om
MichaelHlinka.com
In this Examination:
ka
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Canadian Securities Course Volume One Examination #1
Chapters 1 – 3: 15 questions (1 – 15)
•
Chapters 4 & 5: 13 questions (16 – 28)
•
Chapters 6 & 7: 23 questions (29 – 51)
•
Chapter 8 & 9: 23 questions (51 – 74)
•
Chapter 10: 10 questions (75 – 84)
•
Chapters 11 & 12: 16 questions (85 – 100)
M
ic
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H
lin
•
MichaelHlinka.com
MichaelHlinka.com
What type of broker executes trades for clients at reduced commission rates but
does not provide advice?
a)
b)
c)
d)
2.
Full service
Robo-advisors
Self-directed brokers
Do-it-yourself brokerage
The compliance and auditing functions are associated with…
ka
lin
Which of the following statements about Schedule II and Schedule III banks are
you least likely to agree with?
a)
Schedule II Banks may accept deposits, which may be eligible for deposit
insurance provided by CDIC.
Schedule II Banks may engage in all types of business permitted to a
Schedule I Bank.
Schedule III banks are federally regulated foreign bank branches of foreign
institutions.
Schedule III banks derive their greatest share of revenue from retail banking
and electronic financial services.
H
b)
c)
d)
The practice of exchanging risk between insurance companies to facilitate better
risk management is known as…
ha
4.
el
3.
back office.
middle office.
front office.
These functions are independent of any of these offices.
.c
a)
b)
c)
d)
om
1.
reinsurance.
underwriting.
casualty insurance.
commercial insurance.
M
ic
a)
b)
c)
d)
MichaelHlinka.com
MichaelHlinka.com
5.
The Bank Act…
a)
allows Schedule I Banks to sell insurance related to loans such as mortgage
insurance and loan insurance through their branch network.
allows Schedule I Banks to sell insurance related to loans such as mortgage
insurance and loan insurance and life insurance through their branch network.
allows Schedule I Banks to sell all forms of insurance through their branch
network.
forbids Schedule I Banks from selling any form of insurance through their
branch network.
om
b)
c)
6.
.c
d)
The robo-advisory service is least likely to include which of the following:
lin
7.
Portfolios built primarily with mutual funds.
Goal-based online investment management.
Advisory support offered, typically on-line or by phone.
Portfolios created using algorithms based on modern portfolio theory.
ka
a)
b)
c)
d)
In which market does the issuing company receive the proceeds from the
transactions?
el
Liquid markets are characterized by all of the following except…
ha
8.
Stock market
Primary market
Secondary market
Both the Primary and Secondary Market
H
a)
b)
c)
d)
infrequent sales.
narrow price spread between bid and ask prices.
small price fluctuations from sale to sale.
All of the above characterize liquid markets.
ic
a)
b)
c)
d)
M
9.
The Ontario Securities Act requires that trades of unlisted securities be reported
through the…
a)
b)
c)
d)
MichaelHlinka.com
Canadian Unlisted Board (CUB).
Alternative Trading Systems (ATSs).
Quotation and Trade Reporting Systems (QTRS).
Trades of unlisted securities are not required to be reported in Ontario.
MichaelHlinka.com
10.
Which of the following is not one of the fixed-income electronic trading systems in
Canada?
Gurjinder has $1.5 million invested in securities and cash with XYZ Investment
Inc., when XYZ declares bankruptcy. At the time, the market value of accounts
was $500 million, but the amount available for distribution was only $450 million.
How much would Gurjinder receive from CIPF?
An investor has $75,000 in cash on deposit and in the same institution has
$140,000 in a registered retirement savings plan. If the institution were to fail,
CDIC would insure deposits up to…
ha
13.
$140,000.
$175,000.
$200,000.
$215,000.
el
a)
b)
c)
d)
H
12.
$0.
$ 50,000.
$ 150,000.
$1,000,000.
lin
a)
b)
c)
d)
ka
.c
11.
CanDeal
CBID
CanPX
All of the above are fixed-income electronic trading systems.
om
a)
b)
c)
d)
Which of the following is not one of the four primary objectives in imposing
regulation?
Fairness
Economic stability
Consumer protection
Equalizing financial outcomes
M
ic
a)
b)
c)
d)
MichaelHlinka.com
MichaelHlinka.com
14.
