Chapter 19 CSC

Which of the following products can be sold on margin

• ETF
• Bond Mutual Fund
• Equity mutual fund
• Balanced Mutual Fund

Harry who is a dealer is selling an ETF to his client, he has to give the ETF fund fact to his client

• Before the sale
• Within two days of the sale
• At the moment of sale
• Within 5 business days after the sale

ETFs are created or redeemed in standard units known as

• The prescribed number of units
• Odd lot units
• Contract
• A constant number of units

A special feature of ETF as compared to Mutual fund is

• In-kind exchange
• Management expense ratio
• Tracking error
• Trailer commission

Designated brokers of ETFs generally make the majority of their money by

• Bid / ask spreads on units
• Management fees
• Front end loads
• Back end load

Which of the following will keep the tracking error down by keeping the difference between NAV and unit value minimum

• Arbitrage
• Small bid/ask spread
• Low front end load
• Low back end load

Harry who is a registered dealer is looking at an ETF based on TSX 60, shares of ETF is trading at $60 while the basket of securities is trading at $65 to make a profit he would most likely

• Buy shares of ETF from the market, convert them for a basket of shares and then sell the basket of shares
• Buy the basket of shares exchange them for ETF shares and then sell them on the open market
• Trade at the bid-ask spread
• Trade ETFs in the different market as it is trading at $60, less than its NAV of $65

Harry who is a registered dealer is looking at an ETF based on TSX 60, shares of ETF is trading at $60 while the basket of securities is trading at $65 to make a profit he would most likely

• Buy the basket of shares exchange them for ETF shares and then sell them on the open market
• Buy shares of ETF from the market, convert them for a basket of shares and then sell the basket of shares
• Trade at the bid-ask spread
• Trade ETFs in the different market as it is trading at $60, less than its NAV of $65

Which of the following would most likely have the lowest cost

• ETF
• Bond Mutual Fund
• Equity mutual fund
• Balanced Mutual Fund

Which of the following events in case of ETF would not trigger a capital gain event

• An in-kind redemption
• ETF manager sells certain stocks at a profit
• Harry who is the shareholder of an ETF sells his units for profit
• ETF creates a reinvested phantom distribution