Canadian Securities Course (CSC) Level 2 Practice Exam

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Prepare for the Canadian Securities Course (CSC) Level 2 Practice Exam. Study with multiple choice questions and detailed explanations. Ace your exam with comprehensive practice tests!

Practice this question and more.

What best describes the risk profile of target date funds in relation to age, asset mix evolution, and transition to fixed income investments?

Risk increases with age, fixed asset mix, transition to equities over time
Risk tolerance declines with age, fixed asset mix, transition to fixed income over time
Constant risk level, dynamic asset mix, no transition to fixed income
Default risk, exchangeable asset mix, no transition strategy

The correct answer is: Risk tolerance declines with age, fixed asset mix, transition to fixed income over time

The correct answer is B. As investors in target date funds get older, their risk tolerance typically decreases. Target date funds are designed to adjust the asset mix over time to become more conservative as the target date (usually retirement) approaches. This means that there is a transition from a higher allocation to equities towards fixed income investments as investors age. This shift in asset mix is aligned with the general principle of reducing risk exposure as investors approach retirement age.