EMT Practice Test

1. Question Content...

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Question1: Which statement about unused registered retirement savings plan (RRSP) contribution room is CORRECT?

Question2: What information does Fund Facts provide to potential investors?

Question3: Louis is the portfolio manager for Quattro Fund. The mandate of the mutual fund is to invest in a combination of cash, fixed income, and equity securities; however, Louis has the ability to adjust the portfolio according to market conditions. If Louis feels that interest rates will fall, he could invest the whole portfolio in equities. If he feels the market is too high, he could take profits and sit totally in cash. What type of mutual fund is Quattro Fund?

Question4: One of your clients, Harry, has heard that he can defer paying tax on capital gains. He wants to know if what he has heard is correct and if so, how to defer paying taxes on capital gains.
What would you tell Harry?

Question5: In a mutual fund dealer, who is the person responsible for establishing and maintaining compliance policies and procedures as well as monitoring and assessing compliance?

Question6: Jehona is a Dealing Representative with Vista Wealth Investments Inc., a mutual fund dealer in Ontario and Nova Scotia. Jehona has reviewed her client Sokol's account and wants to adjust the holdings and re-balance the portfolio. Which of the following statements about Jehona's permitted activities is CORRECT?

Question7: Which statement about a net capital loss incurred by a mutual fund trust is CORRECT?

Question8: On January 3, John invests $500 in the Blue Sky U.S. Equity Fund. On July 1 of the same year, he invests another $500 into the same mutual fund. Information about the net asset value per unit (NAVPU) at the time of each transaction is provided below. Given this information, what will be the value of John's investment on December 31 of this year (please ignore transaction costs and distributions)?

Question9: Jasmine received an inheritance from her grandmother of $10,000. She wants to invest her money wisely. She has seen in the news that a particular energy company is doing very well and has good prospects. She has also seen how volatile its share price has been in the last year. She knows the risks of the resource sector and wants to invest but is not comfortable with so much volatility. Which of the following mutual fund benefits would address her concern?

Question10: Last year at age 70, Gregory opened a registered retirement income fund (RRIF). Recently, Gregory unexpectedly received a large cash gift and presently does not need to depend on any payments from his RRIF.
He contacts his financial advisor Eric for guidance.
Which of the following statements by his financial advisor would be CORRECT?

Question11: Xerxes, 45 years old, is a successful architect, having an annual income of $185,000. He has around $10,000 in his non-registered account, which he is looking to invest in a tax-efficient manner.
From the following options, which would be the most tax-efficient?

Question12: Which of the following qualifies as personal information under the Personal Information Protection and Electronic Documents Act (PIPEDA)?

Question13: Your client, Rinaldo, wants to know more about the fees associated with his mutual funds. What can you tell him about a mutual fund's management expense ratio (MER)?

Question14: With respect to the tax treatment of dividends received from a taxable Canadian corporation, which of the following statements is CORRECT?

Question15: Michael had invested in several mutual funds, most of which have appreciated in value. He is not sure if he needs to report the gain as capital gains when he files his income tax return.
What would you tell Michael?

Question16: Which of the following statements best describes dollar-cost averaging?

Question17: Which of the following is a conflict of interest that should be AVOIDED?

Question18: When you buy a put option, which of the following is TRUE?

Question19: Jabir recently joined Prosper Wealth Inc. and is looking forward to being a Dealing Representative for the firm. Which of the following statements CORRECTLY describe when Jabir will be eligible to open new client accounts and sell investments?

Question20: Gregory is a conservative investor who wants to hold a portfolio of equity securities that would fall less than the overall market in a downturn.
Which of the following portfolios would you advise Gregory to invest in?

Question21: In which of the following situations would the client mobility exemption apply?

Question22: Thomas, a resident of Ontario, is a full-time university student. He does food delivery to supplement his income. During the school year, he works on weekends and works full-time during his summer break.
Thomas' pensionable earnings were $16,000 for the year. How much must Thomas contribute to CPP when CPP contribution rate is 5.95%?

