationship between direct and indirect investment?
a) Direct investment occurs when savers directly buy securities issued by government and corporations, indirect investment occurs when those savers sell the securities to other savers. b) Indirect investment occurs when the saver buys the securities issued by government and corporations, which in turn use the funds for direct investment in plant, equipment, etc. c) Direct investment occurs when savers directly buy an ownership position from a corporation, indirect investment occurs when savers purchase debt securities from government or corporations. d) There is no link between direct and indirect investment.
- What occurs when the Government of Canada’s revenues fail to meet expenditures?
a) The Government runs a surplus and it must raise taxes. b) The Government runs a surplus and it must cut spending. c) The Government runs a deficit and it must borrow money. d) The Government runs a deficit and it must spend money.
- Private equity’s purchase of debt securities that are trading below par due to financial difficulties at the firm is known as...
a) junk bonds. b) low-grade debt. c) distressed debt. d) bankruptcy debt.
- Which of the following is not true with respect to Canadian Exchanges and the products that trade on them?
a) The Toronto Stock Exchange (TSX) lists senior equities and some debt instruments. b) The Montreal Exchange (Bourse de Montreal) trades all financial and equity futures and options. c) ICE Futures Canada trades agricultural futures and options. d) The TSX Venture Exchange trades junior securities, income trusts and ETFs.
- The Ontario Securities Commission requires that trades of unlisted securities are reported through the….
a) CUB. b) CBID. c). QTRS. d) Trades of unlisted securities do not have to be reported in Canada.
- Dealer markets are also known as...
a) bid markets. b) bid-ask markets. c) listed markets. d) unlisted markets.
- Which of the following is/are true of trading on the unlisted market? i) A dealer acts as market maker posting bid and offer prices for the securities being traded. ii) The market makers hold an inventory of securities in which they have agreed to “make a market. iii) Brokers do not charge commissions, instead generating revenue from the spread between bid and offer prices.
a) i) only b) ii) only c) i) & ii) only d) ii & iii) only
- Which of the following is not true about CanDeal?
a) It is operated by the TMX group. b) It is recognized as both an ATS and investment dealer. c) It is a joint venture between Canada’s six largest investment dealers. d) It offers both institutional and retail investors access to Government securities and money market instruments.
- Which of the following is not true about CanPX?
a) It operates both retail and institutional marketplaces. b) It provides investors with real time bid and offer prices. c) Issues include Government of Canada bonds and treasury bills and provincial bonds. d) It is a joint venture of the Investment Industry Association of Canada (IIAC)/IIROC member firms.
- Which of the following does OSFI regulate? i) Banks ii) Investment dealers iii) Insurance companies iv) Trust and loan companies
a) i), ii) & iv) only b) i), ii) & iv) only c) i), iii) & iv) only d) i), ii), iii) & iv)
- The thirteen securities regulators of Canada’s province and territories have joined together to form the…
a) SEC. b) CSA. c) IIAC. d) OSFI.
- The function of CIPF is to safeguard investors…
a) against the bankruptcy of member firms. b) from unprofessional investment advisors. c) from companies which disappoint investors with their income reports. d) against losses suffered from premature redemptions of mutual fund units.
- Harjinder Singh had $400,000 in cash and securities with Shaky Ground Investment Dealer. When it declares bankruptcy, the market value of the assets it held was $1,000,000,000; however it only had $800,000,000 in assets to pay off investors. Therefore, CIPF would compensate Mr. Singh in the amount of…
a) $ 80,000. b) $100,000. c) $600,000. d) Insufficient information.
- Which of the following is not true with respect to arbitration in the securities industry?
a) It’s a method of dispute resolution. b) The arbitrator’s decision is binding. c) It’s designed for claims of $100,000 or less. d) Clients who lose in arbitration may then sue the firm.
- All of the following are basic methods the securities acts protect the investing public except …
a) disclosure of necessary facts. b) enforcement of laws and policies. c) registration of dealers and advisors. d) analysis of publicly traded securities.
