LLQP Practice Test

LLQP Investment Basics Practice Questions

Investment Basics makes up 3 of every 50 questions on a Tigertest LLQP practice test. Here are 10 of the 12 questions on it, each with the answer and the reason.

Updated 2026-11-10 by the Tigertest team. Based on the harmonized LLQP's four modules, Canadian law and CCIR/CISRO guidance as of November 2026. Original questions; 50 per test, mixing the modules in proportion. Not affiliated with CISRO, any provincial regulator or the AMF.

1. 1. An investor with a two-year time horizon to buy a home should mostly hold:

   • A.An emerging markets equity fund
   • B.Low-risk, short-term investments
   • C.Small-company equity funds
   • D.A long-term bond fund

   Answer: B. Money needed soon should not be exposed to large swings in value. Short time horizons call for capital preservation.

2. 2. Interest rates rise sharply. Which holding in a bond seg fund would usually lose the most market value?

   • A.A 2-year provincial bond
   • B.A 3-year corporate bond
   • C.A 1-year treasury bill
   • D.A 25-year government bond

   Answer: D. Bond prices move against rates, and the longer the term to maturity, the bigger the price change. A 25-year bond is hit hardest; short-term holdings barely move.

3. 3. Investing the same amount every month regardless of the unit price is called:

   • A.Dollar-cost averaging
   • B.Leveraged investing plan
   • C.Market timing
   • D.Asset rebalancing

   Answer: A. Regular fixed purchases buy more units when prices are low and fewer when high, which can lower the average cost per unit.

4. 4. Spreading money across stocks, bonds and cash mainly reduces:

   • A.The fees of every fund held
   • B.The tax owing on gains each year
   • C.The impact of any one holding
   • D.All risk of loss in a crash

   Answer: C. Diversification reduces unsystematic risk tied to one company or asset class. It cannot remove market-wide risk.

5. 5. A balanced seg fund holds a mix of:

   • A.Only cash and T-bills
   • B.Only real estate investment trusts
   • C.Equities and fixed income
   • D.Only Canadian equities

   Answer: C. Balanced funds combine stocks and bonds (often with some cash) to give moderate growth and lower volatility than an equity fund.

6. 6. A fund's standard deviation is a measure of its:

   • A.Volatility of returns
   • B.Average return over 10 years
   • C.Size of the fund
   • D.Fees charged each year

   Answer: A. Standard deviation shows how widely returns vary around the average; higher means a bumpier ride.

7. 7. A client's risk tolerance is best described as their:

   • A.Number of dependants at home
   • B.Expected rate of return on all savings
   • C.Planned age at retirement
   • D.Willingness and ability to bear losses

   Answer: D. Risk tolerance combines how much loss the client can afford and how much they can accept emotionally; it guides the fund mix.

8. 8. Inflation risk is greatest for a retiree who holds most savings in:

   • A.Indexed life annuities only
   • B.Cash and short-term deposits
   • C.A diversified equity fund
   • D.Real return bonds

   Answer: B. Cash keeps its nominal value but can lose purchasing power over a long retirement. Equities and indexed income tend to keep pace better.

9. 9. A money market seg fund is mainly used for:

   • A.Protection from bond defaults only
   • B.Safety and liquidity
   • C.Long-term growth
   • D.High dividend income

   Answer: B. Money market funds invest in short-term debt such as T-bills, giving low risk and easy access but low returns.

10. 10. A fund returned 12% in a year when inflation was 4%. Its approximate real return was:

    • A.3%
    • B.12%
    • C.16%
    • D.8%

    Answer: D. Real return is roughly nominal return minus inflation: 12 - 4 = 8%.