CSC1 Exam Dumps - Canadian Securities Course Exam 1

At the end of the five-year term, if the issuer does not redeem the rate-reset preferred shares, the shareholder can choose to:

Continue holding the shares at the reset fixed rate.

Convert them intofloating-rate preferred shareswith rates tied to a benchmark (e.g., prime or LIBOR).

This conversion offers flexibility to the shareholder based on market conditions.

A. Exchange for a specified number of common shares: Rate-reset preferred shares do not have this feature.

B. Exchange for a fixed-rate preferred share: The fixed-rate component is reset, not exchanged.

C. Exchange for an unsecured bond: This is not a feature of rate-reset preferred shares.

The settlement date for Government of Canada bonds follows theT+1 rule, meaning settlement occursone business day after the transaction date. This rule ensures efficient clearing and settlement processes in the government bond market.

B. Same day the transaction takes place: While this applies to some instruments in rare cases (e.g., cash transactions), it is not the standard for Government of Canada bonds.

C. Two business days after the transaction (T+2): This applies to equity trades and corporate bonds but not government bonds.

D. Three business days after the transaction (T+3): This is an outdated settlement timeline.

When a security price increases in a long margin position, the equity in the margin account increases. The investor gains additional buying power and may withdraw excess margin, which represents the difference between the current equity and the margin requirement.

Option A:Incorrect; the investor would incur gains, not losses.

Option B:Incorrect; interest is charged on borrowed amounts, not excess margin.

Option C:Incorrect; additional funds are not required when equity rises.

Manyrobo-advisorsoffer a hybrid model where an automated portfolio recommendation is supplemented by human oversight. A telephone call with an advisor ensures the portfolio generated by the algorithm aligns with the client’s risk tolerance and investment objectives. This step helps meet regulatory suitability requirements.

A. The service is exclusively provided to intermediaries such as advisors and employers: Robo-advisors are directly available to retail clients and are not exclusive to intermediaries.

B. The portfolios are rarely rebalanced: Robo-advisors typically offer frequent or automatic rebalancing to maintain target asset allocations.

C. Portfolios are built primarily with individual stocks and bonds: Robo-advisors predominantly use ETFs for diversification and cost-efficiency, not individual securities.

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 which they 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.

Stock index performance is best measured usingpercentage changesrather than absolute values like point changes, relative values, or share price changes. This is because percentage changes provide a normalized measure of performance, allowing for meaningful comparisons over time or between different indexes, regardless of their starting levels or the specific units in which the index is expressed.

Comparative Analysis: Percentage changes allow investors to compare the performance of indexes with vastly different base values or compositions. For example, a 100-point movement on a low-value index might be significant, while the same point movement on a high-value index might be trivial.

Normalized Returns: They normalize the performance, enabling easier tracking of relative gains or losses over time.

International Relevance: With global markets often using indexes based on different currencies or methodologies, percentage changes standardize comparisons across markets.

A. Relative value changes: This term lacks a precise definition in the context of performance measurement and is not commonly used in evaluating index performance.

B. Point changes: While point changes are informative for intraday movements or headlines, they lack context without knowing the index's value. For example, a 50-point drop could represent 0.5% or 5%, depending on the index level.

C. Share price changes: This is specific to individual securities and does not apply to indexes, which aggregate multiple stocks.

Why Percentage Changes?Incorrect Options:Reference from the CSC® Study Material:The Canadian Securities Course explains the role of indexes in tracking market performance and highlights the importance of percentage changes for measuring and interpreting their performance. This is because percentage changes provide consistency and relevance when comparing different periods or indexes with varying base values (CSC Volume 1, Chapter 8, "Stock Indexes and Averages")​.

Key Concepts Related to Index Performance:

Market indexes represent a basket of securities designed to reflect the overall performance of a specific market or sector.

Percentage changes effectively capture market sentiment and performance trends.

Common Canadian market indexes such as the S&P/TSX Composite Index and international indexes like the S&P 500 often report movements in both points and percentages, with the latter providing a more accurate representation of market dynamics​​.

This understanding is fundamental for financial professionals analyzing market trends, investment performance, and conducting portfolio management.

References:

CSC Volume 1, Chapter 8, "Equity Securities: Common and Preferred Shares – Stock Indexes and Averages"​.

CSC Volume 1, Chapter 7, "Fixed-Income Securities: Pricing and Trading – Bond Indexes" for comparative index concepts​.

Defined contribution (DC) plans have driven the demand for cost-effective, diversified, and easily tradeable investment products like exchange-traded funds (ETFs). Unlike defined benefit plans, where the employer guarantees payouts, DC plans place the responsibility for investment decisions and risks on individuals, who increasingly opt for ETFs for their low costs and broad market exposure.

A. The rise of financial technology companies: While fintech has contributed to the growth of investment products, it is not a primary driver of ETF usage.

C. The emergence of cryptocurrency: Cryptocurrencies are separate financial products and are not directly tied to the use of ETFs.

D. The popularity of robo-advisors: Robo-advisors use ETFs extensively, but this is a result of their popularity rather than a cause of ETF growth.