- Which of the following is not an unethical trading practice?
a) Confirming a transaction where no trade has been executed (bucketing). b) Causing the last sale of the day to be higher than warranted by market conditions (window dressing). c) Making a practice of taking the opposite side of the market to clients. d) Trading for a client’s account prior to trading in the Investment Advisor’s own account (front running).
- What is necessary in order for an investor to exercise the right of recession?
a) The investor must not have received the prospectus. b) There must have been something ambiguous in the prospectus. c) There must have been an error in the prospectus, no matter how slight it may have been. d) There must have been an untrue statement or omission of a material fact in the prospectus.
- How long does the Board of Directors have to prepare a directors’ circular after a takeover bid is made?
a) One week b) Fifteen days c) One months d) Ninety days
- Which of the following best describes the regulations governing insider trading?
a) Insiders are not allowed to trade under any circumstances. b) Insiders are allowed to trade as long as they are report their trades prior to making any trade. c) Insiders are allowed to trade as long as they report their trades within five calendar days of making any trade. d) Insiders are allowed to trade and do not have to report their trades to anyone.
CSC VOLUME ONE: Chapters 4 & 5, Test
- Microeconomics would be least likely to examine…
a) how minimum wage laws affect the supply of labour. b) if higher taxes on alcohol would impact the tourism industry. c) the impact of higher interest rates on investment in capital equipment. d) the relationship between tuition costs and the decision to attend university versus college.
- The value of all goods and services produced in a country in a year is known as…
a) Net National Product b) Net Domestic Product c) Gross National Product d) Gross Domestic Product
- Assume that productivity growth exceeds increases in the unit cost of production. Each of the following is likely except …
a) prices will fall. b) corporate profits will increase. c) more goods and services will be sold. d) there will be a cycle of demand-pull inflation.
- “Inflation is stable… Corporate profits are rising and new business start-ups outnumber bankruptcies”… describes which phase of the business cycle?
a) expansion b) peak c) contraction d) trough
- Housing starts and manufacturers’ new orders are examples of…
a) leading indicators. b) co-incident indicators. c) lagging indicators. d) the Composite Index.
- All of the following are considered lagging indicators except …
a) inflation. b) labour costs. c) unemployment. d) personal income.
- The official Statistics Canada definition of a recession is…
a) a 5% drop in economic activity. b) two consecutive quarters of declining real GDP. c) two consecutive quarters of declining nominal GDP. d) None of the above.
- Which of the following are the two key indicators that describe the labour market?
a) Participation rate and unemployment rate b) Employment rate and unemployment rate c) Working-age population and participation rate d) Working-age population and unemployment rate
- There are three general types of unemployment: Structural, cyclical and frictional. Which of the following statements are true about them? i) Structural unemployment may result from a conscious choice about wages ii) Cyclical unemployment rises during the expansion phase of the business cycle iii) Frictional unemployment should be understood as a normal part of a healthy economy
a) i) and ii) only b) i) and iii) only c) ii) and iii) only d) i), ii) and iii)
- The natural unemployment rate is often viewed as that rate of unemployment that is…
a) impossible to achieve. b) consistent with stable inflation. c) consistent with strong economic growth. d) consistent with zero structural and frictional unemployment.
- Which of the following is not true with respect to factors that affect interest rates?
a) Higher inflation results in higher real interest rates. b) The greater the default risk, the higher the interest rates. c) An increase in the savings rate will lower interest rates. d) A large government deficit raises the demand for capital.
- If Canada is running a deficit in its current account, this means…
a) the nation is not benefiting from trade. b) the nation is running a deficit in its capital account. c) the nation is running a surplus in its capital account. d) the balance of payments is in a state of disequilibrium.
- The Canadian and US dollars are trading at par. If inflation in the United States is expected to be higher than in Canada over the next ten years, we would expect that…
a) interest rates will be higher in the US and its currency will appreciate. b) interest rates will be higher in the US and its currency will depreciate. c) interest rates will be lower in the US and its currency will appreciate. d) interest rates will be higher in the US and its currency will depreciate.
