Series 66 - Unit 14: Pooled Investments

How often must an investment company file reports with the SEC as required by the ICA of 1940

Annually.

Which of the following securities would most likely have the lowest expense ratio?

Exchange-traded fund.

Which of the following statements is not true?

Open-end investment companies must have a minimum of $1 mill in assets to have a public offering. ($100,000 is correct)

Which of the following investments would probably have the least liquidity?

Private equity fund

Which of the following statements regarding closed end investment companies is true?

The shares are sold at a current market price.

One way in which UITs differ form open-end investment companies (mutual funds)

UITs have a termination date.

You have a client who is researching various investment options. One of these is a security whose issuer is organized as a partnership. Most likely, this investment is

a hedge fund.

All of the following are advantages of investing in a REIT except

flow through of losses.

A mutual fund has a net asset value of 7.80 per share and the fund pays its underwriter a concession of 0.12. If the fund has a sales load of 0.50 per share and an admin fee of 0.15 per share, how much does the investor pay?

$8.30 (pop+sales charge)

One defining characteristic of a private fun is that section 3c1 of the ICA of 1940 limits the number of investors to

100.

You have a client who wishes to invest $100 per month into something that will give him the opportunity to share in the long-term growth prospects of the overall economy. Which of the following would probably be the most cost-efficient investment vehicle?

A no-load index mutual fund that mimics the S&P

Which of the following statements best describes a hedge fund?

A private and unregistered investment pool that accepts investor's money and employs sophisticated hedging and arbitrage techniques using long and short positions, leverage and derivatives, and investments in many markets.

If a securities salesperson encourages a customer to invest 20,000 in class A shares in each of 3 different mutual fund families, which of the following is most likely to occur?

Breakpoint sale violation

Which of the following statements regarding a mutual fund that offers class A, B, and C shares is not true?

Class B and C shares convert to class A shares after a stated number of year.

An investor has unexpectedly received 20,000 from an old debt he had written off. This money will come in handy for a business venture in two years. Meanwhile, he would like to generate some income on the money with as little risk as possible while keeping expenses to a minimum. Which of the following recommendations is likely to be the most suitable for this customer?

Class C shares of the ABC investment grade bond fun.

A customer has expressed interest in ETFs and wishes to discuss them with you. You could tell him all of the following except

ETFs have a NAV, calculated at the end of the trading day, that serves as the trading price until the next NAV is calculated

Which of the following would be the most important reason for an investor interested in adding foreign stocks to his portfolio to do so by purchasing an international mutual fund?

He would have the benefit of the portfolio mangers picking the stocks instead of having to rely on his own efforts.

All of the following are redeemable securities except

REITs

As defying in the investment company act of 1940 the term investment company would not include

a holding company (management, UIT, and FAC)

In general, the most common form of organization chosen by hedge funds is

a limited partnership.

The XYZ Mutual Fund reports that a large number of their investors have been liquidating shares. The dollar amount of the liquidations exceeds the incoming cash for new purchases More than likely XYZ is

an open-end investment company.

The primary difference btwn an open-end investment company is

capitalization

The ICA of 1940 describes two different management investment companies, open-end and closed-end. Among the differences btwn the two is that

closed-end companies can issue more than one class of capital while open-end companies can only have a single capital issue.

Which of the following investment company securities is the most likely to have a NAV that is 90% of its offer price?

closed-end company share.

Benefits of investing in mutual funds rather than doing it yourself would include all of these except

lower expenses.

Which of the following is a characteristic of a private equity fund? A private equity fund

normally invests in private, nonpublicly traded companies and business.

A UIT has 90% of its portfolio invested in high-grade bonds with an average maturity of almost 25 years. If the industry consensus was that long-term interest rates were about to increase sharply, which of the following actions to the portfolio would most likely be taken?

nothing.

All of the following are true of REITs except

operating losses flow through to the investors.

Investment companies must send financial reports to shareholders

semiannually

ETF have become a very popular pooled investment. One disadvantage compared to mutual funds is

the possibility of selling the ETF at a price lower than the NAV.

All of the following statements regarding unit investment trusts are true except

they do not issue redeemable securities.