Question23: Danny is a Dealing Representative for Everbright Investments. He met with his client Adele, who has
$1,000,000 to invest. During their meeting Danny determines that Adele has a high-risk profile. In addition, he learns that she has an excellent understanding of equities and how volatile they can be. Danny is considering recommending growth funds specifically, and making a recommendation from the following investment options:

Based on the information provided, which mutual fund should Danny recommend?

Question24: Your employer has a contributory group RRSP under which he matches employee contributions, up to a maximum of 5% of salary.
Which of the following statements about a group registered retirement savings plan (RRSP) is CORRECT?

Question25: Which of the following Dealing Representatives has CORRECTLY fulfilled their suitability obligation?

Question26: Your client Charlie is thinking about making a large investment into the Sentinel Canadian Equity Fund on December 15. The ex-dividend date for the mutual fund is December 20. What advice would you give Charlie to avoid the tax trap?

Question27: Malik has been saving money for retirement but he is worried about the impact inflation may have on the value of his savings. He wants to purchase a bond that will give him a steady stream of income that is greater than the inflation rate. He has found a bond issued by a major airline with a market price of $9,200, a par value of $10,000, and a coupon rate of 6.75%. What is the current yield of this bond?

Question28: Karen's know your client (KYC) profile corresponds to someone who has a long time horizon, is comfortable with risk and volatility, and is primarily interested in growth. She watches the daily movements of the Toronto Stock Exchange (TSX) and wants a mutual fund that will closely match what she sees.
What kind of mutual fund would be BEST for her?

Question29: Khuyen is a Dealing Representative for Stark Contrast Investments. Her dealer has relationships with 20 different mutual fund families. This gave her the flexibility to sell two different types of funds from two different fund families to her client, Bao. $5,000 was invested in the Blue Moon Global Balanced fund and an additional $5,000 was invested in the Orange Sun Asset Allocation fund. Khuyen has been reviewing the performance of both funds and has determined that Bao would be better off being fully invested in the Blue Moon Global Balance fund. Bao had previously signed a Limited Authorization Form (LAF) for Khuyen, so she goes ahead and does not worry about consulting with Bao before making the change.
What type of activity has Khuyen performed?

Question30: Throughout the year, the Redwood Global Equity Fund generated the following outcomes:
. $1.00 per unit of interest income from Canadian treasury bills
. $2.50 per unit of dividend income from foreign corporations
. $7.75 per unit of capital gains from the sale of Canadian corporations
. $6.50 per unit of capital gains from the sale of foreign corporations
. $2.00 per unit of capital losses from the sale of foreign corporations Given that the Redwood Global Equity Fund is structured as a mutual fund trust, which of the following statements is true?

Question31: Sylvia decided to use the savings from her bank account to purchase a 5-year bond. The face value of the bond is $10,000, the market price is $9,230 and the coupon rate is 7%.
What is the current yield on the bond? Round to 2 decimal places.

Question32: Sujay contributes 3% of his $60,000 salary to his employer's defined contribution pension plan. His employer contributes the same amount to the plan. How will this affect his registered retirement savings plan (RRSP) contribution room for the year?

Question33: Daisy is a Dealing Representative registered in the province of Saskatchewan only. Daisy's client, Orville, a resident of Lloydminster, Saskatchewan is a retiree who presently has a $1,000,000 with her dealer, Easy Ride Financial. Orville is now planning to move to Vegreville, Alberta next month. Easy Ride Financial is registered in Alberta and Saskatchewan. Neither Easy Ride Financial nor Daisy have any clients who are resident in Alberta.
Which of the following should Daisy do if she wants to continue to service Orville's account?

Question34: Which of the followings describes segregated funds?

Question35: 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)?

Question36: Quinton, a Dealing Representative, meets with his client Banji. Banji's Know Your Client (KYC) indicates that her risk profile is "medium''. Banji currently has $35,000 in her account which is invested 50% in the Middleton Balanced Fund and 50% in the Hector Growth Fund. She tells Quinton that she would like to contribute an additional $10,000 to purchase the Prospect Labour-Sponsored Fund. Which of the following statements about Banji's proposed transaction is CORRECT?