Gatekeepers are expected to do all of the following except…
report any transactions or proposed transactions that seem suspicious.
monitor activity in client accounts for possible illegal transactions.
collect and record client information that is accurate and complete in order to
detect illegal activities.
inform the tax authorities of large withdrawals of cash from trading accounts.
om
a)
b)
c)
d)
Which of the following is most accurate with respect to the requirements of
telemarketers and the National Do Not Call List (DNCL)?
.c
15.
In the base year, Real GDP is $100 billion. The next year, Real GDP has grown
to $102 billion and Nominal GDP is $101 billion. An analyst would conclude
that…
lin
16.
Telemarketers must subscribe to the DNCL.
Telemarketers should subscribe to the DNCL.
Telemarketers should not subscribe to the DNCL
There are no requirements for the investment industry under the DNCL.
ka
a)
b)
c)
d)
the economy is operating at full capacity.
the economy is not operating at full capacity.
there are deflationary forces in the economy.
inflation over the past year was approximately 1%.
el
H
a)
b)
c)
d)
In which phase of the business cycle is it most likely that there will be rallies in
both the bond and stock markets?
ha
17.
Trough
Recovery
Expansion
Peak
ic
a)
b)
c)
d)
M
18.
Unemployment and retail sales are two important…
a)
b)
c)
d)
MichaelHlinka.com
leading indicators.
co-incident indicators.
lagging indicators.
Unemployment is a lagging indicator and retail sales is a co-incident indicator.
MichaelHlinka.com
Which of the following is least likely to increase the unemployment rate?
a)
b)
c)
d)
a)
b)
c)
d)
21.
frictional unemployment.
structural unemployment.
cyclical unemployment.
non-cyclical unemployment.
Which of the following is least likely to contribute to high interest rates?
H
22.
High inflation.
High default risk.
High demand for capital.
High degree of central bank creditability.
lin
a)
b)
c)
d)
The Phillips curve describes that the relationship between...
inflation and unemployment is direct.
inflation and unemployment is indirect.
inflation and gross domestic product is direct.
unemployment and gross domestic product is direct.
ha
el
a)
b)
c)
d)
23.
Canada is buying more goods and services from China than China is buying from
Canada. As a result…
Canada has a surplus in its current account and it needs to buy assets to
finance the spending.
Canada has a deficit in its current account and it needs to sell assets to
finance the spending.
Canada has a surplus in its capital account and it needs to buy assets to
finance the spending.
Canada has a deficit in its capital account and it needs to buy assets to
finance the spending.
ic
a)
b)
M
.c
There are ample employment opportunities in Northern Canada, but unemployed
Torontians are not willing to relocate. We would understand this as…
ka
20.
The number of employed people falls.
The number of people entering the work force increases.
The number of people classified as “discouraged workers” increases.
All of the factors cited will likely increase the unemployment rate.
om
19.
c)
d)
MichaelHlinka.com
MichaelHlinka.com
Which of the following factors is most likely to lead to an appreciating Canadian
dollar vis-à-vis the United States greenback?
a)
b)
c)
d)
Government revenue has exceeded spending this year. Therefore, we would
conclude that…
.c
25.
Higher commodity prices
Higher inflation in Canada
Higher public debt in Canada
Higher economic growth in the United States
om
24.
Which of the following statements are you least likely to agree with about the
Bank Rate and Overnight Rate?
lin
26.
the government is running a deficit, and the national debt will fall.
the government is running a deficit, and the national debt will increase.
the government is running a surplus, and the national debt will fall.
the government is running a surplust, and the national debt will increase.
ka
a)
b)
c)
d)
The overnight rate operates within a 50 basis point wide operating band.
The Bank Rate is the lower limit of the operating band of the overnight rate.
The Bank of Canada carries out monetary policy primarily through changes to
the Target for the Overnight Rate.
Each day, the Bank of Canada targets the mid-point of the operating band as
its key monetary policy objective.
H
a)
b)
c)
el
d)
Which of the following pairs of policy tools would the Bank of Canada employ to
reduce interest rates?
ha
27.
overnight repos and redeposits
overnight repos and drawdowns
overnight reverse repos and redeposits
overnight reverse repos and drawdowns
ic
a)
b)
c)
d)
M
28.
Which of the following is least likely to be understood as an advantage of
monetary policy compared to fiscal policy?
a)
b)
c)
d)
MichaelHlinka.com
It is independent of political considerations.
It is relatively easy to target a specific region.
The effect on the economy may be more immediate.
The initiative can be reversed once the objective is achieved.
