Todays Agenda
1. CIFP Exam Review
Final CIFP Exam
1. Friday August 16th, 9:00AM – 12:00 PM EST
2. Comprehensive Exam
3. 60 Multiple Choice Questions
4. Worth 30% of your final grade
5. You MUST register for this exam with CIFP
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Term Exam #2 : Problem Questions
Question #6
If a client deposits $1.50 each day starting today, how much will the client have at the
end of 40 years, assuming the funds earned 10% interest per year?
a. $143,241.15
b. $266, 551.37
c. $293, 286.15
d. $293,366.50
Question #6
If a client deposits $1.50 each day starting today, how much will the client
have at the end of 40 years, assuming the funds earned 10% interest per
year?
BGN Mode
PV = 0
N = 40 yrs X 365 days = 14,600 periods
I = 10%/365 - .0273973
PMT = -1.50
FV = $293,366.50
Question #7
In a co-movement in supply and demand, a positive shift in the demand curve for a good causes
which of the following?
a. The price to fall and the quantity to rise
b. Both the price the quantity to rise
c. Both the price and the quantity to fall
d. The price to rise and the quantity to fall
Co-movements in Supply and Demand
When a variable shifts the supply or demand curve, the equilibrium of price and quantity also shifts:
➢ Positive Shift in Demand
➢ Negative Shift in Demand
➢ Positive Shift in Supply
➢ Negative Shift in Supply
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Positive Shift in Demand
Demand will have a positive shift when one of the following changes occurs:
• people's incomes increase
• people's preferences change so that consumers become more favourably inclined towards a
product
• the price of substitutes increases or, the price of complements fall
• the number of consumers in the market increases
• people expect future incomes will fall or, if they think prices will rise in the future
Positive Shift in Demand
Example: An increase in consumer income ,
leads to an increase in demand
Result: Greater demand leads to an increase in
quantity supplied, resulting in an increased
price
(Rightward movement in demand curve)
•9
Question #7
In a co-movement in supply and demand, a positive shift in the demand curve for a good causes
which of the following?
a. The price to fall and the quantity to rise
b. Both the price the quantity to rise
c. Both the price and the quantity to fall
d. The price to rise and the quantity to fall
Question #11
Which of the following does not cause an increase in demand?
Question options:
a. A reduction in the commodity's price
b. An increase in consumers' preference for the commodity
c. A reduction in the price of the complementary good
d. An increase in consumers' income
Law of Demand
The law of demand says that, when holding all other factors constant, the quantity demanded
increases as price per unit decreases and the quantity demanded decreases when price
increases.
The law of demand is a reflection of an individual's decreasing willingness to pay for something as
he or she gets more of it.
You have probably heard people say something like "...at that price, it wasn't worth it..." when they
are referring to some product or service they considered buying. As consumers, we each have our
own individual perception of what things are worth.
Movements in Demand
• When price varies, the quantity demand also varies, but the curve does not shift.
• A shift in the demand curve is caused by any variable other than price.
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Question #11
Which of the following does not cause an increase in demand?
Question options:
a. A reduction in the commodity's price
b. An increase in consumers' preference for the commodity
c. A reduction in the price of the complementary good
d. An increase in consumers' income
Question #18
Which of the following items is not included in a client's current cash flow statement?
Question options:
a. The amount of income received by the client and sources of this income.
b. The capital gain/or (loss) accrued on a client's non-registered investments during the year.
c. The nature and extent of the client's expenses, whether discretionary or non-discretionary.
d. The predictability of the client's income, such as fixes salary, commission and bonuses.
Question #18
Which of the following items is not included in a client's current cash flow statement?
Question options:
a. The amount of income received by the client and sources of this income.
b. The capital gain/or (loss) accrued on a client's non-registered investments during the year.
c. The nature and extent of the client's expenses, whether discretionary or non-discretionary.
d. The predictability of the client's income, such as fixes salary, commission and bonuses.
Question #20
Which of the following sets of economic signals represents an economy at the peak of the business
cycle?
Question options:
a. Inflation is stable, corporate profits are increasing and unemployment is decreasing.
b. Inflation is increasing, interest rates are increasing, and business investment is declining.
c. Capacity utilization is low, and the unemployment rate is high.
d. Inventories are increasing, profits are declining, and employment is decreasing.
Phases of the Economic Cycle
Peak
• At the peak, interest rates may reach a level where the central bank begins to tighten credit.
• Inflation is likely in the upper part of the targeted range.
• GDP will likely reach a plateau.
• The exchange rate may hold steady as long as the trade balance in Canada remains positive
however, if foreign investments are rising, the resulting increased demand for the Canadian dollar
may lead to an appreciation.
