Free CSC1 Practice Test Questions 2026

Answer Option (Which option is correct) A. Crowdfunding.
Explanation:

An eligible early-stage company can use crowdfunding to seek small investments from many contributors through an online platform. This can raise funds and increase public awareness. Eligibility and offering limits depend on the chosen securities exemption or prospectus route. A funding campaign must still comply with the rules; broad exposure does not guarantee successful financing.

Why the other options are incorrect:

B. Escrowing shares:
Escrow restricts the release or transfer of shares; it does not itself raise new capital. An eligible early-stage company can use crowdfunding to seek small investments from many contributors through an online platform. This can raise funds and increase public awareness.

C. Offering a greenshoe option:
A greenshoe is an overallotment mechanism associated with an underwritten offering, not an independent early-stage funding channel. An eligible early-stage company can use crowdfunding to seek small investments from many contributors through an online platform. This can raise funds and increase public awareness.

D. Filing disclosure documents on SEDAR+:
SEDAR+ filing is a disclosure mechanism, rather than a source of investor funds. An eligible early-stage company can use crowdfunding to seek small investments from many contributors through an online platform. This can raise funds and increase public awareness.

References:

OSC - Start-up Crowdfunding Guide: Explains crowdfunding as contributions from many investors; the historical guide is conceptual background rather than a current eligibility checklist.

TMX - Capital Pool Company Program: Explains the CPC go-public structure, distinct from crowdfunding.

Answer Option (Which option is correct) A. Right of rescission
Explanation:

Rescission is a statutory remedy that can allow an eligible purchaser to unwind a securities purchase when the prospectus contains a misrepresentation. It is distinct from seeking monetary damages while keeping the investment. Available defendants, conditions, and limitation periods depend on the applicable securities legislation. A misleading prospectus is the key trigger in this question.

Why the other options are incorrect:

B. Right of action for damages:
Damages compensate for loss; they do not themselves cancel the purchase contract. Rescission is a statutory remedy that can allow an eligible purchaser to unwind a securities purchase when the prospectus contains a misrepresentation. It is distinct from seeking monetary damages while keeping the investment.

C. Right of amended prospectus delivery:
Delivery of an amended prospectus is not the named cancellation remedy for a misrepresentation. Rescission is a statutory remedy that can allow an eligible purchaser to unwind a securities purchase when the prospectus contains a misrepresentation. It is distinct from seeking monetary damages while keeping the investment.

D. Right of withdrawal:
Withdrawal is a separate time-limited right linked to prospectus delivery, without necessarily requiring misrepresentation. Rescission is a statutory remedy that can allow an eligible purchaser to unwind a securities purchase when the prospectus contains a misrepresentation. It is distinct from seeking monetary damages while keeping the investment.

References:

Ontario - Securities Act, Prospectus Misrepresentation: Section 130 describes statutory damages and rescission remedies for prospectus misrepresentation.

Answer Option (Which option is correct) C. Independent arbitration.
Explanation:

Arbitration provides an independent hearing followed by a legally binding decision about compensation. The arbitrator considers the investor and dealer's evidence under the applicable process. OBSI is another valid route for unresolved complaints, but its recommendation differs from the binding arbitration award specifically requested here. CIRO itself does not order compensation merely because an investor reports dissatisfaction.

Why the other options are incorrect:

A. Rescission of the disputed trades:
Requesting reversal of trades is not an independent adjudication procedure and may not be an available remedy. Arbitration provides an independent hearing followed by a legally binding decision about compensation. The arbitrator considers the investor and dealer's evidence under the applicable process.

B. A payment from the Canadian Investor Protection Fund:
CIPF protects eligible missing client property following member insolvency, not ordinary disputes over advice or transactions. Arbitration provides an independent hearing followed by a legally binding decision about compensation. The arbitrator considers the investor and dealer's evidence under the applicable process.

D. An investigation by the Ombudsman for Banking Services and Investments:
OBSI can investigate and recommend compensation, but that differs from the binding arbitration decision specified in the question. Arbitration provides an independent hearing followed by a legally binding decision about compensation. The arbitrator considers the investor and dealer's evidence under the applicable process.

