Unit 14 Quizzes 1
According to the Investment Company Act of 1940, all of the following statements are true EXCEPT
12b-1 distribution charges must be approved semiannually by a majority vote of the outstanding shares and by the board of directors
Clients should be aware of the potential effects of volatility on their portfolios. Which of the following would most likely have the lowest volatility?
A money market fund
Which of the following statements regarding a unit investment trust is not true?
Overall responsibility for the fund rests with the board of directors.
Which of the following investments is required by law to have at least 75% of its assets represented by real estate assets such as real property or loans secured by real property, cash, and U.S. government securities?
Real estate investment trust
Regarding open-end investment companies, which of the following sales charges is based on the NAV per share?
Redemption fee
Which of the following clients would be the best candidate for a hedge fund?
Ted and Alice, late 50s, no dependents, semi-retired, $5 million net worth, moderate risk takers, diversified holdings
An investor has been comparing several different mutual funds with the same objectives. When making the decision as to which fund to purchase, which of the following factors would be the most important?
The fund manager's tenure
Louis owns an investment that is an unmanaged portfolio in which the money manager initially selects the securities to be included in the portfolio and then holds those securities until they mature or the investment portfolio terminates. This statement best describes which type of investment?
Unit investment trust
Which of the following investment vehicles provides for redemption by the issuer?
Unit investment trust (UIT)
Early in the year, an investor purchased shares of the GEMCO Fund at $10.40 per share when the net asset value per share was $9.53. Just before the last trading day of the year, this investor liquidated the position at $10.60 per share when the net asset value per share was $10.77. From this, you can discern that GEMCO Fund is
a closed-end investment company
Starflier Mutual Fund, regulated under the Investment Company Act of 1940, wishes to change its investment policy. It may do so with approval of
a majority of the outstanding shares
An open-end investment company is also referred to as
a mutual fund
A registered investment company whose portfolio consists of equity securities and the portfolio does not change in response to market conditions is probably
a unit investment trust
All of the following statements regarding investment companies are correct except
an open-end investment company is categorized as open end because it is limited in the number of shares that are sold.
In order to qualify as a REIT,
at least 75% of the assets must be invested in real-estate related assets, cash, and U.S. government securities.
When an agent is discussing possible discounts related to the purchase of mutual funds shares, she would be referring to
breakpoints
The exchange privilege offered by open-end investment companies allows investors to
exchange shares of one open-end fund for another in the same fund family at a net asset value basis
By investing in a REIT, you are provided all of the following except
flow-through tax treatment of operating losses.
When comparing mutual funds, one of the factors to consider is
the length of time the fund manager has been managing the fund
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?
He will receive a reduced load on $13,200 worth of the shares.
When discussing the differences between purchasing a mutual fund and a hedge fund, the investor should be aware that
hedge funds do not offer the transparency of mutual funds
Under the Investment Company Act of 1940, an investment company may initially retain the services of an investment adviser only with approval of
the majority vote of the outstanding shares and a majority of that portion of the board of directors that is considered noninterested members
Under the Investment Company Act of 1940, which of the following are considered management companies? i Open-end companies ii Closed-end companies iii Unit investment trusts iv Face-amount certificate companies
i and ii
With regard to taxation of distributions from a REIT, i in the majority of cases, dividends are taxed as ordinary income ii in the majority of cases, dividends are considered qualified for the lower tax rate iii capital gains distributions are treated as long-term capital gains iv capital gains distributions are taxed as ordinary income
i and iii
Which of the following statements about the redemption of mutual fund shares are TRUE? i A mutual fund may, but is not required to, redeem its shares if requested by a shareholder. ii A mutual fund will redeem fractional shares as well as full shares. iii Redemptions of mutual fund shares are handled under forward pricing.
ii and iii