• Asset values will likely be high as demand is likely high.
Question #20
Which of the following sets of economic signals represents an economy at the peak of the business
cycle?
Question options:
a. Inflation is stable, corporate profits are increasing and unemployment is decreasing.
b. Inflation is increasing, interest rates are increasing and business investment is declining.
c. Capacity utilization is low and the unemployment rate is high.
d. Inventories are increasing, profits are declining and employment is decreasing.
Question #21
Which of the following situations is an example of an ethical dilemma?
Question options:
a. Sarah's client wants to purchase stock in a specific company, but Sarah has reason to believe the
stock may soon lose value.
b. Sarah's client tells her to sell his stock in the company he works for because he knows that its
value will soon plummet.
c. Sarah recommends that her client purchase a mutual fund that has been performing poorly but that
pays her a high commission.
d. Sarah recommends that her elderly client with health problems purchase a long-term GIC with an
early withdrawal penalty.
What is an Ethical Dilemma?
An ethical dilemma is a problem in the decision-making process between two possible
options, neither of which is absolutely acceptable from an ethical perspective.
Question #21
Which of the following situations is an example of an ethical dilemma?
Question options:
a. Sarah's client wants to purchase stock in a specific company, but Sarah has reason to believe the
stock may soon lose value.
b. Sarah's client tells her to sell his stock in the company he works for because he knows that its
value will soon plummet.
c. Sarah recommends that her client purchase a mutual fund that has been performing poorly but that
pays her a high commission.
d. Sarah recommends that her elderly client with health problems purchase a long-term GIC with an
early withdrawal penalty.
Question #26
Which of the following will not cause a positive shift in a service's demand curve?
Question options:
a. An increase in consumer income
b. An increase in consumer preference for that service
c. An increase in the price of a substitute service
d. A reduction in the price of the service
Variables that Shift Demand
➢ Number of consumers
➢ Consumer preference
➢ Consumer income
➢ Price of substitutes
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Positive Shift in Demand
Demand will have a positive shift when one of the following changes occurs:
• people's incomes increase
• people's preferences change so that consumers become more favourably inclined towards a
product
• the price of substitutes increases or, the price of complements fall
• the number of consumers in the market increases
• people expect future incomes will fall or, if they think prices will rise in the future
Question #26
Which of the following will not cause a positive shift in a service's demand curve?
Question options:
a. An increase in consumer income
b. An increase in consumer preference for that service
c. An increase in the price of a substitute service
d. A reduction in the price of the service
Question #34
What factor will cause the supply curve to shift?
Question options:
a. people's expectations about future incomes or prices
b. the number of firms supplying the good in the market
c. the prices of substitutes or complements
d. an increase or decrease in consumer incomes
Variables That Shift Supply
➢Techonology
➢Price of resources
➢Effects of unexpected events or natural disasters
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Question #34
What factor will cause the supply curve to shift?
Question options:
a. people's expectations about future incomes or prices
b. the number of firms supplying the good in the market
c. the prices of substitutes or complements
d. an increase or decrease in consumer incomes
Question #36
How does a price ceiling affect supply and demand?
Question options:
a. if the price ceiling is below the equilibrium price, it will have no effect on supply and demand
b. if the price ceiling is above the equilibrium price, there will be more demand than supply
c. if the price ceiling is below the equilibrium price, there will be more supply than demand
d. if the price ceiling is above the equilibrium price, it will have no effect on supply and demand
The Imposition of a Maximum Price
E.g. Rent control
Question #36
How does a price ceiling affect supply and demand?
Question options:
a. if the price ceiling is below the equilibrium price, it will have no effect on supply and demand
b. if the price ceiling is above the equilibrium price, there will be more demand than supply
c. if the price ceiling is below the equilibrium price, there will be more supply than demand
d. if the price ceiling is above the equilibrium price, it will have no effect on supply and demand
Question #43
Before meeting with a new client, you decide to review the latest economic news just in case he asks
about the state of the economy. All of the following statements are false, EXCEPT:
Question options:
a. as the economy begins to grow, it moves into a trough.
b. inflation increases during a contraction.
c. as the economy stops growing, it reaches a peak.
d. unemployment increases during an expansion.
Question #43
Before meeting with a new client, you decide to review the latest economic news just in case he asks
about the state of the economy. All of the following statements are false, EXCEPT:
Question options:
a. as the economy begins to grow, it moves into a trough.
b. inflation increases during a contraction.
c. as the economy stops growing, it reaches a peak.
d. unemployment increases during an expansion.
Question #47
How does Canada's inflation rate affect foreign trade?
