- $8,000
- $11,180
- $11,540
- $11,720

Solution: When calculating Larry’s unused contribution room, we begin with $10,000 (which is the carry-forward room from 2017), and then add $9,720 (which is 18% of $54,000 ($53,000 + $1,000)). We arrive at $19,720. We then subtract Larry’s RSP contribution of $2,000 and his PA of $6,000. The calculation is $19,720 - $8,000 = $11,720. Larry’s net rental income of $1,000 will count towards earned income for purposes of computing RSP contribution room. The correct answer is d.

]]>- Glen who received a non-qualifying dividend from a private corporation
- Helen who received a qualifying dividend inside of her RSP
- Isabelle who received a capital dividend
- All will report the same amount of income

Solution: Glen received a non-qualifying dividend which means that it does not qualify for the higher dividend tax credit. On a Federal level only, he will need to gross up the $10,000 he received to $11,500. Helen received a qualifying dividend inside of her RSP which means that she does not have to report this as income. Had the amount been received in a non-registered account, it would have been grossed up to $13,800. Isabelle received a capital dividend which is not subject to tax. The correct answer is a.

- Edgar who deposited $10,000 at the beginning of the period and saw his money grow at a rate of 5% per year (compounded annually).
- Francis who made annual contributions of $2,000 at the beginning of each year and saw her money grow at a rate of 7% (compounded annually).
- Grant who made monthly deposits of $165 at the end of each month and received an 8% rate of return (compounded monthly).
- All will have the same amount at the end of 5 years.

Of the following who has the potential for an unlimited loss?

- Walter who purchased a put option
- Xander who sold one call option of ABC Inc against the 100 shares of ABC Inc that he owns
- Zoey who sold an in-the-money LEAP call option
- None of the above can experience an unlimited loss

- EI Maternity Benefits are available for a period of no more than 15 weeks
- Regular EI Parental Benefits are available for a period of no more than 35 weeks (between both parents)
- Extended EI Parental Benefits are available for a period of no more than 61 weeks (between both parents)
- All of the above are correct

- 12.4%
- 13.0%
- 13.4%
- 15.0%

Solution: The market risk premium is the difference between what the market is expected to return and the risk-free rate of return. We multiply this number by the beta and then add the risk-free rate of return: (1.3 x 8%) + 2% = 12.4%. The correct answer is a.

CAPM: E(r) = Rf + [E(rm) – Rf] where E(r) is the expected return, Rf is the risk-free rate of return, and E(rm) is the expected return of the market.

[E(rm) – Rf] is the market risk premium.]]>- $916 and $1,000
- $928 and $928
- $928 and $1,000
- $1,000 and $928

Solution: As Grant decides to take his CPP retirement benefits one year early, the reduction he will experience is over the rest of his life instead of just over the next year. The correct answer cannot be a, c, or d as the answers all have $1,000 in them. The reduction is calculated as 0.6% for each month he takes the benefit early. Grant will receive a monthly benefit of:

(1 – (12 x 0.006)) x $1,000 = $928

The correct answer is b.

]]>- Increasing the overnight rate
- Increasing special purchase and resale agreements
- Decreasing income tax rates
- Both b and c

- $5,000
- $7,000
- $12,000
- $17,000

- Both will receive $1,000
- Both will receive $2,500
- Mary will receive $2,500 and Chester will receive $1,000
- Mary will receive $3,500 and Chester will receive $2,000

Solution: The grant amounts for Mary and Chester will be different as Mary makes less than the threshold of $95,259 while Chester makes more. Mary will receive grant in the amount of $3 for each $1 contributed (on the first $500) and $2 for each $1 contributed (on the next $1,000). She will receive (500 x $3) + ($500 x $2) = $2,500. Chester will receive $1 for each $1 contributed on the first $1,000 and nothing afterwards. Chester will receive $1,000 in total. The answer is c.

Note: the threshold of $95,259 (for 2019) is adjusted annually for inflation.

]]>- Andrew who turns 18 years old on December 30
^{th}of this year and whose parents have made annual contributions of $2,000 for him each year. - Brenda who turned 16 years old this year and whose parents made two contributions of $5,000 for her when she was 5 years old and 10 years old. A total of $9,000 was withdrawn when she was 12 years old.
- Charlie who turned 17 years old this year and whose parents made annual contributions of $200 for him in each of the past 5 years.
- Denise who will turn 16 years old in December of this year and whose parents already made a $2,000 contribution for her in January of this year. This is her first RESP contribution.

