Check Point Exams
Asset-based sales charges will generally be lowest when holding
Class A shares.
One way in which the method of capitalization of closed-end companies differs from that of open-end companies is that the closed-end company can
Issue more than one class of stock
By investing in a REIT, you are provided all of the following except
pass-through tax treatment of operating losses.
Which of the following statements regarding investment companies is not true?
A management investment company can offer investors two ways of participating in the fund under management: through the purchase of closed-end shares or, if the investor prefers, through open-end redeemable shares.
Which of the following statements regarding convertible bonds is not true?
Coupon rates are usually higher than nonconvertible bond rates of the same issuer.
An ADR is used to
Facilitate trading foreign securities in US markets by US citizens living in the United States.
Which of the following are general characteristics of negotiable jumbo CDs?
Issued in amounts of $100,000 to $1 million
"An investment company with a low expense ratio and a portfolio that doesn't change" is a description of
a UIT.
The term private fund would apply to all of the following except
a unit investment trust. (UIT)
The DERP Corporation has an outstanding convertible bond issue with a conversion price of $125 per share. If the current market price of the bond is 80, the parity price of the stock is
$100.00 per share.
Your client is interested in investing in preferred stocks in an effort to receive dividend income. The client's target goal is a 6% current return on investment (ROI). If the RIF Series B preferred stock is paying a quarterly dividend of $0.53, your client's goal will be achieved if the RIF can be purchased at
$35.33.
If an investor pays 95.28 for a Treasury bond, how much did the bond cost?
$958.75
A TIPS bond is issued in the principal amount of $1,000, paying 3.5%. Over the security's 5-year term, the annual inflation rate is 6%. What is the principal value of the bond at the end of 4 years?
1,267
MNO is planning to raise capital through an offering of 30-year bonds. Which call price would be most beneficial to MNO?
102
A mutual fund must redeem its tendered shares within how many days after receiving a request for their redemption?
7 days
The current yield on a bond with a coupon rate of 7.5% currently selling at 105½ is approximately
7.11%.
Which of the following would be most likely to increase a bond's liquidity?
A higher rating
Although there are a number of risks to owning a debt security that are common to all investors, which specific risk is avoided when a U.S. resident purchases a Eurodollar bond?
Currency risk
One reason that a private equity fund may operate under the Section 3(c)(7) exemption of the Investment Company Act of 1940 is that
It would be able to have more than 100 investors
Which of the following debt instruments generally presents the least amount of default risk?
Municipal general obligation bonds
Which of the following is not a money market instrument?
Newly issued Treasury notes
Why do some mutual funds offer Class A and Class B share options?
To give investors the option of choosing how they wish to be charged for the purchase of their funds
If an investment company invests in a fixed portfolio of municipal or corporate bonds, it is classified as
a unit investment trust. (UIT)
A bond issued by the GEMCO Corporation has been rated BBB by a major bond-rating organization. This bond would be considered
an investment-grade corporate bond.
To secure the debt that a subsidiary is offering, a railroad holding company transfers to a trustee the common stock of another subsidiary. The offering is one of
collateral trust certificates.
Ownership in a corporation is evidenced by holding shares of the company's
common or preferred stock.
One difference between common stock and preferred stock is that common stockholders
have voting rights
The owner of a convertible debt issue
is a creditor of the issuer.
Although investing in managed investment companies can provide many benefits, investors should be aware that disadvantages could include all of the following except
limited liquidity.
KAPCO common stock is listed on the New York Stock Exchange, Inc. (NYSE). If an executive vice president of the company buys 400 shares of the company's stock on the NYSE, she
may sell immediately subject to Rule 144 volume limitations.
One of the benefits of adding foreign debt securities to an investor's portfolio is
potentially higher yields.
One of the advantages of owning a corporation's debentures is that you have prior claim over
preferred stockholders.
When comparing restricted stock to nonrestricted stock, it is important to note that the restricted stock has a restriction placed upon its
resale
The board of directors of DDC omitted dividends in 2016 on their $100 par 6% noncumulative preferred stock. In 2017, a $2 preferred dividend was paid. For DDC, 2018 was a good year, and the board wishes to pay a common dividend. How much must be paid per share on the preferred for 2018 in order to pay a common dividend?
$6
Ownership in a corporation is evidenced by holding shares of the company's
A UIT
The issuer of an ADR is
B. US Depositary bank
Which of the following would you not expect to see issued at a discount?
Bank jumbo CD
Which of the following projects is most likely to be financed by a general obligation rather than a revenue bond?
