Series 65 Chapter 2, 3, 4

Which of the following statements about the redemption of mutual fund shares are true?

A mutual fund will redeem fractional shares as well as full shares. Redemptions of mutual fund shares are handled under forward pricing.

An option that may be exercised before its expiration date is said to be?

American Style

Under the Investment Company Act of 1940 allows a majority vote of the outstanding shares of a registered investment company to authorize the fund to do all of the following:

Approve changing from an open-end to a closed-end company, changing the investment objectives of the fund, and deciding to cease to be an investment company.

Close-End Investment Company

Are priced based on supply and demand. The price paid is based on the ask price.

What type of mutual fund offers the flexibility to allocate between different investment classes such as stocks and bonds?

Asset allocation fund

Current Yield is always

Computed on the basis of CMV (Current Market Value)

Under the Investment Company Act of 1940, the reporting requirements investment companies must comply with include which of these?

Filing a report with the SEC annually, or more frequently if required and sending semiannual reports to shareholders

Which type of contract obligates both parties to act?

Forward, and Future contracts.

Current income of a bond mutual fund is?

Going to fluctuate with interest rates

Open-End Investment Company (Mutual Fund)

Has the ability to issue as many shares as investors want. The value of all the investments the fund holds determines how much each share in the mutual fund is worth.

Unit Investment Trusts (UIT)

Not actively managed investment company. Under creation, must draft a trust indenture. No board of directors, but there is a sponsor. Not actively traded (no secondary market). Minimum investments. Liquid investment w low cost of entrance.

UIT

Not actively traded

Under the Investment Company Act of 1940, what is not required in terms of reporting?

Notifying shareholders of changes in the portfolio as those changes occur

A registered investment company whose capitalization may include preferred stock and/or bonds is?

Only the closed-end company is legally permitted to issue senior securities (preferred stock and bonds).

What are some unique features of class A shares?

Rights of accumulation, breakpoints, low or no 12b-1 charges.

The most common form of investment vehicle for venture capital is?

The limited partnership

Investor redeeming an open-end investment company?

Will receive the NAV less any redemption fee that may be described in the prospectus.

What three investment companies fall under the Investment Company Act of 1940?

face-amount certificate companies, unit investment trusts, and management companies.

Money Markets are

short term debt

What is the minimum Open-end investment companies must have to have a public offering?

100k

Which of the following statements regarding a mutual fund that offers Class A, B, and C shares are true?

Class A shares have a front-end sales charge and a low 12b-1 fee. Class B shares have a declining contingent-deferred sales charge and a high 12b-1 fee. Class C shares have a high 12b-1 fee and a level contingent-deferred sales charge.

GNMA (Ginnie Mae)

pass-through certificates pay principal and the interest monthly