References:

CIRO - Seeking Financial Compensation: Distinguishes OBSI complaint review, arbitration, and other compensation routes.

Answer Option (Which option is correct) C. Support the construction of bond index funds.
Explanation:

A bond index can serve as the benchmark for a bond index fund or ETF. The fund seeks exposure to the eligible bond universe and attempts to track the index's performance, subject to fees, trading costs, and tracking differences. Indexes also help compare portfolio returns. An index is a measurement framework rather than a security that an investor buys directly.

Why the other options are incorrect:

A. Provide liquidity for debt issuers:
An index does not itself lend funds to issuers or provide trading liquidity. A bond index can serve as the benchmark for a bond index fund or ETF. The fund seeks exposure to the eligible bond universe and attempts to track the index's performance, subject to fees, trading costs, and tracking differences.

B. Provide an investment that can be purchased directly:
Investors buy funds or other products linked to an index, rather than the index itself. A bond index can serve as the benchmark for a bond index fund or ETF. The fund seeks exposure to the eligible bond universe and attempts to track the index's performance, subject to fees, trading costs, and tracking differences.

D. Assess the credit risk of individual bonds:
Individual issuer credit assessment is performed using credit analysis; an index summarizes a group of securities. A bond index can serve as the benchmark for a bond index fund or ETF. The fund seeks exposure to the eligible bond universe and attempts to track the index's performance, subject to fees, trading costs, and tracking differences.

References:

FTSE Russell - Canada Universe Bond Index Factsheet: Describes the index's government and corporate coverage, maturity eligibility, and market-value weighting; the linked factsheet is historical.

OSC Investor Education - ETFs: Explains funds holding collections of investments and trading on an exchange.

Answer Option (Which option is correct) D. Through spreads between purchase and sale prices.
Explanation:

A principal dealer trades for its own account and may sell securities from inventory or buy securities into inventory. Its gross trading revenue can arise from the difference between its purchase and sale prices. Inventory risk and expenses can reduce or eliminate the profit. Agency transactions, in contrast, commonly generate commissions for arranging client trades.

Why the other options are incorrect:

A. Through commissions:
Commissions are the usual textbook revenue source for agency execution. A principal dealer trades for its own account and may sell securities from inventory or buy securities into inventory. Its gross trading revenue can arise from the difference between its purchase and sale prices.

B. Through transfer fees:
Transfer fees are charges for processing transfers and related services. They do not describe the dealer's revenue from buying and selling its own inventory. In a principal transaction, the relevant revenue source is the trading spread.

C. Through brokerage charges:
Brokerage charges describe service fees more naturally than the inventory trading spread being tested. A principal dealer trades for its own account and may sell securities from inventory or buy securities into inventory. Its gross trading revenue can arise from the difference between its purchase and sale prices.

References:

SEC Investor Education - Executing an Order: Explains execution through market makers and a firm's own inventory.

Answer Option (Which option is correct) B. Investment banker
Explanation:

Investment bankers help issuers design and distribute new debt securities. Their work can include evaluating financing needs, structuring maturity and coupon terms, preparing an offering with legal advisers, and arranging underwriting or placement. This is primary-market activity because the issuer receives funds from a new issue. Traders mainly deal with transactions in existing securities.

Why the other options are incorrect:

A. Trader:
A trader primarily executes or manages trading positions rather than leading new-issue structuring. Investment bankers help issuers design and distribute new debt securities. Their work can include evaluating financing needs, structuring maturity and coupon terms, preparing an offering with legal advisers, and arranging underwriting or placement.

C. Portfolio manager:
A portfolio manager selects investments for a portfolio rather than arranging the issuer's financing. Investment bankers help issuers design and distribute new debt securities. Their work can include evaluating financing needs, structuring maturity and coupon terms, preparing an offering with legal advisers, and arranging underwriting or placement.

D. Sales representative:
A sales representative distributes products to clients but is not the main new-issue structuring specialist. Investment bankers help issuers design and distribute new debt securities. Their work can include evaluating financing needs, structuring maturity and coupon terms, preparing an offering with legal advisers, and arranging underwriting or placement.

