Series 7 Chapter 10

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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)


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