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Exam CSC topic 1 question 35 discussion

Actual exam question from Canadian Securities Institute's CSC
Question #: 35
Topic #: 1
[All CSC Questions]

Miranda shared with the financial advisor Siddharth that her friend advised her to buy ETNs, because they have no annual fee, are free of tracking error and credit risks, and the bank guarantees their investment performance. Which part of Miranda’s statement describes ETNs correctly?

  • A. ETNs are free of credit risk.
  • B. ETNs are free of tracking error risk.
  • C. ETNs’ investment performance is guaranteed by the bank.
  • D. ETNs have no annual fee.
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Suggested Answer: D 🗳️

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bc51073
1 week, 3 days ago
Selected Answer: B
Unlike ETFs, ETNs do not have tracking error risk because of the above guarantee—the bank issuing them promises to pay a return based on the underlying asset. However, the bank does not guarantee investment performance. If the underlying asset decreases in value, so will the ETN.
upvoted 1 times
bc51073
1 week, 3 days ago
ETNs charge an annual fee.
upvoted 1 times
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