MichaelHlinka.com
The details of a bond issue are outlined in a(n)…
a)
b)
c)
d)
Five years ago, a bond was issued at par with an original term to maturity of
twelve years. Since it was issued, interest rates have decreased sharply. As a
result, you would be most likely to agree that this would be…
An investment dealer acquires a block of high-quality bonds and separates the
coupon payments, selling them at a discount to their face value. The return for
these instruments would be considered…
lin
31.
a medium term bond trading at a discount.
a medium term bond trading at a premium.
a long-term bond trading at a discount.
a long-term bond trading at a premium.
ka
a)
b)
c)
d)
.c
30.
indenture.
covenant.
trust deed.
contractual listing.
om
29.
capital gains.
interest income.
either capital gains or interest income: The investor would make the choice.
either capital gains or interest income: The issuing company would make the
choice.
el
H
a)
b)
c)
d)
Which of the following bonds would most likely be the most liquid?
ha
32.
Provincial bonds
High yield bonds
Money market instruments
Government of Canada bonds
ic
a)
b)
c)
d)
M
33.
Which of the following bond features should not be considered “attractive” from
the investor’s perspective?
a)
b)
c)
d)
MichaelHlinka.com
Extendible
Retractable
Convertible
Redeemable
MichaelHlinka.com
Which of the following features is generally associated with convertible bonds?
a)
b)
c)
d)
The forced conversion clause is understood as an advantage to…
lin
Which of the following statements about protective provisions associated with
corporate bonds are you least likely to agree with?
a)
Debt Test provision limits the amount of additional debt that a firm may issue
by establishing a minimum debt-to-asset ratio.
Negative pledge provides that the borrower will not pledge any assets if the
pledge results in less security for the debt holder.
Limitation on Sale and Leaseback protects the debt holder against the firm
selling and leasing back assets that provide security for the debt.
Dividend Test establishes the rules for the payment of dividends by the firm
and ensures equity will not be drained by excessive dividend payments.
H
b)
c)
d)
A semi-annual pay real return bond is issued at par value of $1,000. In the first
six months of the year, inflation was 1%, then it is 2.5% in the last six months of
the year. The capital appreciation enjoyed by the investor would be closest to…
ha
37.
el
36.
the investor.
the issuing company.
both the investor and issuing company.
neither the investor nor the issuing company.
ka
a)
b)
c)
d)
.c
35.
Callable
Extendible
Retractable
Sinking fund
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34.
1.75%.
1.76%.
3.50%.
3.53%.
M
ic
a)
b)
c)
d)
MichaelHlinka.com
MichaelHlinka.com
The phrase “after-acquired clause” is most closely associated with…
a)
b)
c)
d)
a)
b)
c)
d)
lin
A commercial draft drawn by a borrower for payment on a specified date is
known as…
a)
b)
c)
d)
Everything else being equal, a corporate borrower whose debt has a “Aaa” credit
rating, compared to one with a “A” rating, would see its debt…
trade at a lower price and provide investors a lower yield.
trade at a lower price and provide investors a higher yield.
trade at a higher price and provide investors a lower yield.
trade at a higher price and provide investors a higher yield.
M
ic
ha
a)
b)
c)
d)
el
41.
a term deposit.
commercial paper.
a bankers’ acceptance.
a guaranteed investment certificate.
H
40.
holding companies.
transportation companies.
financial services companies.
heavy equipment manufacturers.
.c
Collateral trust bonds would most likely be issued by…
ka
39.
first mortgage bonds.
floating rate securities.
subordinated debentures.
equipment trust certificates.
om
38.
MichaelHlinka.com
MichaelHlinka.com
42.
An annual-pay bond with a 5% coupon is currently being priced with a discount
rate of 4%. If the discount rate were reduced to 3%...
the present value of the coupon payments would be lower, and the present
value of the principal would be unchanged.
the present value of the coupon payments would be lower, and the present
value of the principal would be lower.
the present value of the coupon payments would be higher, and the present
value of the principal would be unchanged.
the present value of the coupon payments would be higher, and the present
value of the principal would be higher.
om
a)
b)
c)
a)
b)
c)
d)
701.
705.
709.
713.
45.
1.42%.
1.60%.
1.63%.