Question37: Frederic recently sold his units in a US dollar (USD) denominated mutual fund. He wants to convert the proceeds back to Canadian dollars (CAD). If he received proceeds of $1,200 USD from the sale and the exchange rate is $1 CAD for $0.99 USD, how much will Frederic receive in Canadian dollars?

Question38: Janine will celebrate her 71st birthday this year. She currently has a lot of money in a personal registered retirement savings plan (RRSP) and knows there are rules about what she can do with those funds. Which of the following is TRUE?

Question39: When comparing mutual funds, what information would help a Dealing Representative determine a suitable mutual fund for a client?

Question40: Which of the following statements about your mutual fund registration is CORRECT?

Question41: Your client, Kimberly has investments in both registered and non-registered plans. Which of the following investment strategies is best suited for Kimberly from a tax perspective?

Question42: You have been researching Canadian equity mutual funds for a new client. You come across the following information.

What can you conclude from this information?

Question43: Which of the following statements are CORRECT about labour sponsored investment funds (LSIFs)?

Question44: Maalik opens an account for a new client, John. During the new account process, Maalik determines that he will need to confirm John's identity. Which of the following statements about Maalik's identification requirements is CORRECT?

Question45: While assessing the suitability of an investment recommendation as a Dealing Representative, which statement applies to the "Client's Interest First" standard?

Question46: Which of the following statements is TRUE about the movement of business cycles in the Canadian economy?

Question47: Justin and Yvonne both open a Registered Education Savings Plan (RESP) for their daughter Grace. They plan to regularly contribute $1,000 per year until Grace reaches the age of 17.
Which of the following statements relating to RESP is CORRECT?

Question48: Your clients, Jessica and Ken, want to buy a house next year. You recommend a money market fund. How do you think a money market fund will help Jessica and Ken reach their goal?

Question49: Last year Peter's earned income from employment was $50,000.
Last year, after receiving a $2 per share in dividends from 500 shares in ABC Inc., a publicly-traded Canadian corporation, he sold his shares. The sale resulted in a capital gain of $15,000.

Based on the tax rates mentioned above, what is Peter's net federal tax liability for the year? (Round to 2 decimal places).

Question50: Ellen and her only son Jeff live on the family farm with her father George. Jeff is five years old and Ellen has decided that it is time to start saving for Jeff's post-secondary education. She has called you to ask about registered education savings plans (RESPs).
Which of the following statements is TRUE?

Question51: Which of the following is a characteristic of a bond fund?

Question52: Jonathan is a Dealing Representative who has just finished an appointment with his new client, Shirley.
Jonathan has concluded that Shirley has a low-risk profile but wants to establish additional savings of
$500,000. During their discussion, Shirley emphasizes she wants investments that are also tax efficient.
Jonathan learned that currently Shirley has no registered retirement savings plan (RRSP) and tax-free savings account (TFSA) contribution room due to using those opportunities by investmenting elsewhere.
What variable is a PRIMARY consideration for Jonathan when making an investment recommendation?

Question53: Which of the following statement about Exchange Traded Funds (ETFs) is TRUE?

Question54: Marta is turning 71 years old this year. She will have to convert her registered retirement savings plan (RRSP) to a registered retirement income fund (RRIF). Which of the following statements is TRUE?

Question55: Stan, a portfolio manager, is looking at two steel companies as potential investments. Truesteel Inc. has a current ratio of 2:1 while Strongco Ltd. has a current ratio of 0.8:1.
What could this information indicate?

Question56: Which of the following Dealing Representatives has fulfilled their "Know Your Product" obligation?

Question57: Quintin has been a Dealing Representative for Global Maximum Financial for 5 years. Today, he opened an account for his new client, Reginald. In addition to opening a new account, Reginald agreed to accept Quintin's investment recommendation and placed a purchase order to buy units of the Global Maximum Value Equity fund.
Quintin informed his Branch Manager Lupita about this new account on the same day the purchase order was received. Lupita told Quintin that she would complete her review of the New Client Application Form (NCAF) by no later than tomorrow.
Which statement regarding this new account opening is CORRECT?

