Canadian Securities Course (CSC) Level 2 Practice Exam

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Prepare for the Canadian Securities Course Level 2 Exam with our comprehensive quiz. Assess your knowledge with multiple choice questions designed to test your understanding of the Canadian securities industry. Get the insights you need to achieve success!

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Which type of fund typically consists of 90% non-cash assets in equities, emphasizes capital growth through common shares, and comes with market risk?

Commodity funds
Equity funds
Specialty funds
Target date funds

The correct answer is: Equity funds

The correct answer is that equity funds are designed to hold a significant portion of their assets, typically around 90%, in non-cash assets such as common shares of companies. This focus on equities allows these funds to emphasize capital growth, as they invest in stocks with the potential for appreciation over time. However, this aggressive investment in equities also exposes equity funds to market risk, meaning the value of the investments can fluctuate based on market conditions. Commodity funds, while focused on physical goods like metals or agricultural products, do not primarily invest in equities and are subject to different market dynamics. Specialty funds target specific sectors or strategies rather than broadly investing in equities. Target date funds, on the other hand, adjust their asset allocation as the target date approaches, often including a mix of equities and fixed-income assets, which may not align with the emphasis on capital growth through a high equity concentration. Therefore, the characteristics of equity funds, with their strong focus on capital growth through non-cash assets in equities, clearly make them the correct choice.