Sections 7, 8, and 9 Practice Quiz Questions

According to the Investment Company Act of 1940, an open-end investment company must compute its NAV: A) weekly B) monthly C) no less frequently than once per day D) annually

no less than once per day

A farmer entered into a forward contract to sell his produce at $2.25 per bushel. At the expiration date of the contract, the price was $2.00 per bushel. The farmer would receive: A) $2.25 B) $2.125 per contract C) a price negotiated between the buyer and the seller D) $2.00

$2.25

If a call option with an exercise price of $50 is purchased for $300, the maximum amount the investor can lose is A) unlimited B) $4,700 C) $5,000 D) $300

$300

Which of the following statements about the redemption of mutual fund shares are TRUE? I. a mutual fund may, but is not required to, redeem its share if requested by a shareholder. II. A mutual fund will redeem fractional shares as well as full shares. III. Redemption of mutual fund shares are handled under forward pricing.

II and III

An investor interested in obtaining the benefit of professional portfolio management has been tracking a particular investment company for the past several months. In so doing, it becomes obvious that the market price of the shares moves in direct relation to the computed NAV. This investor must be following A) a balanced fund B) a money market fund C) an open-end fund D) a closed-end fund

an open-end fund

Investment company portfolio managers are apt to classify common stocks into groups. One measurement is the product of multiplying the market price per share times the number of shares outstanding. The result is known as A) total value B) market capitalization C) debt to equity ratio D) market value

market capitalization

A review of the prospectus of an open-end investment company reveals that its portfolio consists entirely of CDs, Treasury bills, and repurchase agreements. This is probably a(n) A) balance fund B) money market fund C) index fund D) exchange-traded fund (ETF)

money market fund

An open-end investment company is also referred to as a(n): A) unit investment trust B) mutual fund C) face amount certificate company D) exchange traded fund

mutual fund

The main benefit that variable life insurance has over whole life insurance is A) an adjustable premium B) a lower sales charge C) the availability of policy loans D) the potential for a higher cash value and death benefit.

the potential for a higher cash value and death benefit.

The difference between a fixed annuity and a variable annuity is that the variable annuity: I. offers a guaranteed return II. offers a payment that may vary in amount III. will always pay out more money than the fixed annuity IV. attempts to offer protection to the annuitant from inflation

II and IV

Bob, age 60, has invested $17,000 in his nonqualifed variable annuity over the years, The total value has reached $26,000. He wishes to withdraw $15,000 to send his son to college. What is the tax consequence? A) $6,500 is nontaxable; $8,500 is taxable B) $9,000 is taxable; $6,000 is nontaxable C) the entire amount is taxable D) the entire amount is nontaxable

$9,000 is taxable; $6,000 is nontaxable