Free IFC Practice Test Questions 2026

What bias results in investors valuing an asset that they own over an asset that another individual owns?

A. Representativeness

B. Endowment

C. Risk aversion

D. Status Quo

Which money market fund yield is calculated as the most recent seven-day yield?

A. Current

B. Nominal

C. Duration

D. Effective

Zofia has held units of the ABC Monthly Income fund for many years and has reinvested all distributions by purchasing additional units. During this period, she received $2,500 in reinvested dividends. She originally purchased $10,000 of fund units, and after several years, the portfolio value rose to $15,000. What is the tax consequence if Zofia decides to sell her units?

A. The capital gain will be $5,000.

B. The NAVPS will be increased by the amount of the cumulative distributions.

C. The cumulative distributions will be taxed separately as an investment dividend when she sells her units.

D. The adjusted cost base would be $12,500.

Which organization regulates mutual and investment funds?

A. Investment Industry Regulatory Organization of Canada (IIROC)

B. Securities commissions

C. ICE Futures Canada

D. Bourse de Montreal

You wish to sell a perpetual preferred share with a par value of $25.00, which pays a quarterly dividend of $0.25. If other preferred shares of similar quality are currently yielding 3.5%, what price should you expect to receive for your share?

A. $30.35

B. $25.00

C. $28.57

D. $14.29

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

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

Your client has very limited investment knowledge and is confused about what is meant by "marginal tax rate". What do you tell him?

A. It is the tax rate applied to the next dollar earned

B. It is the tax rate used in calculating taxable capital gains

C. It is an amount resulting from dividing your total tax liability by your taxable income for the year.

D. It is the number used to gross-up Canadian dividend income.

Which type of mutual fund is best suited to a client who is averse to volatility?

A. Mortgage

B. Money market

C. Bond

D. Preferred dividend

All other factors being equal, which fund outperformed the benchmark during this period? The benchmark return is 4.75%. Fund Starting NAV ($) Ending NAV ($) ABC 21.15 22.09 FED 25.37 26.61 MCQ 30.14 31.55 XYZ 31.00 31.99

A. ABC

B. MCQ

C. FED

D. XYZ

Your client, Rinaldo, wants to know more about the fees associated with his mutual funds. What can you tell him about a mutual fund’s management expense ratio (MER)?

A. Mutual funds are required to calculate the MER on a daily basis.

B. Trailer and brokerage fees are charged separately from the MER.

C. The MER reflects the percentage of each dollar of fund assets that is used to pay for management services.

D. Mutual fund performance is not impacted by the MER since rates of return are published net of fees.

Which stock would be considered the most defensive?

A. ABC Bank with a beta of 0.5

B. Unity Corp with a beta of 2.0

C. KYX Manufacturing with a beta of 1.0

D. ISS Technology with a beta of 1.5

What type of risk remains unaffected by diversification?

A. Business

B. Firm-specific

C. Non-market

D. Systematic