series 7 -- investment companies
An investor buys 100 shares of an open-end investment company with a 5% contingent deferred sales charge. The sales charge is reduced by 1% for every full year that the fund is held. The investor redeems the 100 shares at an NAV of $20 per share after holding them for 3 months. The investor will receive:
$1,900
An open end fund has a Net Asset Value of $10 per share. The minimum price at which a share can be purchased is:
$10
A customer has signed a Letter of Intent (LOI) to buy $25,000 of XYZ mutual fund to qualify for a breakpoint that reduces the sales charge from 7% to 6%. The customer deposits $15,000 into the fund over the next 13 months. At the end of 13 months, the NAV is $20,000. How much does the customer have to deposit to complete the LOI?
$10,000
A mutual fund has a net asset value per share of $9.45. The maximum offering price per share is:
$10.33
A mutual fund has a net asset value per share of $10.45. The maximum offering price per share is:
$11.42 (NAV / (100% - sales charge %))
A customer redeems 1,000 shares of XYZ Fund. The computed Net Asset Value per share is $14.75 and the Public Offering Price is $16.03. The fund has a 1/4% redemption fee. The customer will receive:
$14,713
A customer buys a 3X Inverse Leveraged ETF at $30 per share. The customer's maximum loss per share is:
$30
An investor purchases 1,000 mutual fund shares with a Net Asset Value of $10 each, where the fund imposes a 5% contingent deferred sales charge if the shares are redeemed within the first year. The sales charge decreases by 1% for each year the investor remains invested in the fund. If the investor were to redeem within the first year based upon the current NAV, he or she will receive:
$9,500
What is the Net Asset Value per share of a mutual fund?
(assets - liabilities) / outstanding shares
A customer redeems a mutual fund. The customer must be paid the money from the fund company within how many business days?
5
The ex dividend date for mutual funds is set by:
BOD
If a fund distributes a dividend to shareholders, which statements are TRUE? I The dividend is taxable if it is taken as a check II The dividend is not taxable if it is taken as a check III The dividend is taxable if it is automatically reinvested in the fund IV The dividend is not taxable if it is automatically reinvested in the fund
I and III
Index ETFs are: I passively managed II actively managed III negotiable IV redeemable
I and III
Publicly traded fund shares are: I Negotiable II Redeemable III Managed IV Non-Managed
I and III
Which of the following customers is allowed a breakpoint on mutual fund purchases? I Corporate purchaser II Investment club III Individual purchaser IV Investment adviser omnibus account
I and III
Which of the following statements are TRUE regarding the Federal tax treatment of "regulated" mutual funds? I Investors have no Federal tax liability on the interest income received from a municipal bond fund II Investors have no Federal tax liability on the interest income received from a corporate bond fund III The investment company has no Federal tax liability on the undistributed income that it retains from a municipal bond fund IV The investment company has no Federal tax liability on the undistributed income that it retains from a corporate bond fund
I and III
Which statements are TRUE regarding Real Estate Investment Trusts? I REITs must distribute at least 90% of Net Investment Income to shareholders II REITs must invest at least 90% of assets in other REIT securities III Interest expense paid by REITs is deductible to the REIT IV REITs are registered as investment companies under the Investment Company Act of 1940
I and III
Exchange Traded Funds (ETFs) are: I registered under the Investment Company Act of 1940 II not registered under the Investment Company Act of 1940 III closed-end management companies IV open-end management companies
I and IV
Which of the following securities are redeemable? I Open-end funds II Closed-end funds III Corporate debentures IV Series EE bonds
I and IV
Which statements are TRUE when comparing types of management companies? I Open-end funds are mutual funds II Open-end funds are publicly traded funds III Closed-end funds are mutual funds IV Closed-end funds are publicly traded funds
I and IV
Which of the following funds MUST be a closed end fund? I Net Asset Value = $10 / Purchase Price = $9.50 II Net Asset Value = $10 / Purchase Price = $10 III Net Asset Value = $10 / Purchase Price = $10.50
I only (The minimum price for a mutual fund is Net Asset value; while the only type of fund that can trade for less than Net Asset Value is a closed end fund)
The provisions of the Investment Company Act of 1940 include which of the following? I Minimum initial fund capital of $100,000 II "Interested persons" on the Board of Directors cannot hold over 60% of the seats III Changing the fund's investment objective requires a majority vote of the shareholders IV Setting maximum sales charges on mutual fund purchases
I, II, III
Which sources of REIT income are counted towards the 75% test required by Subchapter M? I Property rentals II Interest from mortgages III Capital gains on property sales IV Real estate tax refunds
I, II, III, IV
Which of the following statements about investment company securities are TRUE? I Open end fund shares are redeemable II Closed end fund shares are negotiable III Fixed unit investment trusts are redeemable IV Participating unit investment trusts are redeemable
I, II, III, and IV
Which of the following statements are TRUE regarding REITs? I REITs are similar to closed end investment companies II REITs issue shares of beneficial interest representing an undivided interest in a pool of real estate investments III REITs are similar to open end investment companies IV REITs are registered under the Securities Act of 1933
I, II, and IV
Mutual fund shares are: I Negotiable II Redeemable III Managed IV Non-Managed
II and III
Which of the following statements are TRUE about the expense ratio of a mutual fund? I The lower the ratio, the less efficient the fund is II The lower the ratio, the more efficient the fund is III The higher the ratio, the less efficient the fund is IV The higher the ratio, the more efficient the fund is
II and III
Which of the following terms apply to fixed unit investment trusts? I Managed II Unmanaged III Regulated IV Unregulated
II and III
Quotes published in the news media for mutual funds show: I Bid price at NAV less any redemption fee II Bid price at NAV III Ask price at NAV plus minimum sales charge IV Ask price at NAV plus maximum sales charge
II and IV
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 terms apply to mutual fund shares? I Negotiable II Redeemable III One-time stock issuance IV Continuous stock issuance
II and IV
Which statements are TRUE regarding mutual funds that have adopted "12b-1" plans? I Mailings to existing shareholders of the fund are an acceptable "12b-1" expense II Mailings to existing shareholders of the fund are not an acceptable "12b-1" expense III Expense ratios for funds that have adopted 12b-1 plans can be expected to be lower than for similar funds without a 12b-1 fee IV Expense ratios for funds that have adopted 12b-1 plans can be expected to be higher than for similar funds without a 12b-1 fee
II and IV
Which statements are TRUE under FINRA rules? I The maximum 12b-1 fee is .25% II The maximum 12b-1 fee is .75% III The 12b-1 fee is imposed as a 1-time up front charge IV The 12b-1 fee is imposed annually as a charge against fund net assets
II and IV
Which of the following can be purchased on margin? I Mutual Funds II Initial public offerings of Closed End Funds III Closed End Funds trading on the NYSE IV Initial public offering of Fixed Unit Investment Trusts
III only
Assets - Liabilities for a mutual fund equals:
NAV
The minimum price at which an open end fund share can be purchased is:
NAV
Which of the following funds MUST be closed end?
