Which statement regarding Canada's income tax system is CORRECT?

• A.Federal and provincial income tax brackets are both progressive and each respective jurisdiction determines the tax rates that will be used.
• B.Once a person's taxable income reaches the next income tax bracket level, all income is subject to be taxed at the higher tax rate.
• C.Tax credits will reduce an individual's taxable income and may lower that person's top marginal tax rate.
• D.After federal and provincial tax rates have been applied to a person's taxable income, tax deductions are then applied to reduce taxes.

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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?

• A.time horizon
• B.income and net worth
• C.risk tolerance
• D.investment objectives

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Exchange traded funds (ETFs) that track an index and index mutual funds have many similarities. However, what is a major difference between these two products?

• A.While ETFs are prone to tracking errors, index funds are perfectly aligned with their underlying index.
• B.The market price of ETFs always matches the underlying basket of securities while there can be a discrepancy in pricing index funds.
• C.ETFs do not have management fees since they are exchange traded while index funds do incur such fees.
• D.ETFs can be purchased continuously throughout the trading day while index funds can only be bought or sold at the end of the day.

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Patrick is a portfolio manager for the HyperTally Growth Fund. It has generated an annualized rate of return of
10% this past year. However, with the anticipation of very high inflation to soon occur, there is also an expectation of higher interest rates. Patrick is concerned about the future returns of existing stocks within the fund. What may Patrick do to protect against the market value of the fund dropping?

• A.Agree to buy forward contracts where he is in the "long' position.
• B.Buy call options for the existing stocks stored within the fund.
• C.Avoid the use of derivatives because they are speculative in nature.
• D.Purchase put options for the fund's existing assets.

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Lior is considering an investment that gains exposure to companies that trade on the Toronto Stock Exchange (TSX). He is not sure what the differences are between a Canadian equity fund and a Canadian dividend fund.
What would you tell him?

• A.Equity funds hold common shares while dividend funds hold only preferred shares.
• B.Dividend funds generate tax-preferred income while income from equity funds is fully taxable.
• C.Equity funds are more appropriate than dividend funds if Lior requires a steady flow of income.
• D.Dividend funds tend to be less volatile and lower risk than equity funds.

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