1.87%.
ha
a)
b)
c)
d)
The yield curve shows…
the yield at a specific point of time for bonds having the same credit quality,
but different terms to maturity.
the yield at a specific point of time for bonds having different credit quality, but
the same terms to maturity.
the yield at varying times for bonds having the same credit quality, but
different terms to maturity.
the yield at varying times for bonds having different credit quality, but the
same terms to maturity.
ic
a)
b)
M
H
A T-bill with 318 days to maturity is currently priced at 98.40. Its yield is closest
to…
el
44.
ka
A semi-annual pay bond with a 4% coupon has five years to maturity. If the
discount rate is 7%, the present value of the principal would be closest to…
lin
43.
.c
d)
c)
d)
MichaelHlinka.com
MichaelHlinka.com
46.
Which of the following statements about an upward sloping yield curve are you
least likely to agree with?
According to Expectations Theory, investors believe that interest rates will be
higher in the future.
According to Liquidity Preference Theory, investors require additional returns
for assuming additional (term) risk.
According to Market Segmentation Theory, there is less demand and more
supply for long-dated bonds, leading to lower prices and higher yields for
these securities.
All of these statements are consistent with an upward sloping yield curve.
om
a)
b)
.c
c)
d)
An investor is looking at three bonds, each of which is priced to yield 5%. Bond
A has a duration of 4. Bond B has a duration of 6. Bond C has a duration of 8.
If the investor believes that interest rates will decline sharply in the near future,
the investor would likely select…
Which of the following is least likely to be one of the occupational roles on the
sell-side in the fixed income space?
el
48.
Bond A.
Bond B.
Bond C.
Insufficient information.
H
a)
b)
c)
d)
Trader
Portfolio Manager
Investment Banker
Sales Representative
ha
a)
b)
c)
d)
Which of the following statements about inter-dealer brokers in the fixed-income
market are you least likely to agree with?
M
ic
49.
lin
ka
47.
a)
b)
c)
d)
MichaelHlinka.com
They are participants in the wholesale bond market.
They perform a similar function to a market exchange.
They act solely as principals, holding a portfolio of bonds.
A key advantage the inter-dealer broker provides for institutional clients is
anonymity.
MichaelHlinka.com
a)
b)
c)
d)
51.
$3,000.
$3,500.
$3,700.
$7,000.
Which of the following indexes tracks the broad Canadian bond market?
lin
52.
S & P Market Bond Index
Moody’s Universal Bond Index
FTSE Canada Universe Bond Index
Barclay’s Capital Aggregate Bond Index
ka
a)
b)
c)
d)
Clearing and settlement for trading in equities occurs through…
el
53.
the Toronto Stock Exchange.
the Ontario Securities Commission.
CDS Clearing and Depository Services.
the TSX Settlement and Reconciliation System.
H
a)
b)
c)
d)
The 50% exemption rate for capital gains is enjoyed on…
neither common nor preferred shares.
common shares only.
preferred shares only.
both common and preferred shares.
ha
a)
b)
c)
d)
An investor read the following notice in the newspaper: “A $.50 quarterly
dividend will be paid to holders of record on December 20th, payable January
11th.” If December 20th fell on a Monday that year, the latest date that an investor
could buy the shares and receive the declared dividend would be…
M
ic
54.
om
A semi-annual GOC bond with a coupon of 4% and par value of $500,000,
trading at 105, matures December 15th, 2030. It was sold on August 7th, and the
trade will settle on August 9th. The accrued interest the buyer of the bond will
owe the seller of the bond is closest to…
.c
50.
a)
b)
c)
d)
MichaelHlinka.com
Wednesday December 15th.
Thursday December 16th.
Friday December 17th.
Friday January 7th.
MichaelHlinka.com
A TSX-listed company that IPO’d at $10 has seen its share price fall to $.75. In
order to increase the price to avoid being delisted, you would recommend that
it…
a)
b)
c)
d)
splits its stock.
executes a reverse stock split.
increase the book value per share.
reduce the dividend on its common shares.
Which of the following is least likely to be a valid reason for a company to issue
preferred shares rather than debt?
.c
56.
Existing assets are already heavily mortgaged.
Issuing preferred shares will increase the company’s debt-equity ratio.
The company is reluctant to assume the legal obligations associated with
debt.
All of the above are valid reasons for a company to issue preferred shares
rather than debt.
ka
a)
b)
c)
Which of the following preferred shares would be most attractive to most
investors?
H
57.
lin
d)
cumulative callable
cumulative non-callable
non-cumulative callable
non-cumulative non-callable
ha
el
a)
b)
c)
d)
ABC Company has the following securities on the market:
• ABC Common Shares
• ABC Preferred Shares
• ABC Convertible Preferred Shares
ic
58.
om
55.
