Unit 14 series 65
Investors with a short time horizon most likely will invest in which class of mutual fund shares? A) Class A shares, then convert to Class B shares B) Class C shares C) Class A shares D) Class B shares
B
Under the Investment Company Act of 1940, which of the following statements regarding the investment objective of a mutual fund are TRUE? Only the board of directors needs to approve changes in the investment objective. The majority of outstanding shares must vote to approve changes in the investment objective. The SEC must approve all changes in the investment objective. The investment adviser does not set, but tries to meet, the investment objective. A) III and IV B) II and IV C) I and III D) I and II
B
When comparing the pricing of open-end investment companies with that of closed-end investment companies, it is correct to state that A) shares of closed-end funds are generally priced higher than open-end shares. B) only the open-end bases its price on the next computed net asset value per share. C) the closed-end can issue common and preferred shares; the open-end can only issue one class of stock. D) both must compute their NAV at least once every day as of the close of trading.
B
Which of the following are characteristics of a REIT? It is traded on an exchange or over the counter. It is professionally managed. It passes through both gains and losses to investors. It is a type of limited partnership. A) III and IV B) I and II C) I and IV D) II and III
B
Which of the following individuals would be considered a noninterested person in a mutual fund? A) A shareholder who owns 10% of the fund's shares B) A member of the board of directors who does not hold another position within the investment company C) A member of the board of directors who is also employed as the investment adviser D) A person who holds a position with the fund's underwriter
B
Which of the following investment companies registered under the Investment Company Act of 1940 can include senior securities in its capital structure? A) Unit investment trusts B) Closed-end management investment companies C) Open-end management investment companies D) Face-amount certificate companies
B
A mutual fund must redeem its tendered shares within how many days after receiving a request for their redemption? A) 7 B) 10 C) 5 D) 3
A
Which of the following is the least suitable mutual fund transaction? A) Encouraging a mutual fund shareholder to switch from one fund family to another while a deferred load is in existence B) Encouraging an investor in a high tax bracket with an income objective to invest in a municipal bond fund C) Encouraging an investor in his early 30s to invest in an emerging markets mutual fund D) Encouraging a retired 65-year-old investor to invest a small percentage of his savings in a large-cap growth fund
A Encouraging a mutual fund shareholder to switch from one fund family to another while a deferred load is in existence is not in the client's best interest, because the client might be subject to substantial additional sales charges.
An investor reading the open-end investment company section of today's The Wall Street Journal sees that Bull in the Teashop Fund has a NAV of $10.65 and an offering price of $11.15. He knows that he would have received which of the following if his redemption order had been received by the fund prior to yesterday's market close? A) $10.65 B) $11.15, less redemption fee, if any C) $10.65, less redemption fee, if any D) $10.65, less commission
C An investor redeeming his shares will receive the NAV less any redemption fee that may be described in the prospectus. Investors redeeming through the fund are not charged a commission
A client invests $2,200 in an open-end investment company and signs a letter of intent for a $10,000 breakpoint. If 6 months later he deposits $11,000, which of the following statements is TRUE? A) He will not receive any reduction in the sales load. B) He will receive a reduced load on $10,000 worth of the shares. C) He will receive a reduced load on $8,800 worth of the shares. D) He will receive a reduced load on $13,200 worth of the shares.
D
A customer with no other mutual fund investments wishes to invest $47,000 in the XYZ Technology Fund. If the Class A shares are eligible for a breakpoint sales charge discount at the $50,000 investment level, the action least appropriate for an agent is to A) inform the customer that he can reduce his sales charge through a letter of intent B) inform the customer that he can reduce his sales charge by combining purchases in other funds offered by XYZ group C) inform the customer that he can reduce his sales charge by investing an additional $3,000 D) place the order as instructed
D
Which of the following are features of Class C mutual fund shares? Typically charge no front-end load Typically charge a front-end load Typically impose lower CDSCs than Class B shares for a shorter period Typically convert to Class A shares after they are held for a defined period A) I and IV B) II and IV C) II and III D) I and III
D
Which of the following is likely to be characterized by no management fees and a portfolio consisting of municipal or corporate bonds? A) Closed-end investment companies B) Open-end investment companies C) Face-amount certificate companies D) Unit investment trusts
D
With regard to taxation of distributions from a REIT, in the majority of cases, dividends are taxed as ordinary income in the majority of cases, dividends are considered qualified for the lower tax rate capital gains distributions are treated as long-term capital gains capital gains distributions are taxed as ordinary income A) I and IV B) II and IV C) II and III D) I and III
D
When an open-end management investment company computes its net asset value per share, each of the following occurrences would have an impact EXCEPT A) a capital gains distribution B) interest payments made on debt securities held in the fund's portfolio C) a greater value of shares being redeemed than purchased D) a drop in the value of equity securities held in the fund's portfolio
c Because shares are purchased and redeemed at NAV, net redemptions (this case) or net purchases have no effect on the net asset value of the fund's shares. However, receipt of cash in the form of interest payments causes assets to increase, while falling equity prices leads to a decrease. Distributions of capital gains (or dividends) represents a payment of cash, thus decreasing the amount of assets on hand
A registered investment company whose capitalization may include preferred stock and/or bonds is A) the closed-end management investment company. B) the unit investment trust. C) the open-end management investment company. D) the face-amount certificate company.
