CSI Updated IFC Exam Questions and Answers by valentino

Systematic risk (market risk) affects the entire market or asset class, and cannot be diversified away. A downturn in Canadian equities impacts all Canadian stocks, making it a systematic risk.

Unique risk (A) is company-specific and can be diversified away.

Currency risk (B) arises from exchange rate fluctuations, not applicable here.

Default risk (C) applies to debt issuers failing to meet obligations, not equities.

Financial circumstances are a critical component of the Know Your Client (KYC) process, as they determine the client’s ability to commit savings to investments and the level of risk they can assume. Mortgage documents provide insights into the client’s debt and obligations, which are essential for assessing financial circumstances. The feedback from the document states:

"Financial circumstances are an important consideration in judging the suitability of investments, because they determine the amount of savings clients can commit to investing and the level of risk they can assume. Marc’s client’s mortgage document will give Marc valuable insights into the level of debt and mortgage obligations his client has, helping in evaluating the client’s financial circumstances."

One of the main reasons for holding bonds in a mutual fund portfolio is to generate regular interest income, which can be distributed to the investors as cash or reinvested in more units of the fund. Bonds are debt securities that pay a fixed or variable rate of interest, called the coupon, to the bondholders until the maturity date, when the principal amount is repaid. The interest income from bonds can provide a steady source of cash flow for the fund and its investors, especially in low-interest-rate environments or when other sources of income, such as dividends or capital gains, are scarce or uncertain