M
Ranked by dividend yield, (lowest to highest), the most likely ranking would be…
a)
b)
c)
d)
MichaelHlinka.com
common shares, convertible preferred shares, preferred shares
common shares, preferred shares, convertible preferred shares
preferred shares, convertible preferred shares, common shares
convertible preferred shares, preferred shares, common shares
MichaelHlinka.com
The yield on a floating rate preferred shares is generally based on…
a)
b)
c)
d)
60.
the yield on common shares plus a spread.
the yield on common shares minus a spread.
a percentage of prime or 3-month T-bills plus a spread.
a percentage of prime or 3-month T-bills minus a spread.
Which of the following companies dominate a value-weighted index?
ka
Which of the following is least likely to be one of the criteria that determines if a
stock is included in the TSX Composite Index?
lin
61.
Companies with high share prices.
Companies that pay generous dividends.
Companies with the largest market capitalizations.
Companies that have been in business a long time.
.c
a)
b)
c)
d)
Which of the following is not true about the Dow Jones Industrial Average?
el
62.
Liquidity
Revenue
Trading volume
Length of time listed on exchange
H
a)
b)
c)
d)
It is price-weighted.
It is composed of 30 companies.
It is composed of blue-chip stocks with a lower than average risk profile.
It is the main gauge for measuring the investment performance of institutional
investments in the United States.
ha
a)
b)
c)
d)
The broadest available barometer for all the U.S. indexes is the…
M
ic
63.
om
59.
a)
b)
c)
d)
MichaelHlinka.com
NYSE Composite Index.
AMEX Market Value Index.
NASDAQ Composite Index.
Value Line Composite Index.
MichaelHlinka.com
Which of the following securities requires that the investor pays fully for it on the
day it is purchased in a cash account?
a)
b)
c)
d)
a)
b)
c)
d)
a)
b)
c)
d)
When an investor has a margin account, it means that he/she…
el
67.
Daily
Weekly
Monthly
Annually
is not able to pay for securities in full.
can pay for securities in full, but there is a penalty for doing so.
can pay for securities in full, treating the account like it is a cash account.
can pay for securities in full, and in doing so, will receive a break on
commissions.
ha
a)
b)
c)
d)
“Margin calls” are most likely to occur under which of the following
circumstances?
M
ic
68.
lin
How frequently is the interest on a margin loan calculated?
H
66.
New Account Application Form
Margin Account Agreement Form
Leveraged Trading Agreement Form
Long/Short Trading Agreement Form
.c
What document must be obtained from a potential client before business is
transacted in a margin account?
ka
65.
Treasury bills
Preferred shares
Option contracts
All securities have two business days settlement
om
64.
a)
b)
c)
d)
MichaelHlinka.com
When both long and short positions increase in price.
When both long and short positions decrease in price.
When long positions decrease in price and short positions increase in price.
When long positions increase in price and short positions decrease in price.
MichaelHlinka.com
An investor has just opened a margin account and there is nothing in it. She
deposits $10,000 and buys 10,000 shares of Epsilon Enterprises which was
trading at $1.00 per share, hence was not eligible for margin. Three months
later, it has doubled in price. What does this mean to this investor?
om
69.
a)
She could buy more shares of Epsilon, but she could not withdraw funds from
her account.
She could buy more shares of other companies (not Epsilon), but she could
not withdraw funds from her account.
She could not buy more shares of companies, but she could withdraw funds
from her account.
She could either buy more shares of companies, including Epsilon, or she
could withdraw funds from her account.
b)
.c
c)
ka
d)
a)
b)
c)
d)
An investor short-sold 2,000 shares of Steph Adventure Tours at $18 per share.
Two months later, after Steph had paid a $.20 per share dividend, he offset the
position at $16.80. As a result, the investor…
ha
el
71.
$ 3,000.
$ 5,000.
$ 7,000.
$10,000.
lin
An investor bought 1,000 shares of a $30 stock which was eligible for reduced
margin, making the minimum margin deposit possible. If the shares
subsequently increased in price to $40, the investor’s margin surplus would be
closest to…
H
70.
suffered a loss of $2,800.
enjoyed a profit of $2,000.
enjoyed a profit of $2,400.
enjoyed a profit of $2,800.
ic
a)
b)
c)
d)
M
72.
Why is short-selling considered riskier than buying shares?
a)
b)
c)
d)
MichaelHlinka.com
There is the potential for unlimited loss.
