Which statement best describes key differences between dividend funds and standard equity funds?
A.
Standard equity funds cannot invest in preferred shares
B.
Standard equity funds’ objectives do not include capital preservation
C.
Standard equity funds’ objectives do not include current dividend income
D.
Standard equity funds’ objectives are based on a belief in market efficiency
The Answer Is:
B
This question includes an explanation.
Explanation:
Standard equity funds focus on capital gains and may include dividend income, but unlike dividend funds, they do not prioritize capital preservation. The feedback from the document states:
"A standard equity fund seeks to earn some combination of dividend income and capital gains from investment in Canadian common stocks. This objective appears to be similar to that of a preferred dividend fund. The difference between the two is that an equity fund usually has a much stronger capital gains focus. Note as well that equity funds make no specific attempt to preserve capital; in other words, equity funds are willing to put capital at substantially greater risk than preferred dividend funds."
[Reference: Chapter 12 – Riskier Mutual Fund ProductsLearning Domain: Analysis of Mutual Funds, , , ]
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