NAV $20 POP $19.50 (only fund that can trade at discount)
Quotes for mutual funds in the news media show:
NAV and POP computed using the max sales charge imposed by the fund
ETFs trade on all of the following markets EXCEPT:
OTC
Which of the following customers is allowed a breakpoint on mutual fund purchases?
a corporate treasurer buying for investment
The purchaser of a hedge fund must be a(n):
accredited investor
An equity REIT would most likely invest in:
apartment and office buildings
Which of the following mutual fund terms are synonymous?
ask, POP
An investment in an inverse ETF would be profitable in a:
bear market
All of the following statements are true about exchange traded index funds EXCEPT exchange traded index funds:
can be traded at no commission cost to the customer
Which statement about management fees is TRUE?
cannot be based on fund performance
The essential difference between an open end management company and a closed end management company is:
capitalization
Which of the following can be purchased on margin?
closed end funds trading on the NYSE
REITs are similar to
closed-end investment company shares
The front-end load on a mutual fund is best described as the:
cost of investing in a fund
Mutual funds that have an automatic reinvestment provision must reinvest:
dividends at NAV and capital gains at NAV
A 65-year old retired teacher living on a pension has $200,000 invested in 2 year certificates of deposit that are yielding 4%. $20,000 of the CDs are maturing and the customer wants to diversify into an investment that gives a higher return and a moderate level of risk. The BEST recommendation would be:
equity REITs
An investor has a $1,000,000 portfolio that is split evenly between "blue chip" stocks and Treasury securities. The current economic environment is characterized by low interest rates and flat stock prices - and this is expected to remain unchanged for a number of years. However, the residential and commercial real estate market is expected to be strong. The investor would like to diversify the portfolio and enhance returns without adding much additional risk. Which of the following investment purchase recommendations would help achieve this objective?
equity REITs
A client sells $28,000 of various stocks and wishes to use the proceeds to buy a mutual fund that has breakpoints at $5,000 intervals. What must the registered representative do?
explain to the client that investing an additional $2,000 will provide the benefit of a breakpoint
An individual wishes to have a fixed portion of the portfolio liquidated each month. He or she should elect which type of withdrawal plan?
fixed percentage
When a sales charge is imposed on a fund purchase, this is known as a:
front-end load fund
The majority of open-end investment companies impose:
front-end load sales charges
The expense ratio of a mutual fund is:
fund operating expenses / total net assets
When comparing a mutual fund to a hedge fund, which statement is FALSE?
hedge fund are liquid
Who would be MOST likely to invest in a BDC?
high net worth investor seeking dividends
Which statement is TRUE regarding dollar cost averaging?
if market prices are fluctuating, the plan will produce a lower average per share cost
What is the main objective of investing in Equity REITs?
income and growth
REITs can invest in all of the following EXCEPT:
limited partnerships
All of the following statements are true about REITs EXCEPT:
losses may be passed to shareholders under conduit tax treatment
Regularly scheduled investments of the same dollar amount in fund shares will most likely result in a:
lower average price per share
Typically, the largest expense associated with running a mutual fund is (are) the:
management fee
The minimum price at which a closed end fund share can be purchased is:
market price + a commission
open-end management companies are commonly called
mutual funds
Money market funds are usually:
no load funds
A variable annuity is a(n):
participating UIT
A variable annuity is a:
participating UIT
All of the following terms apply to index ETFs EXCEPT:
redeemable
Exchange traded funds are NOT:
redeemable
What is a characteristic of a Unit Investment Trust?
securities that are redeemable w the sponsor
Which term BEST describes an ETF?
stock
Which statement is TRUE regarding mutual funds?
that day's closing price is the basis for fund purchase price and redemption computations
Which statement is TRUE regarding money market funds?
the NAV / share is constant at $1
A customer asks the following; "One of my neighbors was talking about his investment in an ETF(Exchange Traded Fund) and said that it is "low cost." Is this true?" The registered representative should respond that:
the expense ratios of most ETFs are lower than those for comparable index mutual funds
Which statement is TRUE regarding ETFs (Exchange Traded Funds)?
the purchaser is required to receive either a prospectus or a product description summarizing key info