The investment dealer can force the investor to buy back shares.
There is the possibility that shares cannot be borrowed for short-selling
purposes.
Short-selling is not considered riskier than buying shares.
MichaelHlinka.com
If a client places a market order in a fluid and volatile market to buy a security
where the bid-offer is currently $15.00 to $15.05, it means that he/she…
a)
b)
c)
d)
75.
Limit
Market
Stop-buy
Stop-loss
“Pro orders” are orders…
a)
for the accounts of institutional traders and must be executed before orders
for retail clients.
for the accounts of institutional traders and must be executed after orders for
retail clients.
for the accounts of partners, directors, officers and IAs and receive
preferential treatment compared to client orders.
for the accounts of partners, directors, officers, and IAs and client orders
receive preferential treatment compared to pro orders.
H
b)
el
c)
ha
d)
Which of the following statements would you agree with?
i)
All derivatives have an expiration date.
ii)
All derivatives require a performance bond.
iii)
Derivatives can be considered a zero-sum game.
M
ic
76.
ka
a)
b)
c)
d)
.c
An investor who has short-sold a security might place which of the following
orders as a protective measure?
lin
74.
is guaranteed to pay no more than $15.00.
is guaranteed to pay between $15.00 and $15.05.
is guaranteed to pay exactly $15.05.
could either pay more than $15.05 or less than $15.00.
om
73.
a)
b)
c)
d)
MichaelHlinka.com
i) & ii) only
i) & iii) only
ii) & iii) only
i), ii) & iii)
MichaelHlinka.com
Which of the following derivatives is or are more likely to trade on an exchange?
a)
b)
c)
d)
A particular benefit of OTC derivatives is…
79.
liquidity.
regulation
customization
standardization.
The two major categories of underlying assets for derivative contracts are…
stocks and bonds.
futures and forwards.
options and forwards.
commodities and financial assets.
H
lin
a)
b)
c)
d)
A scenario where the same asset or commodity is trading at different prices in
two separate market describes…
el
80.
hedging.
arbitrage.
speculation.
risk mitigation.
ha
a)
b)
c)
d)
81.
An uncovered writer of an at-the-money put option…
expects the price of the underlying to decline sharply.
expects the price of the underlying to increase sharply.
expects the price of the underlying to either decline sharply or increase
sharply.
expects the price of the underlying to remain stable.
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a)
b)
c)
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a)
b)
c)
d)
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78.
options only
options and forwards
options and futures
forwards and futures
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77.
d)
MichaelHlinka.com
MichaelHlinka.com
Which of the following options would most likely be most valuable?
a)
b)
c)
d)
84.
$ 9 per share.
$11 per share.
$13 per share.
$17 per share.
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a)
b)
c)
d)
.c
An investor purchased 1,000 shares of DEF Security at $45 per share. After it
had appreciated in price to $57, she sold $60 calls, receiving a premium of $2
per share. When the options expired, the shares were trading at $54. At this
point in time, profit per share would be…
ka
83.
American-style options that are in the money.
European-style options that are in the money.
American-style options that are out of the money.
European-style options that are out of the money.
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82.
If a futures contract is held to expiration date…
the long will accept delivery and make payment to the short.
the short will accept delivery and make payment to the long.
the long will refuse delivery and accept payment from the short.
the long will refuse deliver and must make payment to the short.
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a)
b)
c)
d)
What security is frequently issued as part of a package that also contains a new
debt or preferred share issue?
ha
85.
puts
calls
rights
warrants
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a)
b)
c)
d)
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86.
Which of the following is true of corporations?
a)
b)
c)
d)
MichaelHlinka.com
Corporations cannot be sued in a court of law.
Shareholders have no liability for the debts of the corporation.
Property acquired by the corporation belongs to its shareholders.
Corporations are able to raise capital by issuing equity, but not debt.
MichaelHlinka.com
87.
Which of the following is not true about proxies?
In order to calculate depreciation expense, an analyst must know…
.c
88.
Proxies are always revocable.
Sending proxies to company shareholders is compulsory.
Under the federal act, a proxy holder must be a shareholder of the company.
A proxy form and an annual information form must accompany the notice of a
shareholders’ meeting.
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a)
b)
c)
d)
When a company capitalizes an expenditure, rather than recording it as an
expense, in that year it will show…
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89.
the original cost of the asset and its years of useful life.
the current market value of the asset and its years of useful life.
the original cost of the asset, its years of useful life, and its residual value.
the current market value of the assets, its years of useful life, and its residual
value.
