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NEW QUESTION # 81
Which of the following best describes how a target date fund works?
Answer: D
Explanation:
Explanation
This is because a target date fund is designed to reduce the risk and volatility of the portfolio as the investor gets closer to their retirement or other savings goal. Equities tend to have higher returns but also higher risk than fixed income, so a target date fund gradually reduces the exposure to equities and increases the exposure to fixed income over time. This way, the investor can benefit from the growth potential of equities in the early years and preserve their capital with the stability of fixed income in the later years.
NEW QUESTION # 82
Dakota is a Dealing Representative with Harvest Wealth Inc., a mutual fund dealer. Dakota starts a marketing campaign to contact prospective new clients and increase sales with existing clients. Which of the following CORRECTLY describes activities that Dakota can engage in under her marketing campaign?
Answer: A
NEW QUESTION # 83
What areas are addressed in the Client Relationship Model (CRM) regulation?
Answer: A
NEW QUESTION # 84
Iliana owns 1,000 participating preferred shares in the First Canadian Bank. Which of the following features are characteristic of her investment?
Answer: B
NEW QUESTION # 85
Justin and Yvonne both open a Registered Education Savings Plan (RESP) for their daughter Grace. They plan to regularly contribute $1,000 per year until Grace reaches the age of 17.
Which of the following statements relating to RESP is CORRECT?
Answer: D
Explanation:
Explanation
A Registered Education Savings Plan (RESP) is a tax-advantaged savings plan that helps parents and family members save for a child's post-secondary education. The government also contributes to the plan through the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB), depending on the family income and the amount of contributions. However, there are some rules and limits that apply to RESP contributions and government grants. One of them is the lifetime contribution limit, which is the maximum amount that can be contributed to an RESP for a beneficiary from all sources. The lifetime contribution limit is
$50,000 per beneficiary, regardless of how many RESPs are opened for them or who contributes to them.
Therefore, statement A is correct. Justin and Yvonne may contribute a combined lifetime maximum of
$50,000 for Grace to their RESP.
The other statements are incorrect for the following reasons:
Statement B: RESPs are not tax-free investment plans. They are tax-deferred plans, meaning that the contributions are made with after-tax dollars and the investment income earned in the plan is not taxed until it is withdrawn as an educational assistance payment (EAP) for the beneficiary. The EAPs are taxed in the hands of the beneficiary, who usually has little or no income and pays little or no tax.
Statement C: There is no annual contribution limit for RESP contributions. However, there is an annual limit for the CESG, which is 20% of the first $2,500 contributed per beneficiary per year, up to a maximum of $500 per year. The CESG also has a lifetime limit of $7,200 per beneficiary.
Statement D: Contributions made to an RESP are not eligible for a tax deduction in the year they are contributed. They are made with after-tax dollars and do not reduce the contributor's taxable income.
References: Canadian Investment Funds Course, Unit 9, Section 9.1
NEW QUESTION # 86
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