Canadian Securities Course CSC1 Reddit Questions

Sinking fundsrequire the issuer to redeem a specified portion of the bond issue at regular intervals. This ensures systematic debt reduction and is mandated regardless of market conditions.

Purchase funds, however, allow the issuer to buy back bonds only if they are available in the market at or below a stipulated price, making redemption conditional on market conditions.

B. Sinking funds can redeem bonds only if they trade below a stipulated price: This applies to purchase funds, not sinking funds.

C. Sinking funds involve the issuer determining when bonds are redeemed while purchase funds involve the investor determining when the bonds are redeemed: Investors have no role in determining bond redemption under either method.

D. Sinking funds can redeem the bonds any time while purchase funds follow a prearranged schedule: Sinking funds follow a schedule, and purchase funds rely on market conditions.

TheCanadian Investment Regulatory Organization (CIRO)is responsible for overseeing trading and market-related activities of participants on Canadian equity marketplaces. CIRO conducts surveillance to ensure compliance with rules, regulations, and fair market practices.

Other options:

OBSI (Ombudsman for Banking Services and Investments): Handles disputes between financial institutions and their clients but does not conduct trading surveillance.

OSFI (Office of the Superintendent of Financial Institutions): Regulates and supervises federally regulated financial institutions, focusing on their solvency.

CSA (Canadian Securities Administrators): Coordinates securities regulation across Canada but does not directly monitor trading activities.

References:

Volume 1, Chapter 3:The Canadian Regulatory Environment, section on "Market Surveillance and Trading Oversight" explains CIRO's role​.

Dividends are taxed at a preferential rate in Canada due to thedividend tax credit, which reduces the effective tax rate on dividend income. This is intended to prevent double taxation because corporations have already paid taxes on their profits before distributing dividends to shareholders.

B. Dividends from preferred shares are ineligible for the dividend tax credit: This is incorrect; dividends from both common and preferred shares are eligible for the dividend tax credit.

C. Stock dividends are treated differently than regular cash dividends for tax purposes: Stock dividends are generally taxed similarly to cash dividends.

D. Reinvested dividends are non-taxable to the shareholders: Reinvested dividends are taxable in the year they are earned, even if reinvested.

The expectations theory assumes that the yield on a long-term bond reflects the expected future short-term interest rates. According to this theory, investors are indifferent to holding a single long-term bond or a series of short-term bonds that collectively match the duration of the long-term bond, as the total interest earned should be the same.

Study Document References:

Volume 1, Chapter 7:Term Structure of Interest Rates and Yield Curve Theories, including the expectations theory and its assumptions​​.