Public Library
In a mutual fund portfolio, you might find all of the following except
Short Stock
All of the following characteristics are advantages of a REIT except
Tax Deferral
Which of the following statements regarding U.S. government agency securities is true?
They generally offer higher yields than direct U.S. obligations.
When comparing exchange-traded funds (ETFs) to mutual funds, a feature available in ETFs that is not found in mutual funds is the ability to
be bought and sold at a profit the same day.
The residual right of common shareholders refers to their right to
claim company assets in bankruptcy after wages, taxes, creditors, and preferred shareholders have been paid.
Examples of private funds include
hedge funds and private equity funds.
A common stockholder's rights include all of the following except
the right to determine the par value of the stock.
Probably the most significant characteristic of municipal bonds for investors is
their exemption from federal income tax.
A hedge fund and a traditional mutual fund are similar in that
their portfolio managers are required to adhere to the fund's stated objective.
When comparing mutual funds and exchange-traded funds (ETFs), the disadvantages of investing in ETFs include which of the following?
Commissions when both purchasing and liquidating shares
One characteristic found in equity securities issued by a corporation is
Limited Liability
A client wishing to invest $10,000 in a tax-exempt unit investment trust would be acquiring
Units
Hedge funds are issued by
limited partnerships
All of the following are characteristics of exchange-traded funds except
they are redeemable securities.
All of the following are true of REITs except
they must take equity or debt positions, never both.
An investor purchasing 10 corporate bonds at a price of 102¼ each will pay
$10,225.00.
A client has indicated that his primary objective is maximizing current income regardless of the risk. Which of the following mutual funds would probably be most suitable for achieving that goal?
DEF High-Yield Bond Fund
Securities issued by which of the following issuers have the direct backing of the U.S Treasury?
Government National Mortgage Association (Ginnie Mae)
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 managers picking the stocks instead of having to rely on his own efforts.
Which of the following statements regarding nonqualified stock options (NQSOs) is correct?
The NQSO is taxable to the recipient at the time of exercise to the extent of the difference between the fair market value of the stock and the exercise price.
When reading a research report about an investment company, you read that, in addition to common stock, the company also has a preferred stock issue outstanding. From this, you could conclude that this is
a closed-end investment company.
For a profitable and rapidly growing firm, holders of preference shares are least likely to benefit from the firm's growth if the preference shares are
cumulative
In general, among the advantages to investing in Brady bonds over those issued by countries classified as emerging economies is
increased liquidity.
Investing in an emerging market mutual fund subjects the investor to all of the following risks except
liquidity
The GHIJ Corporation has a 3% convertible debenture outstanding with a conversion price of $40. The bond's current market price is 126. The most probable reason for this is
the current market price of the GHIJ common stock is approximately $50 per share.
A bond with a par value of $1,000 and a coupon rate of 6% paid semiannually is currently selling for $1,200. The bond is callable in 15 years at 105. In the computation of the bond's yield to call, which of these would be a factor?
Interest payments of $30
A high-net-worth client expresses an interest in adding a hedge fund to her portfolio and asks for your advice. Among the points you could make is that
adding the hedge fund increases the portfolio's diversification.
You are meeting with a relatively unsophisticated investor who doesn't understand very much about stocks and bonds. The investor asks, "Can you list the advantages of owning common stock as compared to bonds?" Among other reasons, you could reply that
bonds must be surrendered at maturity or at a call while the owner of common stock can hold the investment as long as desired.
A customer with an aggressive growth investment objective and short-term (6- to 12-month) time horizon wants to invest $50,000 in a mutual fund. He has a substantial net worth, but none of it is invested in mutual funds. You inform him that mutual fund investments are intended to be long-term investments, but he expresses his intention to make the short-term investment anyway. If the XYZ fund family (one you have dealt with in the past) offers an aggressive growth fund that has a respectable track record, your recommendation should be to
buy the XYZ Aggressive Growth Class C shares with a 1% CDSC expiring in one year and 0.75% 12b-1 fee.
As defined in the Investment Company Act of 1940, investment companies include
face-amount certificate companies, management companies, and unit investment trusts.
In a portfolio containing common stock, straight preferred stock, convertible preferred stock, and adjustable-rate preferred stock, changes in interest rates would be most likely to affect the market price of the
straight preferred stock.
An investor is studying the prospectus received from the Abundant Returns Asset Allocation Fund. In a section titled "Tenure," the discussion would be dealing with
the number of years the portfolio manager has been managing the fund.