Solution: Andrew will not receive CESG grant during this calendar year as he turns 18 this year. Brenda and Denise do not meet the conditions of either having made $2,000 in contributions (and not withdrawn) or $100 in contributions each year for the 4 years leading up to the calendar year in which the beneficiary turns 16 years old. Neither will receive CESG grant. The correct answer is c.

]]>- A single annuity in Muriel’s name
- A single annuity in Arma’s name
- A joint first-to-die annuity
- A joint last-to-die annuity

Solution: as a joint first-to-die annuity would stop paying out when either Muriel or Arma pass away, this would be the annuity with the highest annual payout. It is expected to have the shortest lifespan. The lowest would be the joint last-to-die annuity as it requires the death of both Muriel and Arma in order to stop paying out. The correct answer is c.

]]>- Single ownership with an up-to-date Will naming Noemi as the recipient of the cottage
- Joint tenancy
- Tenants in common
- Either joint tenancy or tenants in common

Solution: The main learning concept is the joint tenancy vs tenants in common concept. When a property is owned in joint tenancy, the share ownership of the first person (when they pass away) transfers to the other owner. In this case when Harry passes away his share would go to Noemi. When two or more individuals own a property tenants in common, their ownership passes onto their heirs (usually specified in a Will) and not to the other owners of the asset. The answer is b.

]]>- $1,000
- $8,400
- $9,000
- $9,600

the pension adjustment (PA) is calculated as:

(9 x future annual benefit) – 600 which in this case equates to $8,400

The future annual benefit is 2% x $50,000 = $1,000. The answer is b.

]]>- If there are multiple steps to achieve the change.
- If Kile maintains the same circle of friends but does not share his desire to change with them.
- If Kile is told that change is required by an expert such as a financial planner (rather than if he perceived the need for change himself).
- If change can be accomplished quickly or easily.

The characteristics that make change easier to accomplish (and stick with) are: it is simple (fewer steps), there is gratification over the short term (instead of long-term), the person has support or a coach to encourage them, and if there is a plan in place to follow.

What makes change difficult is if it is painful or forced.

For change to be successful it must be brought on from the person wanting to make the change – motivation. The correct answer is d.

]]>- $1,200 rent
- $400 car payment
- $150 car insurance
- $200 in other debt repayments

When talking to a mortgage expert, Tom becomes aware of the 32% and 40% thresholds for debt service ratios. He wants to know how much of a monthly mortgage payment he will be able to afford. According to the gross debt service (GDS) ratio what is the maximum monthly mortgage payment that Tom can afford?

- $990
- $1,350
- $1,470
- $1,950

As the GDS does not include other debt repayments, the maximum that the mortgage payment, property taxes, heat, and 50% of condo fees can equate to is 32% of gross monthly income. 32% of (72,000/12) is $1,920.

As his expenses are expected to total: 100 + 150 + 0.5 (400) = 450, Tom is able to afford a monthly mortgage payment of 1,920 – 450 = 1,470. The correct answer is c.

- $720
- $1,080
- $1,440
- $2,160

The correct answer is a. The amount of the stand-by charge (for leased vehicles) is calculated as 2/3 of the monthly lease cost (including taxes). In Michelle’s case, 2/3 of $600 is $400. Although the answer would seem to be 6 x $400 = $2,400, this is not correct. As Michelle drove the car for business purposes more than 50% of the time and her personal kilometres totalled less than 1,667 per month, she can reduce the stand-by charge by [3,000/(6 x 1,667)].

$2,400 x [3,000/(6 x 1,667)] = $719.86

Which of the following statements is correct?

- At the end of the year Jonathan will have a capital loss of $16,800 to carry forward.
- At the end of the year Jonathan will have neither a capital loss nor a capital gain to report as they cancel each other out.
- Jonathan will report a taxable capital gain of $500.
- Jonathan will report a capital gain of $800.

In order to get this question correct it is imperative to identify the different categories of assets and the characteristics of each category. The rare manuscript (sold at a loss) falls into the listed personal property (LPP) category whereas the cars fall into the personal use property (PUP) category. Losses incurred in the LPP category cannot be used to offset gains in any other category whereas all losses in the PUP category are disallowed. The loss from the shares which fall into “other capital property” can be used to offset gains in any category.

- Shares: loss of $4,000
- Antique car: gain of $5,000
- Daily use vehicle: loss is disallowed
- Shares: loss of $4,000 (which can be applied to other gains)
- Rare manuscript: the loss of $200 can only be used if a gain is made on other LPP assets within the next 7 years (or the 3 previous years).

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