Question options:
a. if Canadian prices increase faster than foreign prices, our exports will become less expensive
abroad
b. if domestic inflation is allowed to continue, imports will become more expensive than domestic
goods
c. if Canadian goods becomes too expensive on foreign markets, our domestic market share will
decline
d. if domestic inflation rises, domestic producers will have a more difficult time competing against
imports
Macroeconomics
Inflation
An economy-wide, sustained increase in the cost of goods and services over a period of time
caused when the demands of an expanding economy are greater than the supply of goods.
Consumer Price Index (CPI)
One of the most widely used indicators of inflation, used to measure the cost of living in
Canada.
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Inflation and International Competitiveness
If Canadian prices increase faster than prices in the countries with which we trade, our exports will
become increasingly expensive abroad. If Canadian goods become too expensive on foreign
markets, we will lose market share.
If uncontrolled domestic inflation continues, imports become relatively cheaper than domestic
goods. Domestic producers find it more and more difficult to compete against imported products.
The ultimate effect is reduced domestic production and a reduction in the number of people
employed.
Question #47
How does Canada's inflation rate affect foreign trade?
Question options:
a. if Canadian prices increase faster than foreign prices, our exports will become less expensive
abroad
b. if domestic inflation is allowed to continue, imports will become more expensive than domestic
goods
c. if Canadian goods becomes too expensive on foreign markets, our domestic market share will
decline
d. if domestic inflation rises, domestic producers will have a more difficult time competing against
imports
Question #48
Which of the following statements about the Bank of Canada's actions is correct?
Question options:
a. increasing the Canadian interest rates will decrease the value of the Canadian dollar
b. increasing the Canadian money supply will decrease Canadian interest rates
c. decreasing the Canadian money supply will decrease Canadian interest rates
d. decreasing the Canadian interest rates will increase the value of the Canadian dollar
Bank of Canada Tools of Monetary Policy
Expansionary & Contractionary Policy Techniques
Technique Description Example
Bank Rate Minimum rate of interest at which If the Bank of Canada decreases the bank rate,
the chartered banks can borrow nominal interest rates will also fall and money supply
from the Bank of Canada will increase.(expansionary)
If the Bank of Canada increases the bank rate, nominal
interest rates will also rise and money supply will
decrease.(contractionary)
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Bank of Canada Tools of Monetary Policy
Expansionary & Contractionary Policy Techniques
Technique Description Example
Cash A central bank If the bank of Canada buys
Management controls its national bonds in the market, the price
money supply of the bonds will rise, causing
through the buying interest rates to fall, increasing
or selling of bonds in money supply. (expansionary)
the market.
If the Bank of Canada sells
bonds in the market, the price
of bonds will fall causing
interest rates to increase,
decreasing money supply.
(contractionary)
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Question #48
Which of the following statements about the Bank of Canada's actions is correct?
Question options:
a. increasing the Canadian interest rates will decrease the value of the Canadian dollar
b. increasing the Canadian money supply will decrease Canadian interest rates
c. decreasing the Canadian money supply will decrease Canadian interest rates
d. decreasing the Canadian interest rates will increase the value of the Canadian dollar
Question #49
How does the Bank of Canada increase interest rates?
Question options:
a. it can buy T-bills from investors and financial institutions
b. it can sell Canadian dollars on the foreign exchange markets
c. it can make a drawdown of moneys from the chartered banks
d. it can make a redeposit of moneys to the chartered banks
Bank of Canada Tools of Monetary Policy
Drawdowns and Redeposits
• Another strategy defining monetary policy
• Federal Government maintains accounts both with the Bank of Canada and chartered banks. They can
influence short-term interest rates by transferring funds to or from the Bank of Canada
• Drawdowns: a transfer of deposits to the Bank of Canada from the chartered banks
• Redeposit: a transfer of funds from the Bank of Canada to chartered banks
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Question #49
How does the Bank of Canada increase interest rates?
Question options:
a. it can buy T-bills from investors and financial institutions
b. it can sell Canadian dollars on the foreign exchange markets
c. it can make a drawdown of moneys from the chartered banks
d. it can make a redeposit of moneys to the chartered banks
Which of the following situations does not meet the suitability standard?
A) Natalia who recommends the Delta Growth fund, which pays her a 2% trailer, over the Omicron Growth
fund, which would pay her a 1% trailer, to her client, since the Delta Growth fund corresponds more closely
to her client’s objectives.
B) Joan who recommends putting about 10% of her aggressive client’s portfolio in an emerging market
mutual fund.
C) James who recommends investing in a moderate amount into a Bitcoin ETF for her growth-oriented
client.
D) All of the above meet the suitability standard.
Which of the following situations does not meet the suitability standard?
