Free IFC Practice Test Questions 2026

Exchange traded funds (ETFs) that track an index and index mutual funds have many similarities. However, what is a major difference between these two products?

A. While ETFs are prone to tracking errors, index funds are perfectly aligned with their underlying index.

B. ETFs can be purchased continuously throughout the trading day while index funds can only be bought or sold at the end of the day.

C. The market price of ETFs always matches the underlying basket of securities while there can be a discrepancy in pricing index funds.

D. ETFs do not have management fees since they are exchange traded while index funds do incur such fees.

Which statement about market risk is true?

A. Market risk is measured by the standard deviation

B. Market risk is cancelled out by diversification

C. Market risk is greater than the sum of the risks of all stocks

D. Market risk can result from changes in inflation and interest rates

What action does an investor take when making a long margin purchase of common shares at market?

A. The investor buys common shares using entirely their own funds at the current price available

B. The investor places an order to buy when the price of common shares reaches or drops below a specified level

C. The investor buys common shares using borrowed funds at the current price available

D. The investor borrows common shares and then sells them in anticipation of a decline in the price of the common shares

A married couple is opening a spousal RRSP account in the name of the wife. The dealing representative gathers the information required on the NAAF, including the wife’s name, social insurance number, permanent address, and investment objectives. The representative also gathers KYC information for both and informs them that leveraging is not permitted with respect to RRSP accounts. Which information was not required?

A. Disclaimer with respect to leveraging

B. Wife’s KYC information

C. Wife’s social insurance number

D. Husband’s KYC information

You are meeting a potential client, William, for the first time. He is a high net worth individual and you are keen to get his business. Which of the following would you consider the most important to create an impressive first impression on your potential client?

A. your body language

B. volume of your voice

C. your words

D. tone of your voice

Which of the following statements about nominee name accounts is TRUE?

A. The dealer is the registered owner of the account and holds funds in trust for the client.

B. Discretionary trading on a client's account, without specific instructions, is permitted.

C. Holding accounts in nominee name means the client no longer needs to provide any trading instructions.

D. A Limited Trading Authorization (LTA) is necessary since the dealer, and not the client, is the registered owner of the mutual funds

An unlicensed person was hired at a securities administrator, and they accepted their first case, which may result in suspending a registrant's license. The new hire immediately requests a subpoena of witnesses (and evidence) and requests guidance from the FATF. What error did the new hire likely commit?

A. Requesting legally binding documentation

B. Proceeding on a case without proper registration

C. Engaging an unrelated inter-governmental department

D. Investigating a licensing violation case

What is an example of an indirect investment?

A. A couple purchases their first home.

B. A couple purchases a corporate bond.

C. A couple pays their granddaughter's tuition.

D. A couple uses their savings to start a business

The Canadian Investor Protection Fund provides what amount of maximum protection for eligible customer losses due to a dealer member’s insolvency?

A. $250,000

B. $100,000

C. $500,000

D. $1,000,000

Using historical market data, which investment strategy's purchasing power is least susceptible to inflation risk?

A. A diversified portfolio of equities

B. Laddered GIC strategy with maximum maturities of five years

C. Mixed-maturity Government of Canada bond portfolio

D. Balanced allocation of equities and corporate bonds

Which of the following is a rationale for a portfolio manager to use a passive portfolio management strategy?

A. The manager does not believe in using benchmarks

B. The manager wishes to create c apital gains in the mutual fund by frequently buying and selling stocks

C. The manager believes he or she can outperform the market with his or her stock picking skills.

D. The manager believes that as the markets are fairly priced, it would be futile to look for mis-priced securities.

Felipe is a Dealing Representative who is developing a non-registered investment solution for Laryssa. Felipe is debating between recommending either mutual fund trusts or mutual fund corporations. He wants to recommend an investment that reduces Laryssa's exposure to taxation. Which feature may influence his recommendation?

A. Distributions from mutual fund corporations are not taxable to investors.

B. Mutual fund trusts can only distribute capital gains and Canadian dividends

C. Capital losses may be distributed from mutual fund corporations

D. Any income received by a mutual fund corporation is distributed in the form of either capital gains or Canadian dividends