Dec 5, 2012
Question #1 (8 Marks) 1. According to the results I have a medium tolerance for risk, which is very accurate. Most
of the time I’m very thorough with business decisions, evaluating all the pros and cons
of the situation, and looking at it from an analytical and objective point of view.
However, there are other, fewer, business decisions where I usually find myself
emotionally invested on the project or cause and therefore decide to take a risk of what
would be “not a safe bet”.
2. As I stated above, I believe I have medium tolerance when investing, since sometimes I
lean to toward companies/projects/causes that are not well established in the business
market. Due to this, my investment portfolio would be composed of:
50% Balanced Mutual Funds
20% Real Estate
3. Since risk averse investors usually go for government bonds or income mutual funds.
Two disadvantages of being risk averse would be:
Low to zero possibilities for high returns. Low interest.
High risk that if the company that issued the bond declares bankruptcy the
bonds won’t be paid out.
4. Since high risk investor usually go for stocks and equity mutual funds, some of the
disadvantages of being a high risk investor are:
High chance of losing all or most of your investment. Higher levels of anxiety.
Harder to generate a consistent income Question #2 (18 marks)
1. The three mutual fund of the RBC Fund Family-Series A are the following:
RBC Canadian Government Bond Index Fund (Fixed Income)—Provides a total
return consisting of income and moderate capital growth by tracking the
performance of the DEX Universe Federal Bond Index
RBC Canadian Equity Fund—Provides long-term capital growth by investing
primarily in equity securities of major Canadian companies in order to provide
broad exposure to economic growth opportunities in Canada
RBC Canadian Money Market Fund—Provides current income and liquidity
consistent with short-term money market rates and to preserve the value of the
investment. The fund invests primarily in high-quality, short-term (one year or
less) debt securities, including treasury bills and promissory notes issued or
guaranteed by Canadian governments or their agencies, bankers acceptances,
asset-backed commercial paper and commercial paper issued by Canadian
chartered banks, loan companies, trust companies and corporations
RBC Canadian Money Market Fund
- Low risk. Investor accepts full market risk, as the fun will maintain its
holdings despite changes in general interest rates. Other risk associated
with this fund: the unit rice of the fund may rise or fall, interest rate risk, underlying risk, multiple series risk, credit risk, derivate risk, and securities
lending, repurchase and reverse repurchase transaction risks.
- The fund was created on November 30,1986. The current value is 3.007.7
million. The fund has not drop in value in the last ten years and has an
annual compound return on 1.8%
- The fund invests mainly in high-quality, short-term (one year or less)
Canadian debt securities, including treasury bills and promissory notes,
bankers acceptances, asset-backed commercial paper and commercial
- The fund is distributed monthly. No specified dividends. Taxes apply, unless
the investment is held in a RRSP or Tax-Free savings account.
- The fund is managed by Walter Posiewko, Vice President and Senior