References:

TMX - Guide to Listing 2026: Explains access to public capital, listing benefits, and financing roles.

Answer Option (Which option is correct) C. $53
Explanation:

At expiration, a purchased put breaks even at its strike price minus the premium paid. Here that is $55 ? $2 = $53 per share. At $53, the put's $2 intrinsic value offsets its $2 cost. Buying five contracts changes the total dollar exposure, not the per-share break-even price. Before expiration, market value also depends on remaining time value.

Why the other options are incorrect:

A. $55:
At $55 at expiration, the put has no intrinsic value and the premium is lost. At expiration, a purchased put breaks even at its strike price minus the premium paid. Here that is $55 ? $2 = $53 per share.

B. $57:
Adding the premium gives the usual long-call break-even formula, not the long-put formula. At expiration, a purchased put breaks even at its strike price minus the premium paid. Here that is $55 ? $2 = $53 per share.

D. $63:
$63 uses the current stock price instead of the contractual $55 strike. At expiration, a purchased put breaks even at its strike price minus the premium paid. Here that is $55 ? $2 = $53 per share.

References:

Montreal Exchange - Options Strategies Guide: Explains put and call payoffs, intrinsic value, and strike-minus-premium break-even calculations.

Answer Option (Which option is correct) A. An increase in the shares' affordability.
Explanation:

A conventional stock split increases the share count and reduces the price per share proportionally, making individual shares more affordable. For example, a two-for-one split turns one $100 share into two shares worth approximately $50 each immediately after adjustment. The split alone does not increase the shareholder's total wealth or ownership percentage. Subsequent market movements may change value.

Why the other options are incorrect:

B. An increase in the shares' market price:
A conventional forward split lowers, rather than raises, the adjusted price per share. A conventional stock split increases the share count and reduces the price per share proportionally, making individual shares more affordable. For example, a two-for-one split turns one $100 share into two shares worth approximately $50 each immediately after adjustment.

C. An increase in the value of the shareholder's stake:
The larger number of shares is offset by the lower price, so the split itself does not create value. A conventional stock split increases the share count and reduces the price per share proportionally, making individual shares more affordable. For example, a two-for-one split turns one $100 share into two shares worth approximately $50 each immediately after adjustment.

D. An increase in the shareholder's proportionate ownership:
Other shareholders receive the same proportional adjustment, leaving relative ownership unchanged. A conventional stock split increases the share count and reduces the price per share proportionally, making individual shares more affordable. For example, a two-for-one split turns one $100 share into two shares worth approximately $50 each immediately after adjustment.

References:

SEC Investor Education - Stock Split: Explains proportional share-count and price adjustments and affordability.

Answer Option (Which option is correct) B. Five-year bond with four years remaining to maturity.
Explanation:

With comparable coupon rates, credit quality, and other terms, the bond with the longest remaining maturity is normally most sensitive to interest-rate changes. Option B has four years remaining, compared with two, three, and one years for the others. Its original five-year term is not the relevant comparison. Duration provides a more precise sensitivity measure when full cash-flow information is available.

Why the other options are incorrect:

A. Six-year bond with two years remaining to maturity:
Two years remaining gives lower sensitivity than the four-year bond under the stated assumptions. With comparable coupon rates, credit quality, and other terms, the bond with the longest remaining maturity is normally most sensitive to interest-rate changes. Option B has four years remaining, compared with two, three, and one years for the others.

C. Ten-year bond with three years remaining to maturity:
Its original ten-year term is misleading; only three years remain. With comparable coupon rates, credit quality, and other terms, the bond with the longest remaining maturity is normally most sensitive to interest-rate changes. Option B has four years remaining, compared with two, three, and one years for the others.

D. Seven-year bond with one year remaining to maturity:
One year remaining is the shortest maturity and usually produces the least sensitivity. With comparable coupon rates, credit quality, and other terms, the bond with the longest remaining maturity is normally most sensitive to interest-rate changes. Option B has four years remaining, compared with two, three, and one years for the others.

