Free CSI CSC2 Practice Exams Questions 2026 - TheExamsLabs

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Total 785 Questions | Updated On: May 22, 2026

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Question 1

In the context of conventional mutual funds and alternative mutual funds, which of the following accurately describes the maximum allowed short sales for a fund?

A : Conventional mutual funds can short sell up to 20% of the fund’s NAV, while alternative mutual funds can short sell up to 50% of the fund’s NAV.

B : Conventional mutual funds can short sell up to 50% of the fund’s NAV, while alternative mutual funds can short sell up to 20% of the fund’s NAV.

C : Conventional mutual funds can short sell up to 5% of the fund’s NAV, while alternative mutual funds can short sell up to 10% of the fund’s NAV.

D : Conventional mutual funds can short sell up to 10% of the fund’s NAV, while alternative mutual funds can short sell up to 20% of the fund’s NAV.

Answer: A

Question 2

An investor comparing two funds observes that both have the same average return over five years. However, Fund A has a standard deviation of returns of 8%, while Fund B's standard deviation is 3%. Which fund is likely to have the narrower probable range of returns, and why is this significant?

A : It-s not possible to determine without knowing the funds' betas.

B : Both funds will have the same range of returns since their average returns are identical.

C : Fund A, because a higher standard deviation indicates more predictable outcomes.

D : Fund B, because a lower standard deviation indicates less variability in returns.

Answer: D

Question 3

An ETF that uses a sampling method to replicate an index is most likely to experience higher:

A : Dividend yield compared to an ETF that holds all securities in the index.

B : Liquidity risk compared to an ETF that holds all securities in the index.

C : Management fees compared to an ETF that holds all securities in the index.

D : Tracking error compared to an ETF that holds all securities in the index.

Answer: D

Question 4

What is a structured product?

A : A mortgage loan.

B : A principle-protected note.

C : An equity index.

D : A credit card receivable

Answer: B

Question 5

David is assessing his investment options. He notices that the effective tax rate on his interest income is higher compared to his capital gains income. Which of the following is a valid explanation for this observation?

A : Capital gains are taxed at a higher rate than interest income because they are included in taxable income fully.

B : Interest income is taxed at the marginal tax rate, while capital gains are taxed at a reduced rate due to the inclusion rate.

C : Both interest income and capital gains are taxed at the same rate when considering their tax treatment.

D : Interest income benefits from tax credits, whereas capital gains do not.

Answer: B

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Total 785 Questions | Updated On: May 22, 2026

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