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a)
b)
c)
d)
lower assets and lower income.
lower assets and higher income.
higher assets and lower income.
higher assets and higher income.
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a)
b)
c)
d)
In an era of rising prices, using the FIFO method of inventory valuation compared
to the weighted average cost method, results in…
ha
90.
lower cost of goods sold and lower net income.
lower cost of goods sold and higher net income.
higher cost of goods sold and lower net income.
higher cost of goods sold and higher net income.
M
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a)
b)
c)
d)
MichaelHlinka.com
MichaelHlinka.com
Share of profit of associates occurs when a company invests in another company
and where significant influence exists without control. Traditionally, what percent
of voting shares does this represent?
a)
b)
c)
d)
You are examining the financial statements of a company that receives dividends
from associates. In which section of the cash flow statement would those
dividends be recognized?
lin
Which of the following is least likely to be found in a company’s Notes to the
Financial Statements?
Investor Lee purchased 5,000 shares of ROG-DOG which was being issued in
the primary market under prospectus requirements. The same day he placed the
order, which was Thursday August 10th, his investment advisor e-mailed a
prospectus to him, which went to Lee’s junk folder. On Monday morning before
the market opened, Lee called his advisor to cancel the trade. According to
Canadian legislation…
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94.
Use of derivatives
Accounting policies
Analysts’ profit estimates
Commitments and contingencies
H
a)
b)
c)
d)
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93.
Financing activities
Either operating or investing activities
Either operating or financing activities
Either investing or financing activities
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a)
b)
c)
d)
.c
92.
At least 10% but less than 50%
At least 20% but less than 50%
At least 25% but less than 50%
At least 33% but less than 50%
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91.
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a)
b)
c)
d)
MichaelHlinka.com
Lee would be protected under the Right of Withdrawal.
Lee would not be protected under the Right of Withdrawal, because more
than two days passed since the receipt of the prospectus.
Lee would not be protected under the Right of Withdrawal, but would be
protected unconditionally under the Right of Rescission.
Lee would be protected under the Right of Action for Damages, as long as the
security declined in value from its IPO price.
MichaelHlinka.com
In order to submit bids to the Bank of Canada for Canadian government issues,
an institution must be recognized as a(n)…
a)
b)
c)
d)
a)
b)
c)
d)
Which of the following is least likely to be one of the potential disadvantages of
raising investment capital by issuing preferred shares?
lin
97.
due diligence report.
preliminary prospectus.
red herring prospectus.
broker of record document.
Dividends are costlier than debt because they are paid with after-tax income.
A purchase fund could be a drain on company assets during recessionary
times.
The underwriting discount is usually greater than would have been charged
on common shares.
Non-payment of dividends could trigger the implementation of voting
privileges for preferred shareholders.
H
a)
b)
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c)
ha
d)
98.
.c
When negotiations begin for a new issue of securities, the report that the
investment dealer will prepare is referred to as the…
ka
96.
primary dealer.
accredited institution.
competitive tender dealer.
government securities distributor.
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95.
What permits an underwriter to cancel an offering without penalty under certain
conditions?
Recission clause
Market out clause
Withdrawal clause
An underwriter cannot can only cancel an offering after incurring a penalty.
M
ic
a)
b)
c)
d)
MichaelHlinka.com
MichaelHlinka.com
What is the purpose of NEX?
It is a regulatory agency that monitors companies on the TSX Venture
Exchange.
It provides a trading forum for companies that have fallen below the Venture
Exchange’s listing standards.
It is the organization that holds escrowed shares and options on treasury
shares in the underwriting process.
It is a program through the TSX Venture Exchange that provides businesses
with an opportunity to obtain financing earlier in their development than
through a regular IPO.
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a)
b)
c)
d)
.c
99.
Which of the following statements about withdrawals of trading privileges are you
least likely to agree with?
a)
b)
c)
A delayed opening impacts all securities that trade on an exchange.
A halt in trading can be ordered or arranged at any time in the trading day.
Suspensions are generally imposed if the company’s financial condition does
not meet exchange requirements.
Reasons for delisting include that the security no longer exists (because of
merger) or the company is bankrupt.
M
ic
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ha
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d)
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100.
MichaelHlinka.com
MichaelHlinka.com
Answer Key – Examination #1, CSC Volume 1
1 – 5/6.
2.B
1 – 6.