A) Natalia who recommends the Delta Growth fund, which pays her a 2% trailer, over the Omicron Growth
fund, which would pay her a 1% trailer, to her client, since the Delta Growth fund corresponds more closely
to her client’s objectives.
B) Joan who recommends putting about 10% of her aggressive client’s portfolio in an emerging market
mutual fund.
C) James who recommends investing in a moderate amount into a Bitcoin ETF for her growth-oriented
client.
D) All of the above meet the suitability standard.
Kimberly’s client has asked how much of his deposits at his bank are covered by CDIC insurance. The
client has $2,500 in chequing accounts, $50,000 in 7-year term deposits and $5,000 in savings accounts at
one branch of the bank, and $75,000 in a Registered Retirement Savings Plan (RRSP) at another branch
of the same bank. Calculate the amount Kimberly should tell his client that he is insured for.
A) $132,500
B) $100,000
C) $82,500
D) $7,500
Kimberly’s client has asked how much of his deposits at his bank are covered by CDIC insurance. The
client has $2,500 in chequing accounts, $50,000 in 7-year term deposits and $5,000 in savings accounts at
one branch of the bank, and $75,000 in a Registered Retirement Savings Plan (RRSP) at another branch
of the same bank. Calculate the amount Kimberly should tell his client that he is insured for.
A) $132,500
B) $100,000
C) $82,500
D) $7,500
The compliance watchdog over the banks, trust companies, and insurance companies is the:
A) Industry Regulatory Organization of Canada (IIROC)
B) Financial Transaction and Report Analysis Centre of Canada (FINTRAC)
C) Financial Consumer Agency of Canada (FCAC)
D) Office of the Superintendent of Financial Institutions (OSFI)
The compliance watchdog over the banks, trust companies, and insurance companies is the:
A) Industry Regulatory Organization of Canada (IIROC)
B) Financial Transaction and Report Analysis Centre of Canada (FINTRAC)
C) Financial Consumer Agency of Canada (FCAC)
D) Office of the Superintendent of Financial Institutions (OSFI)
Which of these activities might require a suspicious activity report?
A) A customer cancels a transaction and requests to do a second transaction for a less amount
in order to avoid providing id.
B) A customer requests an unusually high dollar transaction and cannot explain the reason for
the transaction or the source of the cash.
C) A customer appears nervous and asks unusual questions about your record keeping.
D) All of these activities
Which of these activities might require a suspicious activity report?
A) A customer cancels a transaction and requests to do a second transaction for a less amount
in order to avoid providing id.
B) A customer requests an unusually high dollar transaction and cannot explain the reason for
the transaction or the source of the cash.
C) A customer appears nervous and asks unusual questions about your record keeping.
D) All of these activities
Identify the group or organization that oversees all investment dealers and trading activity on debt and
equity marketplaces in Canada.
A) Investment Industry Regulatory Organization of Canada (IIROC).
B) Securities and Exchange Commission (SEC).
C) Canada Deposit Insurance Corporation (CDIC)
D) Office of the Superintendent of Financial Institutions (OSFI).
Identify the group or organization that oversees all investment dealers and trading activity on debt and
equity marketplaces in Canada.
A) Investment Industry Regulatory Organization of Canada (IIROC).
B) Securities and Exchange Commission (SEC).
C) Canada Deposit Insurance Corporation (CDIC)
D) Office of the Superintendent of Financial Institutions (OSFI).
Registrants must try to know all financial and personal circumstances that can affect the client’s
investment objectives; they must know the client from a “suitability” perspective. This is known as
what type of code of ethics standard.
A) Professionalism
B) Competence
C) Know Your Client
D) Integrity
Registrants must try to know all financial and personal circumstances that can affect the client’s
investment objectives; they must know the client from a “suitability” perspective. This is known as
what type of code of ethics standard.
A) Professionalism
B) Competence
C) Know Your Client
D) Integrity
Monica, a financial advisor with Top Financial has been dealing with Joanna, a risk averse client, for several years. Of late
however, Joanna has been getting some tips from her best friend on speculative cannabis stocks to buy and she decides to
invest. Monica executes her trade requests without providing any advice to Jonna. What code of ethics standard has
Monica violated?
A) Duty of Care
B) Integrity
C) Professionalism
D) Confidentiality
Monica, a financial advisor with Top Financial has been dealing with Joanna, a risk averse client, for several years. Of late
however, Joanna has been getting some tips from her best friend on speculative cannabis stocks to buy and she decides to
invest. Monica executes her trade requests without providing any advice to Jonna. What code of ethics standard has
Monica violated?
A) Duty of Care
B) Integrity
C) Professionalism
D) Confidentiality
ALL THE BEST
Its not the exceptional few
who surge ahead but the
exceptionally hard working.
So do your best and reach
high