- In a floating exchange rate system, the value of a currency is determined by…
a) market forces. b) the Central Bank. c) the Federal Government. d) the International Monetary Fund.
- Which economic theories tend to favour minimal government intervention in the economy?
a) Keynesian and Monetarist b) Keynesian and Supply-Side c) Monetarist and Supply-Side d) Rational Expectations and Keynesian
- All of the following are major functions of the Bank of Canada except …
a) to conduct monetary policy. b) to issue and remove bank notes. c) to prepare balanced federal budgets. d) to act as the government’s fiscal agent.
- The overnight rate operates within a band of ____ basis points.
a) 25 b) 50 c) 100 d) 200
- Special PRAs or SPRAs are used by the Bank of Canada…
a) to narrow the limit of the operating band. b) to relieve undesired upward pressure on overnight financing rates. c) to relieve undesired downward pressure on overnight financing rates. d) to influence call loans and the interbank deposit rates through the large value transfer system.
- A redeposit means...
a) that the Chartered Banks are redepositing money with the Bank of Canada which puts upward pressure on interest rates. b) that the Chartered Banks are redepositing money with the Bank of Canada which puts downward pressure on interest rates. c) that the Bank of Canada is redepositing money with the Chartered Banks which puts downward pressure on interest rates. d) that the Bank of Canada is redepositing money with the Chartered Banks which puts upward pressure on interest rates.
CSC VOLUME ONE: Chapters 4 & 5, Test
- Market equilibrium is an important concept in the stock market because…
a) the supply of a given stock is unlimited. b) the demand for a given stock will not fluctuate in the short run. c) the demand for a given stock will not fluctuate in the long run. d) this establishes the price at which a stock will be exchanged at any point in time.
- Nominal GDP will always exceed Real GDP unless…
a) there is inflation in the system. b) there is deflation in the system. c) the constant dollar approach is used. d) the constant dollar approach is not used.
- Which of the following is least likely to have an impact on a country’s GDP growth?
a) Increases in population. b) Improvements in technology. c) Increases in the capital stock. d) Increases in government spending.
- If productivity growth exceeds the increases in the cost of production, all of the following are true except …
a) this tends to have a deflationary effect. b) this tends to have an inflationary effect. c) firms enjoy higher profit margins in the short run. d) consumers enjoy lower prices in the long run.
- “Labour and product shortages cause wage increases… interest rates rise and bond prices fall… stock prices fall and stock market activity declines…” This describes which phase of the business cycle?
a) trough b) recession or contraction c) recovery d) peak
- Housing starts and stock prices are two important…
a) leading indicators. b) co-incident indicators. c) lagging indicators. d) determinants of interest rates.
- A popular definition of a recession is at least…
a) two declining quarters of real GDP. b) two declining quarters of nominal GDP. c) four declining quarters of real GDP. d) the same as the Statistics Canada definition: The depth, duration and diffusion of the decline in business activity.
- If unemployment increases by the same amount that employment decreases…
a) the participation rate will increase. b) the participation rate will decrease. c) the participation rate will be unaffected. d) either a) or b) depending on the phase of the business cycle.
- Which of the following is/are not true with respect to unemployment? i) Cyclical unemployment tends to rise during the expansion phase of the business cycle. ii) Frictional unemployment is not a normal part of a healthy economy. iii) Structural unemployment typically leads to shorter periods of unemployment than frictional unemployment. iv) The distinction between frictional and structural unemployment is sometimes difficult to determine.
a) i) & ii) b) i) & iii) c) i), ii) & iii) d) i), ii), iii) & iv)
- Interest rates are currently being raised in the United States of America. As a result, the Canadian economy should be impacted in all of the following ways except…
a) demand for interest-rate sensitive products like automobiles should be expected to decrease. b) Canadian bonds should be expected to decline in value. c) American consumers will have to pay more to service their household debt, which means a decline in discretionary spending on goods and services made in Canada. d) the Canadian dollar should be expected to appreciate.
