INVESTMENT COMPANIESS!

A mutual fund has a net asset value per share of $11.00. The maximum offering price per share is:

$12.02 Ask price = NAV ------------------- 100% - SC % $11.00 ------------ 100% - 8.5% =12.02

All of the following statements are true about REITs EXCEPT: A REITs are similar to closed end investment companies B REITs issue redeemable shares C REITs are listed and trade on stock exchanges D REITs must invest at least 75% of their assets in real estate related activities to qualify for conduit tax treatment

B

All of the following statements are true regarding the sponsor of a mutual fund EXCEPT the sponsor: A establishes the fund B manages the fund C is also known as the fund underwriter D registers the fund with the Securities and Exchange Commission

B

Which of the following is NOT defined as an "investment company" under the Investment Company Act of 1940? A Face Amount Certificate Company B Real Estate Investment Trust C Management Company D Unit Investment Trust

B

An investor in a "Ginnie Mae" mutual fund assumes all of the risks EXCEPT: A Fluctuation of Net Asset Value B Reinvestment Risk C Credit Risk D Prepayment Risk

C

All of the following terms apply to publicly traded fund shares EXCEPT: A one-time issuance B managed C redeemable D negotiable

C redeemable

Shareholders in a management company have all of the following rights EXCEPT the right to: A vote for the Board of Directors of the fund B vote for the investment adviser C receive semi-annual and annual reports D choose the broker who executes the portfolio transactions

D

What does a BDC invest in? A Hedge funds B Small cap stocks C Large cap stocks D Privately-held companies

D

Which of the following is a fair comparison of two mutual funds? A Income funds and growth funds should be compared based on yield per share after tax B A comparison of two income funds should use a ten-year period for one and a five-year period for the other C A comparison of two growth funds should use total initial investment, disregarding sales charges D A comparison of a municipal bond fund and an income fund should use after-tax return for both

D Income funds cannot be compared to growth funds on the basis of income yield because the investment objective of growth funds is to achieve capital appreciation, not income. Thus, Choice A is incorrect. Any comparison between funds should be over the same period, thus Choice B is incorrect. A fair comparison will take into account the effect of the sales charges, because one fund may have higher sales charges and thereby reduce the effective investment return. Thus, Choice C is incorrect. Municipal bond funds are a type of income fund, so they can fairly be compared to another income fund. However, to have a valid comparison, the yield on the income fund must be brought to an "after-tax" basis, since municipal bond yields are free of federal income tax (and state income tax for the purchaser of a bond that lives in the state of issuance). Thus, Choice D is correct.

All of the following terms apply to index ETFs EXCEPT: A benchmarked B passively managed C marginable D redeemable

D redeemable

Which statements are TRUE regarding mutual funds? I That day's closing price is the basis for fund purchase price computations II That day's closing price is the basis for fund redemption price computations III The next day's closing price is the basis for fund purchase price computations IV The preceding day's closing price is the basis for redemption price computations

I and II

Mutual funds that have an automatic reinvestment provision will typically reinvest: I dividends at NAVII dividends at POPIII capital gains at NAVIV capital gains at POP

I and III

Which statements are TRUE regarding hedge funds? I Hedge funds are subject to little regulatory oversight II Hedge funds must register as management companies under the Investment Company Act of 1940 III Hedge fund managers are compensated based on a percentage of capital appreciation in the fund IV Hedge fund managers can only be compensated based on a percentage of assets under management

I and III

The ex date for a mutual fund is: I set by the Board of Directors of the Fund II 1 business day prior to the Record Date III the date on which the fund's NAV per share is reduced for any distributions

I, II, III

Exchange Traded Funds (ETFs) are: I registered under the Investment Company Act of 1940 as closed-end management companies II registered under the Investment Company Act of 1940 as open-end management companies III regulated by the SEC and FINRA IV regulated by FDIC and the Department of Treasury

II and III

The investment adviser performs which of the following functions? I Sending dividend and capital gains distributions to shareholders II Selecting the securities to be purchased in the portfolio of investments III Selecting the securities to be sold from the portfolio of investments IV Selecting the brokers to sell the fund shares

II and III

Which statements are TRUE under FINRA rules? I The maximum annual 12b-1 fee is .25% II The maximum annual 12b-1 fee is .75% III If a fund charges a 12b-1 fee, the maximum up front sales charge is limited to 7.25% IV If a fund charges a 12b-1 fee, the maximum up front sales charge is limited to 8.50%

II and III

Which of the following securities CANNOT be sold by an individual holding an investment companies/variable annuities registered representative's (Series 6) license? I Municipal Investment Trusts II Real Estate Investment Trusts III Municipal Bond Funds IV Revenue Bonds

II and IV

Which of the following statements are TRUE regarding the Federal tax treatment of a "regulated" mutual fund investing solely in municipal securities? I Investors have a Federal tax liability on the interest income received from the fund II Investors have no Federal tax liability on the interest income received from the fund III The investment company has Federal tax liability on the undistributed income that it retains IV The investment company has no Federal tax liability on the undistributed income that it retains

II and IV

REITs can invest in which of the following? I Limited partnerships II Government securities III Mortgages IV Real estate

II, III, and IV

What is a balanced fund?

It allocates investment among common stocks, preferred stocks, and bonds of companies in various industries

The minimum price at which an open end fund share can be purchased is:

Net Asset Value (NAV)

Real Estate Investment Trusts are not suitable as tax advantaged investments because they:

are not allowed to pass operating losses to shareholders

Under FINRA rules, a "no load" mutual fund: can or cannot charge?

can charge a maximum annual 12b-1 fee of .25%

The principal difference between an open end management company and a closed end management company is:

capitalization

variable annuity is a:

non-fixed unit investment trust

How often must mutual funds send their financial statements to shareholders?

semi-annually