Chapter 3: Mutual Funds
1. A little less than three years ago Patricia bought $2,000 worth of Maple Leaf Resource Fund. T he fund has since performed poorly. S he feels she has been patient enough and wants to redeem all of her units. S he purchased the fund on a deferred sales charge basis. The DS C schedule starts with a 5% commission if the funds are redeemed in the first year which is reduced by 1% each year thereafter. If redeemed after the 5th year the commission is 0% . T he DS C fee is based upon the original NAV PS at the time of purchase. When Patricia bought the Maple Leaf Resource Fund, the NAVPS was $10 per share and is currently priced at $6.75 per share. How much will she receive?
Chapter 6: Pensions, Registered Accounts and Other Investments
2. In 2012, John earned $45,000 as a computer technician. He received rental income of $7,000, rental expenses were $2,000. H e also received $6,000 in dividends from his Bell Canada preferred shares. John is a member of the companies defined contribution pension plan and contributes 5% of his salary which is matched by his employer? What is his eligible RRSP contribution room for 2013, assuming no carry-forward room.
1. a) `$1,290.00
Redemption amount = NAVPS – back-end sales charge
= $6.75 – (original NAVPS × sales charge %)
= $6.75 – ($10 × 0.03)
= $6.75 – $0.30
= $6.45 × 200 units*
* she originally purchased 200 units ($2000 ÷ 10)
2. b) `$4,500
$45,000 Year 2013 salary
+ 5,000 Net rental income [ $7,000 – $2,000 ]
= $50,000 Earned income for 2012 RRSP purposes × 18% = $9,000
John can contribute $9,000 or $22,970 whichever is less minus the pension adjustment (PA).
Pension adjustment (PA) is contribution by employer + employee to the plan in the previous year (2012)
$45,000 × (5% + 5%) = $4,500 PA
$9,000 – $4,500 = $4,500 RRSP room for the year 2012
For more Mutual Funds questions check out our Mutual Funds Quiz Book.
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