Exam CIFC Topic 1 Question 98 Discussion

Actual exam question for IFSE Institute's CIFC exam
Question #: 98
Topic #: 1

One of your clients, Sheldon, is 65 years old. He has $30,000 to invest. He has a low risk profile, and an investment objective of receiving regular income. He has a time horizon of 5 years.
Based on Sheldon's risk profile and investment objective, which of the following investment recommendations is MOST appropriate for Sheldon?

A. ABC common shares which had a 20% annual yield during the previous 5 years. B. 3% Government of Canada Bonds at par, which have a maturity that coincides with Sheldon's time horizon. C. FEG Labour-Sponsored Fund which will give him a tax benefit. D. Debentures of XYZ Corporation will give Sheldon a regular income and an attractive yield.

Suggested Answer: B Vote an answer

Explanation
Government of Canada Bonds are fixed income securities issued by the federal government that pay a fixed rate of interest (coupon) and return the principal amount (par value) at maturity. They are considered low risk investments, as they are backed by the full faith and credit of the government. They also provide regular income to investors, as they pay interest semi-annually. For Sheldon, who has a low risk profile and an investment objective of receiving regular income, 3% Government of Canada Bonds at par would be an appropriate investment recommendation, as they would match his time horizon of 5 years and provide him with a stable and predictable income stream. The other options are not suitable for Sheldon, as they involve higher risk, volatility, or complexity.
References = Canadian Investment Funds Course, Unit 5: Types of Investments, Lesson 2: Fixed Income Securities, Section 5.2.1: Government Bonds1; CIFC prepkit, Chapter 5: Types of Investments, Question 5.2.1
2

by Lester at Oct 10, 2024, 05:34 AM

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