3.D
1 – 10.
4.A
1 – 11.
5.A
1 – 12.
6.A
1 – 13.
7.B
2 – 7.
8.A
2 – 8.
9.A
2 – 10.
10.D
2 – 10/11.
11.C
3 – 6.
XYZ can cover 90% of client accounts, or in this case, $1,350,000, leaving
a shortfall of $150,000 which would be covered by CIPF.
12.B
3 – 6/7.
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3 – 9.
14.D
3 – 11.
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13.D
3 – 16/17.
16.C
4 – 8.
17.A
4 – 9/12.
18.D
4 – 12/13.
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15.A
MichaelHlinka.com
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1.C
21.D
4 – 18/19.
22.B
4 – 23/24.
23.B
4 – 25.
24.A
4 – 25/27.
25.C
5 – 3/4.
26.B
5 – 8/9.
27.A
5 – 9/10.
28.B
5 – 12.
29.C
6 – 4.
30.B
6 – 7.
31.B
6 – 8.
32.D
6 – 8.
.c
4 – 17.
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20.B
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4 – 14/17.
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19.C
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MichaelHlinka.com
6 – 9/10.
34.A
6 – 10/11.
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33.D
6 – 11.
36.A
6 – 13.
37.D
6 – 14.
Return over first six months is 1% and bond grows in value to $1,010.
Return over last six months: $1,010 x 1.025 = $1,035.25
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35.B
MichaelHlinka.com
MichaelHlinka.com
6 – 16.
39.A
6 – 18.
40.C
6 – 19.
41.C
6 – 22.
42.D
7 – 4.
43.C
7 – 5/8.
[10][N][7][I/Y][0][PMT][1000][FV]… [CPT][PV]…-708.92
44.D
7 – 8/9.
1.60/98.40 x 365/318 x 100 = 1.87%.
45.A
7 – 13/14.
46.D
7 – 14/15.
47.C
7 – 18/19.
48.B
7 – 20.
49.C
7 – 21.
50.A
7 – 23/24.
The buyer of the bond owes the seller of the bond 55 days of accrued
interest: 15 days in June, 31 days in July and 9 days in August.
Daily interest: ($500,000 x .04)/365 = $54.79 x 55 days = $3,013.69.
52.C
8 – 4.
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53.D
8 – 4/5.
54.B
8 – 5/6.
MichaelHlinka.com
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7 – 25.
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51.C
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38.A
8 – 13.
57.B
8 – 14/15.
58.A
8 – 13/20.
59.C
8 – 16.
60.C
8 – 20/21.
61.B
8 – 21/22.
62.D
8 – 24.
63.D
8 – 24.
64.A
9 – 3.
65.B
9 – 4.
66.A
9 – 4.
67.C
9 – 4/7.
68.C
9 – 4/10.
.c
56.B
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8 – 9/10.
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55.B
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MichaelHlinka.com
9 – 4/7.
70.C
9 – 5/7.
Purchase price: $30,000. Margin required: $9,000, Loan value $21,000.
At $40, loan value is $28,000; hence there is a margin surplus of $7,000.
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69.D
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71.B
MichaelHlinka.com
9 – 10.
The investor earned a capital gain of $1.20 per share, but was responsible
for paying the $.20 dividend, netting out to $1.00 per share. The investor
short-sold 2,000 shares for a total profit of $2,000.
MichaelHlinka.com
9 – 11.
73.D
9 – 14.
74.C
9 – 16.
75.D
9 – 16.
76.B
10 – 4.
77.C
10 – 4/5.
78.C
10 – 4/5.
79.D
10 – 7.
80.B
10 – 10.
81.D
10 – 11.
82.A
10 – 12/13.
83.B
10 – 16/19.
Purchase price is $45. $2 in premium was received. Shares would be
marked-to-market at $54: $54 + $2 – $45 = $11.00.
84.A
10 – 25/26.
86.B
11 – 3.
87.C
11 – 6.
88.C
11 – 11/12.
89.D
11 – 13.
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10 – 32.
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85.D
MichaelHlinka.com
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72.A
11 – 13/14.
91.B
11 – 18.
92.B
11 – 21.
93.C
11 – 22.
94.A
11 – 24.
95.D
12 – 4.
96.A
12 – 8.
97.C
12 – 9.
98.B
12 – 14.
99.B
12 – 17/18.
100.A
12 – 20.
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90.B
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MichaelHlinka.com
MichaelHlinka.com