CSI Updated IFC Exam Questions and Answers by emilie

A put option is a contract that gives the buyer the right, but not the obligation, to sell an underlying stock at a specified price (the strike price) within a specified time period (the expiration date). The seller of a put option is obligated to buy the stock if the buyer exercises the option. Patrick can purchase put options for the fund’s existing assets, which means he can lock in a minimum selling price for his stocks in case the market value drops below the strike price. This way, he can protect against potential losses and hedge his portfolio against market risk. References: What Is a Put Option and How to Use It With Example - Investopedia, How to Hedge With Stock Index Futures - Investopedia

Interest rate risk is the primary risk for fixed-income securities, as their value decreases when interest rates rise due to fixed cash flows. The feedback from the document states:

"Interest rate risk is the fundamental risk factor for fixed-income securities such as bonds, mortgages and preferred shares. As interest rates move up, the value of a fixed-income security falls. This is because the cash flow from the fixed-income security is fixed."

Contractionary monetary policy is used when the economy is overheating or facing inflationary pressure.

The Bank of Canada increases interest rates, which leads to reduced borrowing and lending.

This action decreases the money supply in circulation and reduces the availability of credit to consumers and businesses.

Therefore, the correct effect of contractionary monetary policy is that it reduces both money supply and credit in the economy.

Dustin needs to ensure that his recommendation is suitable for the new joint account, which may have a different risk profile than the individual accounts of Salvatore and Harriet. A joint account is an account that is owned by two or more people who share the rights and responsibilities of the account. A joint account may have different investment objectives, time horizon, risk tolerance, and financial situation than the individual accounts of the joint owners. Therefore, Dustin needs to conduct a know your client (KYC) process for the joint account and determine the appropriate risk profile for the account, based on the collective responses of Salvatore and Harriet. The risk profile of the joint account will guide Dustin in recommending suitable investment products and services that match the goals and needs of the joint owners