Question58: What do Guaranteed Income Supplement (GIS) and Allowance for the Survivor have in common?

Question59: One of your clients, Rakesh, had a portfolio composed of 60% ABC Equity Fund and 40% ABC Bond Fund.
Since equities were performing much better than fixed income, he had increased his holdings in ABC Equity Fund to 70% and had reduced his holding in ABC Bond Fund to 30% of his portfolio.
After benefitting the growth in his ABC Equity Fund for over 2 years, Rakesh is uncomfortable with this heavy exposure to equity funds and decides to rebalance his portfolio back to 60% of ABC Equity Fund and
40% of ABC Bond Fund.
He instructs you to switch 10% of the portfolio from the ABC Equity Fund to the ABC Bond Fund.
Which of the following statements is CORRECT?

Question60: Eleanora receives a $500 eligible Canadian dividend from her mutual fund. Her federal marginal tax rate for the year is 29%. Assuming the enhanced gross-up of 38% and a federal dividend tax credit of 15.02%, how much federal tax will she pay on her dividend?

Question61: You are meeting a potential client, William, for the first time. He is a high net worth individual and you are keen to get his business. Which of the following would you consider the most important to create an impressive first impression on your potential client?

Question62: Dakota is a Dealing Representative with Harvest Wealth Inc., a mutual fund dealer. Dakota starts a marketing campaign to contact prospective new clients and increase sales with existing clients. Which of the following CORRECTLY describes activities that Dakota can engage in under her marketing campaign?

Question63: Over the course of a couple of weeks and several appointments, Harold was finally able to provide an investment solution for his new client, Felicia. It was a lump sum investment where they plan to see her money grow for the next 5 years.
With regards to Know Your Client (KYC) requirements, what are Harold's responsibilities moving forward?

Question64: Which among the following BEST describes a company's income statement?

Question65: Xerxes, 45 years old, is a successful architect, having an annual income of $185,000. He has around $10,000 in his non-registered account, which he is looking to invest in a tax-efficient manner.
From the following options, which would be the most tax-efficient?

Question66: Lucas wants to participate in the Lifelong Learning Program (LLP). He currently has $10,000 in his registered retirement savings plan (RRSP) for this purpose. He plans to make his maximum permitted withdrawal of $10,000 under the LLP in two months. Based on this information, what would be his investment objective for the $10,000 currently sitting in his RRSP?

Question67: Sean purchases 500 units of Penn Canadian Equity Fund when the net asset value per unit (NAVPU) is
$16.70. On December 15, the mutual fund's NAVPU is $21. On December 16, the mutual fund declares a distribution of $1.25 per unit. Sean's distribution is immediately reinvested and he purchases additional units of the mutual fund.
Which of the following statements about the effect of the distribution is correct?

Question68: Your client, Cosmo, recently inherited $50,000 from his uncle. He wants to use this money towards his retirement savings. Cosmo is a 50-year old, self-employed carpenter and he earns on average $65,000 per year. He has a registered retirement savings plan (RRSP) with the bank worth $425,000 and a tax-free savings account (TFSA) worth $46,000. He started saving when he was 25 years old and has always made his own investment decisions. His money is mostly invested in balanced funds. He feels most comfortable with these types of mutual funds since they offer potential investment growth but without being too aggressive. Cosmo has no other assets.
What additional information do you need about Cosmo to fulfill your know your client obligation?

Question69: Which of the following is included when calculating a country's gross domestic product (GDP)?

Question70: Pippa purchased a 15-year bond with a face value of $5,000 and a 7% coupon rate at the time of issuance. The bond is due to mature later this year. The general interest rate climate remained stable for the first 13 years of the bond's term. However, especially over the past 18 months, both inflation and general interest rates have increased more than expected.
What is Pippa likely to experience from her bond?

Question71: The Mutual Fund Dealers Association of Canada (MFDA) has strict rules concerning conflicts of interest.
Which of the following is TRUE?

Question72: Which of the following CORRECTLY describes a material conflict of interest that has been properly addressed by the Dealing Representative?