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| Certification Vendor: | CSI (Canadian Securities Institute) |
|---|---|
| Exam Name: | Canadian Securities Course Examination 2 |
| Exam Number: | CSC2 |
| Related Certifications: | CIM (Chartered Investment Manager) CPH (Conduct and Practices Handbook) CSC1 |
| Available Languages: | English, French |
| Exam Duration: | 120 minutes |
| Passing Score: | 60% |
| Certificate Validity Period: | No expiry, but must be registered within 5 years of passing |
| Real Exam Qty: | 100 |
| Exam Format: | Multiple Choice |
| Exam Price: | CAD $250 (approximately) |
| Sample Questions: | CSI CSC2 Sample Questions |
| Exam Way: | Computer-based testing at Pearson VUE test centers |
| Pre Condition: | Must pass CSC1 before taking CSC2; Completion of both exams required for securities registration |
| Official Syllabus URL: | https://www.csi.ca/ |
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NEW QUESTION # 87
When acting as a principal, how do investment dealers generate revenue?
Answer: C
Explanation:
When acting as aprincipal, investment dealers buy and sell securities for their own account. They generate revenue by earning aspread, which is the difference between the price at whichthey buy securities (bid price) and the price at which they sell them (ask price). This is distinct from their role as an agent, where revenue is earned through commissions on trades executed on behalf of clients.
* A. Through commissions: Commissions are earned when acting as an agent, not as a principal.
* B. Through tracers: This term does not apply to revenue generation.
* C. Through brokerage charges: Brokerage charges relate to fees imposed on client accounts, not principal trading spreads.
NEW QUESTION # 88
What type of risk were mortgage-backed securities designed to address?
Answer: B
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 # 89
A firm implements a comprehensive due diligence process before allowing their firm to sell a few funds. The fund's high-water mark falls within what primary area of inquiry?
Answer: D
Explanation:
A high-water mark is tied to performance fee arrangements, especially in hedge funds and alternative investment funds. It prevents the fund manager from earning performance fees on the same gains more than once. If a fund loses value, the manager must first recover the losses and bring the fund above its previous highest value before charging a new performance fee. Because this feature directly affects how the manager is compensated, it falls under the fees area of due diligence. Fund structure deals with legal organization and terms. Risk analysis examines exposures, volatility, leverage, and strategy risk.
Operations focus on processes, controls, valuation, custody, and administration. The high-water mark is primarily a fee-related inquiry.
NEW QUESTION # 90
What is the measure of risk commonly applied to portfolio and to individual securities within that portfolio?
Answer: A
Explanation:
Standard deviation measures the dispersion or variability of returns around the mean of a portfolio or security's historical performance. It is a widely used statistical metric in finance to assess risk, as it captures the degree to which returns can deviate from their expected value. A high standard deviation indicates higher risk, reflecting greater volatility in returns, while a low standard deviation suggests more stable performance.
Beta measures market risk relative to a benchmark, correlation measures the relationship between securities, and alpha represents excess return above a benchmark. However, standard deviation is the most common measure of total risk applicable to portfolios and individual securities.
* References:
* CSC Volume 2, Chapter 15: Introduction to the Portfolio Approach - Measuring Risk.
* CSC Volume 2, Chapter 16: The Portfolio Management Process - Risk Metrics.
NEW QUESTION # 91
An analyst compiles the following information for Theta Inc.
Based on the financial information provided, what will the dividend payout ratio be for Theta Inc.?
Answer: C
NEW QUESTION # 92
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