Series 7 Chapter 10
Prospectus discloses
1, 5, and 10 year performance histories
With a NAV of $10 and POP of $10.50 what is the sales charge percentage
10.50-10.00 and divide by POP
Mutual funds financial information statements in the prospectus must be dated not more than
16 months prior
IA contract is for a maximum of
2 years but is subject to annual shareholder approval
A broker/dealer selling open-end investment company shares will be required to return its entire selling concession if the principal underwriter has to repurchase those shares from a customer within how many business days of trade date?
7
Mutual fund must redeem shares within
7 calendar days
Max sales charge allowed
8.5 of POP
Which of the following is true regarding a "summary section" and a "statement of additional information" for management investment companies?
A statement of additional information (SAI) need not be included in the prospectus of a management company.
A fund must inform its shareholders of their right to reinvest dividends at NAV:
Annually
Funds NAV=
Assets-liabilities
Holding Company Depository Receipts (HOLDRS) are
B/D issued products that trade on an exchange and are priced through the trading day
For a customer interested in buying an inverse exchange traded fund (ETF) tracking the performance of the Standard & Poor's 500 index, which of the following market views would make that purchase most inappropriate?
Bullish
An investment company share purchased at its NAV that can always be redeemed later at its then-current NAV is a:
Class C shares
Investment act of 1940 classifies investment companies into which 3 catagories
Face amount certificate companies Unit investment trusts Management investment companies
To qualify for the quantity discount, which of the following may NOT be joined together under the definition of "any person" ?
Father and his 35-year-old son investing in separate accounts.
Margin eligibility
Index fund shares can be purchased on margin
Intraday trading
Investors do not have to wait until the end of a trading day to purchase or sell shares
Closed end companies trade?
Like corporations in the secondary market
What kind of securities does a closed end company trade?
Like corporations they issue common, preferred and bonds
If an open-end investment company wishes to change its investment objective, it may only do so with a:
Majority vote of outstanding shares
Open ended investment company=
Mutual fund
Offer price (POP) is the ask price: it is the
NAV plus the maximum sales charge applicable to the fund
Public offering price (POP) is the
Net asset value per share plus a sales charge
If a customer transfers his holdings from one fund to another within the same family of funds, what are the tax consequences?
On the transaction date, any gain or loss is recognized for tax purposes.
The capital structure of an open-end investment company can include:
One issue of common stock and a limited bank offering
Which of the following statements best describes a breakpoint sale?
Sale of investment company shares in dollar amounts slightly below the point at which the sales charge is reduced on quantity transactions, to make a higher commission.
Non-fixed UIT purchases
Shares
Which of the following types of mutual funds has capital appreciation as its investment objective?
Specialized
The principal underwriter of an open-end investment company is also known as the
Sponser
The open-end investment company share price quoted in the newspaper is the:
The bid price
Not traded in secondary market they must be redeemed by the trust
UIT shares
When is the sales charge deducted from purchases of mutual fund shares made under a letter of intent?
When each purchase is made
Subchapter M requires
a fund to distribute 90% of its net investment income to shareholders
With HOLDRS the trustee or custodian charge
a quarterly flat dollar rate for each round lot of 100 HOLDRS held
Most funds wait until when before making their NAV calculation
after NYSE closes (4:00 pm)
Mutual fund board of directors members must serve a term of
at least 1 year, and cannot serve more than 5 years without being reelected.
Key point of Class B, C and D shares cannot take advantage of
break point reductions
Closed end funds do not have a sales charge investors pay ____________an agency transaction or a _______ in a principal transation
brokerage commission / markup or markdown
Mutual funds shares that are redeemed are
cancelled
Tax liabilities for an investment are simplified because
clients receive 1099 form
Dual purpose funds are
close end funds
When a closed end investment company wants to raise capital for its portfolio, it conducts a
common share offering price
A front-end sales load is defined as the
difference between the public offering price and the net asset value of a mutual fund share.
ETFs are rebalanced to
in order to adhere to the original intended weighting of the portfolio
Funds the comply with Sub-chapter M are
known as regulated investment companies
Lifecycle or target date funds are managed in such a way as to
lessen the amount of risk associated with the portfolio as it gets closer to its target date, which is usually the anticipated time of retirement for the fund investor.
In the sale of an open end investment company share, the prospectus
must be delivered to the client either before or during the sales solicitation.
Act of 40 restricts who may sit on an investment company's board of directors. A majority of directors
must be independent or non interested persons
Act of 1940 requires mutual funds to have
no more than one class of security issued and a minimum asset-to-debt ratio of 300%
Money market funds are usually
no-load, open-end mutual funds that serve as temporary holding tanks for investors
Exchanges from one fund to another within in the same family
not subject to sales charge, it is a taxable event
Fixed UIT usually purchases
portfolio bonds
HOLDRS
preserve some ownership benefits related to owning the underlying stocks that EDFs do not
12-1 fees are charged
quarterly
A fund is allowed to act as its own underwriter under
section 12b-1 of the Act of 40
Dividends and capital gains are
taxable whether reinvested or taken in cash
The ex-dividend date for mutual funds is
the day after record date
Investor buys and redeems shares at
the price next calculated (forward pricing)
