investment companies

annually

A fund must inform or notify its shareholders of their right to reinvest dividends at NAV

time limit for a letter of intent

13 months

ETFs can be purchased throughout the trading day real-time quotes are available for ETFs

A customer is interested in an exchange-traded fund (ETF). With regard to the trading of ETFs, the customer should be aware that ETFs can be purchased throughout the trading day ETFs use forward pricing, the same as mutual funds do real-time quotes are available for ETFs the NAV calculated at the end of the day, plus a sales charge, will equal the trading price

Class A Shares

A customer wishes to invest $800,000 in the Ajax Fund, an open-end company with a long-term growth objective. In order to take advantage of breakpoints, you recommend that the customer purchase

B) misleading because closed-end fund shares are subject to market pricing

A prospect has primary investment objectives of current income and safety of principal. During the initial public offering of a closed-end government bond fund, an agent explains to the prospect that the fund invests in U.S. government-backed bonds, which are very safe as to principal, and plans to make monthly distributions. Little could therefore go wrong. Taken as a whole, this representation is A) misleading because government bonds experience considerable credit risk B) misleading because closed-end fund shares are subject to market pricing C) accurate because the fund offers current income D) accurate because the fund invests in government bonds that are fully backed by the United States

once per business day

According to the Investment Company Act of 1940, an open-end investment company must compute its NAV no less frequently than

A) the ability to have personal control over the investments in the portfolio

All of the following are advantages of investing in mutual funds EXCEPT A) the ability to have personal control over the investments in the portfolio B) the ability to qualify for reduced sales loads on the basis of accumulation of investment within the fund C) exchange privileges within a family of funds managed by the same management company D) the ability to invest almost any amount at any time

C) it has a high beta and is safest in periods of low market volatility

All of the following are characteristics typical of a money market fund EXCEPT A) the underlying portfolio consists of short-term debt instruments B) its net asset value normally remains unchanged C) it has a high beta and is safest in periods of low market volatility D) it is offered as a no-load investment

to be considered a diversified investment company, the IC's portfolio must invest in both equity and debt instruments

All of the following statements concerning investment companies are true EXCEPT A) to be considered a diversified investment company, the IC's portfolio must invest in both equity and debt instruments B) a diversified company can be either an open-end (mutual fund) or a closed-end investment company C) a nondiversified company is any management company that has not been classified as a diversified company D) an investment company that invests the majority of its assets in one industry may still qualify as a diversified company

it will redeem its own shares

All of the following statements regarding a closed-end investment company are true EXCEPT A) it will redeem its own shares B) it is a type of management company C) it differs from a mutual fund D) it sells at the market price plus a commission

specified rates of return are guaranteed

All of the following statements regarding money market funds are true EXCEPT

face amount certificate companies; unit investment trusts

All of the following would qualify as management companies EXCEPT face amount certificate companies unit investment trusts closed-end investment companies open-end investment companies

generally make a one-time public offering of shares; may issue debt securities

Closed-end investment companies continuously issue new shares generally make a one-time public offering of shares may issue debt securities may not issue preferred stock

Shares are redeemable at net asset value. Shares are always sold by prospectus.

Which of the following statements describe characteristics of open-end investment companies? Shares are redeemable at net asset value. Shares are always sold by prospectus. Only a limited number of shares are offered. Shares are traded on securities exchanges.

These fees are charged against the assets of the fund to defray distribution expenses.

Which of the following statements regarding 12b-1 fees is TRUE?

Dividends are not taxable. Capital gains distributions are taxable.

If a customer purchases shares in a municipal bond fund, which of the following statements are TRUE? Dividends are taxable. Dividends are not taxable. Capital gains distributions are taxable. Capital gains distributions are not taxable. A) I and IV B) II and IV C) I and III D) II and III

Loss of principal

If a customer's portfolio is heavily invested in common stock mutual funds, what is the customer's greatest risk?

10

If a mutual fund's net asset value is $9.30 and its sales charge is 7%, its offering price is

Growth mutual fund

If an investor is in a low tax bracket and wishes to invest a moderate sum to gain some protection from inflation, which of the following would you recommend?

majority vote of the outstanding shares

If an open-end investment company wishes to change its investment objective, it may only do so with a

stock on margin

In a mutual fund portfolio, it is permissible to buy all of the following EXCEPT

must be delivered to the client either before or during the sales solicitation

In the sale of open-end investment company shares, the prospectus

Balanced

Last year, the bond market was profitable and ABC Fund had 70% of its assets in bonds. Next year, the fund's managers expect the stock market to do well, and will adjust the fund's portfolio so 60% of its assets will be invested in stock. ABC is probably what type of fund?

90 days from the date it was files

Letters of intent may be backdated up to how many days?

as the fund moves closer to its target date, the portfolio holdings will be adjusted to gradually assume more and more risk

Lifecycle funds embody all of the following characteristics EXCEPT A) these funds are usually structured as funds of funds so that the entire composition of the fund portfolio consists of funds offered by the same fund family B) the asset allocation of the fund will be adjusted regularly to keep risk and reward balanced optimally, given the time remaining until the target date is reached C) the objective assumes that as an investor nears retirement, the investor's tolerance for risk will diminish D) as the fund moves closer to its target date, the portfolio holdings will be adjusted to gradually assume more and more risk

Selling price of shares/ (POP)/ offering price

NAV / (100% - SL%) = public offering price

average annual net assets of the fund

The fee received by the management company from an investment company depends on the

C) supply and demand

The price of closed-end investment company shares is determined by A) the board of directors B) the net asset value plus the sales charge C) supply and demand D) the Financial Industry Regulatory Authority

a specialized fund

The prospectus of the ABC Fund contains the phrase "will have at least one-quarter of common stock investments in the field of business machines." The ABC Fund most likely is identified as

semiannually

Under the Investment Company Act of 1940, mutual funds must send financial statements to shareholders at least

A large-cap growth fund

Which of the following funds would you recommend to a moderate-risk client seeking long-term capital gains who also values professional stock selection?

50% small-cap stocks, 25% international stocks and 25% large-cap stocks

Which of the following mutual fund portfolio allocations would probably be most suitable for a 40-year-old professional who states that he is an aggressive investor?

Exchange-traded notes (ETNs) are issued by financial institutions and therefore I should be concerned about the credit worthiness of the issuer.

Your customer is asking if either exchange-traded funds (ETFs) or exchange-traded notes (ETNs) might be suitable investments for his portfolio. The customer makes several statements regarding his understanding of the products but only one of them is accurate. Which is it? A) Exchange-traded funds (ETFs) have a fixed coupon rate that I should expect to realize when they mature. B) If I want to sell my shares of an exchange-traded fund (ETF) I have to wait until the next price is calculated to value the portfolio of securities just like mutual funds. C) Exchange-traded notes (ETNs) are issued by financial institutions and therefore I should be concerned about the credit worthiness of the issuer. D) Exchange-traded notes (ETNs) are equity securities because they trade on exchanges.

custodian back

the monies and securities of a mutual fund company are held by

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.