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| Section | Weight | Objectives |
|---|---|---|
| Derivative Securities | 20% | - Futures Contracts - Swaps - Forward Contracts - Option Contracts |
| Fixed Income Securities | 20% | - Government Bonds and Money Market Securities - Risks of Fixed Income Investments - Corporate Bonds - Bond Pricing and Yield Measures |
| Portfolio Management | 20% | - Portfolio Planning and Construction - Managed Products - Portfolio Concepts and Risk/Return - Performance Measurement |
| Analysis of Equity Securities | 20% | - Valuation Methods - Growth and Defensive Stocks - Industry Analysis - Financial Statement Analysis |
| Corporate Finance | 20% | - Capital Structure and Dividend Policy - Capital Budgeting - Working Capital Management - Mergers, Acquisitions, and Corporate Restructuring |
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NEW QUESTION # 120
What type of risk were mortgage-backed securities designed to address?
Answer: C
Explanation:
Mortgage-Backed Securities (MBS) are designed to address prepayment risk, which arises when borrowers pay off their mortgages earlier than expected. Prepayments reduce the interest income investors receive and can affect the expected return on the security.
* Why Prepayment Risk is Addressed:
* Prepayment often occurs when interest rates decline, as borrowers refinance their mortgages. This leaves MBS investors reinvesting at lower yields, which impacts returns.
* Structuring MBS helps mitigate prepayment risk through mechanisms like tranches in Collateralized Mortgage Obligations (CMOs).
* Explanation of Options:
* A. Liquidity: Incorrect. MBS provides liquidity to lenders but is not designed to address liquidity risk directly.
* B. Interest Rate: Incorrect. MBS investors are still exposed to interest rate risk as rates impact prepayment behavior.
* C. Rollover: Incorrect. Rollover risk applies to short-term debt securities, not MBS.
* D. Prepayment: Correct. MBS structures are specifically designed to mitigate the impact of prepayments on investors.
:
CSC Volume 2, Chapter 23: Risks of structured products, particularly prepayment risks in MBS.
NEW QUESTION # 121
Which asset type is classified as a fixed-income asset for portfolio management purposes?
Answer: D
Explanation:
* Fixed-income assets are characterized by predictable cash flows. Convertible bonds qualify because they have features of fixed-income securities (coupon payments and principal repayment) while also offering the option to convert into equity.
* Money market securities (Option A) are short-term, high-liquidity instruments and typically not classified as fixed-income for long-term portfolio management purposes.
* Preferred shares (Option B) are equity-like instruments with fixed dividend payments but lack the " fixed-income " designation for portfolio management.
* Bonds with less than one year to maturity (Option D) fall under money market classifications rather than fixed income.
* Canadian Securities Course Volume 2, Fixed-Income Securities Section.
NEW QUESTION # 122
What is a disadvantage of fee-based accounts when compared to commission-based accounts?
Answer: B
Explanation:
Fee-based accountscharge clients a fixed percentage of assets under management rather than commissions on individual trades. While these accounts offer benefits like cost transparency and reduced incentive for excessive trading, they may also impose restrictions on the number of trades allowed without incurring additional fees.
* Disadvantages of Fee-Based Accounts:
* Trade Limits: Some fee-based accounts cap the number of trades to ensure trading costs remain within the agreed fee structure.
* Higher Fixed Costs: These accounts can be more expensive for clients who trade infrequently or have smaller portfolios.
* Why Other Options Are Incorrect:
* B: Fee-based accounts reduce the advisor's incentive for frequent trading as they are not commission-based.
* C: Fee-based accounts typically allow access to a broad range of advisory services.
* D: Investment opportunities are not restricted in fee-based accounts.
References:
* CSC Volume 2, Chapter 25: Advantages and Disadvantages of Fee-Based Accounts.
NEW QUESTION # 123
Supriya, an advisor, receives a research service from a dealer in exchange for placing securities transactions with that dealer. What statement best applies to this type of arrangement?
Answer: D
NEW QUESTION # 124
A client who seeks advice from an investment advisor but does not require financial planning guidance.
Which platform is most appropriate for this client?
Answer: C
Explanation:
Adiscount brokerageis an ideal platform for clients who seek professional advice but do not require comprehensive financial planning. Discount brokers allow clients to trade securities with minimal fees, offering tools and resources for investment decision-making without the cost of full-service advisory.
* Why This Platform is Appropriate:
* Clients retain control over their portfolios but can access limited advisory services when needed.
* Suitable for investors who are comfortable with self-directed investing and require occasional guidance.
* Why Other Options Are Incorrect:
* A: A family office provides high-end services, including financial planning, making it excessive for this client.
* B: A self-directed brokerage is entirely self-managed, without access to advisory support.
* C: ETFs are an investment product, not a platform.
References:
* CSC Volume 2, Chapter 25: Overview of Fee-Based and Discount Brokerage Accounts.
NEW QUESTION # 125
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