References:

OSC Investor Education - Factors Affecting Bond Prices: Explains interest-rate sensitivity, duration, and the inverse price-yield relationship.

Answer Option (Which option is correct) D. Warrants.
Explanation:

A warrant gives the holder a right to purchase the issuer's shares at a specified exercise price during a stated period, often several years. That longer life distinguishes warrants from ordinary subscription rights, which generally expire quickly. Warrants may be issued with other securities or distributed to shareholders. They do not require the holder to exercise them.

Why the other options are incorrect:

A. Stock options:
Stock options may give purchase rights, but the issuer-created, multi-year subscription instrument described is a warrant. A warrant gives the holder a right to purchase the issuer's shares at a specified exercise price during a stated period, often several years. That longer life distinguishes warrants from ordinary subscription rights, which generally expire quickly.

B. Long-term equity anticipation securities:
LEAPS are long-dated exchange-traded options, rather than the company's warrant issuance described. A warrant gives the holder a right to purchase the issuer's shares at a specified exercise price during a stated period, often several years. That longer life distinguishes warrants from ordinary subscription rights, which generally expire quickly.

C. Subscription rights:
Subscription rights usually have a short exercise period, rather than several years. A warrant gives the holder a right to purchase the issuer's shares at a specified exercise price during a stated period, often several years. That longer life distinguishes warrants from ordinary subscription rights, which generally expire quickly.

References:

OSC Investor Education - Rights and Warrants: Explains subscription rights, warrants, exercise terms, and expiry.

Answer Option (Which option is correct) C. In the notes to the financial statements.
Explanation:

The notes to the financial statements provide detailed information about property, plant, and equipment, including asset classes, measurement policies, depreciation, and changes in carrying amounts. The statement of financial position normally presents summarized balances. Although the annual report contains the statements and notes, the notes are the most precise location among the choices for the detailed description.

Why the other options are incorrect:

A. In the auditor's report:
The auditor's report gives an audit opinion rather than a detailed inventory of fixed assets. The notes to the financial statements provide detailed information about property, plant, and equipment, including asset classes, measurement policies, depreciation, and changes in carrying amounts. The statement of financial position normally presents summarized balances.

B. In the annual report:
The annual report is the broad document containing the notes; C identifies the specific section. The notes to the financial statements provide detailed information about property, plant, and equipment, including asset classes, measurement policies, depreciation, and changes in carrying amounts. The statement of financial position normally presents summarized balances.

D. In the statement of financial position:
The statement of financial position usually shows summarized asset balances rather than full descriptive disclosures. The notes to the financial statements provide detailed information about property, plant, and equipment, including asset classes, measurement policies, depreciation, and changes in carrying amounts. The statement of financial position normally presents summarized balances.

References:

IFRS Foundation - IAS 16: Addresses recognition, measurement, and disclosures for property, plant, and equipment.

Answer Option (Which option is correct) C. Treasury bills
Explanation:

A six-month Government of Canada security issued without periodic coupon interest is a Treasury bill. Investors normally purchase it at a discount and receive its face value at maturity; the difference is their return. Its short original maturity distinguishes it from ordinary coupon-paying government bonds. The absence of a coupon does not mean the investment produces no income.

Why the other options are incorrect:

A. Guaranteed bonds:
Guaranteed bonds are not the specific short-term federal discount instrument described. A six-month Government of Canada security issued without periodic coupon interest is a Treasury bill. Investors normally purchase it at a discount and receive its face value at maturity; the difference is their return.

B. Commercial paper:
Commercial paper is normally issued by corporations, not the Government of Canada. A six-month Government of Canada security issued without periodic coupon interest is a Treasury bill. Investors normally purchase it at a discount and receive its face value at maturity; the difference is their return.

D. Term deposits:
A term deposit is a deposit with a financial institution, rather than a marketable federal Treasury bill. A six-month Government of Canada security issued without periodic coupon interest is a Treasury bill. Investors normally purchase it at a discount and receive its face value at maturity; the difference is their return.

References:

Department of Finance - Government Market Debt Instruments: Describes Treasury bills and other federal marketable debt instruments.