Question 1

When reviewing a company's balance sheets, what ratio best determines whether their borrowing is excessive?

Options :

A : The cash flow from operations / total debt ratio.

B : The debt / equity ratio.

C : The interest coverage ratio.

D : The price / earnings ratio.

Answer: B

Question 2

Cristina wants to add a mutual fund to her portfolio offering dividend income. She is considering either apreferred dividend fund or a standard equity fund. What is an important difference for Cristina to considerwhen comparing these two types of funds?

Options :

A : The standard equity fund would track an index and have less volatility.

B : A preferred dividend fund takes a more passive approach to investing.

C : The standard equity funds are willing to put capital at substantially greater risk.

D : A preferred dividend fund would offer more opportunity for capital gains and appreciation.

Answer: C

Question 3

Pierre buys a call option on a stock. What is the implication of this transaction?

Options :

A : Pierre has the right to buy the stock if he exercises the option.

B : Pierre is obligated to sell the stock if the option is exercised.

C : Pierre has the right to sell the stock if he exercises the option.

D : Pierre is obligated to buy the stock if the option is exercised.

Answer: A

Question 4

When selecting an investment to add to a portfolio, what feature would reduce the overall risk?

Options :

A : High standard deviation

B : High beta

C : Low variance

D : Low alpha

Answer: C

Question 5

Ken is a member of his employer’s Defined Benefit Pension Plan (DBPP). Which of the following statementsabout Ken’s plan is CORRECT?

Options :

A : Contributions to the plan do not result in a Pension Adjustment (PA) for Ken.

B : The amount Ken receives in retirement depends on the performance of the investments he has selectedwithin the plan.

C : The amount that Ken will receive at retirement is not guaranteed.

D : Income received from the plan is eligible for pension income splitting even if Ken retires before 65.

Answer: D