A
All of the following statements regarding investment companies are correct except A) an open-end investment company is categorized as open end because it is limited in the number of shares that are sold. B) a unit investment trust is a type of investment company whose units are redeemable at NAV by the trust's sponsor. C) a closed-end investment company is a type of company whose shares trade in the same manner as publicly-traded stocks in the secondary market. D) an exchange-traded fund is an investment that can be bought and sold throughout the trading day.
A
An investor invests $25,000 into the KAPCO Balanced fund. It would be unlikely for this investor to be required to pay a CDSC when redeeming A) Class A shares B) Class C shares C) Class B shares D) any shares, regardless of Class
A
As defined in the Investment Company Act of 1940, the term "investment company" would NOT include A) a holding company B) a management company C) a unit investment trust D) a face-amount certificate company
A
Under adverse market conditions, it is not unusual for mutual fund investors who had been investing on a regular basis to cease or reduce their level of financial commitment. This can have the effect of A) net redemptions B) reducing the operating expense ratio of the fund C) reducing the NAV of the fund as the demand for new shares wanes D) a reduction in the fund's net operating income due to a reduction in sales charges received
A
Who safeguards the securities held in a mutual fund's portfolio? A) The custodian B) The trustee C) The corporation D) The manager
A
y investing in a REIT, you are provided all of the following EXCEPT: A) flow-through tax treatment of operating losses B) ownership of real property without management responsibilities C) flow-through tax treatment of income D) diversification of real estate investment capital
A
All of the following may receive breakpoint discounts EXCEPT A) a pension plan trustee B) an investment club C) an investor in an individual retirement account D) a husband and wife in a joint account
B
Shareholders of mutual funds have all of the following rights EXCEPT: A) voting rights B) voting proxies C) the right to vote on the selection of specific securities for the portfolio D) receiving semiannual reports
C
Which of the following statements about open-end investment companies are TRUE? Open-end investment companies are also known as mutual funds. Open-end investment companies continually offer shares for sale to the public. The price at which an open-end investment company will sell shares to the public is based on the share's net asset value (NAV). A) II and III B) I and II C) I, II, and III D) I and III
C
Which of the following would be common features of mutual funds and hedge funds? A) Redemption of ownership interests within 7 days B) Portfolio transparency C) Investors have pooled their money together D) Registration with the SEC
C
An investor signed a letter of intent to purchase $50,000 worth of Sky-High Mutual Fund. At the end of 13 months, he had only invested $48,000 in the fund. Which of the following is TRUE? A) There are no additional requirements; he will receive the breakpoint. B) He has 90 days to invest the additional $2,000 for the breakpoint. C) He must sign a new letter for the $2,000 to receive the breakpoint. D) The fund will liquidate shares to meet the additional sales charge.
D
The Investment Company Act of 1940 requires certain types of investment companies to compute their net asset value on a regular basis. Excluded from that requirement are A) closed-end management investment companies. B) open-end management investment companies. C) unit investment trusts. D) face-amount certificate companies.
D
Under the 1940 Investment Company Act, an investment company may take all of the following forms EXCEPT: A) a unit investment trust B) a closed-end investment company C) an open-end investment company D) a limited partnership with partners as passive investors
D
Under the Investment Company Act of 1940, which of the following are considered management companies? Open-end companies Closed-end companies Unit investment trusts Face-amount certificate companies A) II and IV B) I and III C) III and IV D) I and II
D
