CSC1 Exam Dumps : Canadian Securities Course Exam 1

A foreign pay bond is a type of bond that allows the investor to choose the currency in which to receive interest payments, usually between the currency of the issuer's country and a foreign currency. This feature provides flexibility for investors who may want to manage currency risk or take advantage of fluctuations in exchange rates.

Review of Other Options:

A. Eurobonds:

Eurobonds are international bonds issued in a currency other than the currency of the country where they are issued. However, they do not provide the investor with a choice of interest payments in different currencies.

C. Subordinated Debentures:

These are unsecured bonds that rank below other debts in terms of repayment priority in case of liquidation. They do not involve currency options for interest payments.

D. Floating-Rate Securities:

These bonds have variable interest rates that adjust periodically based on a benchmark interest rate, such as LIBOR or prime rate, but they do not allow investors to choose the currency of interest payments.

Why B is Correct:

Foreign pay bonds are explicitly designed to offer investors a choice of interest payments in two currencies, making them unique among fixed-income securities. This feature provides added flexibility for investors dealing with foreign exchange considerations.

References:

Canadian Securities Course (CSC), Volume 1, Chapter 6: Fixed-Income Securities – Features and Types. Detailed explanation of foreign pay bonds and their distinguishing features​.

Discussion of bond types and their characteristics, including Eurobonds and floating-rate securities, in Chapter 6​.

Aninterest rate forward agreement (FRA)is anover-the-counter (OTC)derivative contract. Unlike exchange-traded derivatives, OTC contracts are not centrally cleared, meaning there is no intermediary to guarantee performance. This increases counterparty (default) risk, making FRAs inherently riskier than exchange-traded contracts.

A. Individual investor buying shares on an exchange during the ex-rights period: This is a standard transaction involving equity securities, not derivatives, and carries no default risk.

C. Exchange-traded equity option contract between an individual investor and a dealer: Exchange-traded derivatives are backed by a clearinghouse, which mitigates default risk.

D. Individual investor entering a futures contract with an institutional investor: Futures contracts are also exchange-traded and centrally cleared, reducing default risk.

TheEnergy sectoris one of the highest-weighted sectors in theS&P/TSX Composite Indexbased on market capitalization. This reflects Canada's resource-rich economy, where energy companies, including oil, gas, and related services, make up a significant portion of the market.

Other options:

Health care: A relatively small portion of the index.

Utilities: Have a smaller weight compared to energy.

Information technology: While growing, it has not surpassed energy in weight within the Canadian market.

References:

Volume 1, Chapter 8:Equity Securities, section on "Canadian Market Indexes" outlines the composition and sectoral weightings of the S&P/TSX Composite Index​.