Chapter 4 Assessment Exam

Unlike other investment companies, a unit investment trust does not A) Offer securities to non-accredited investors B) Have an investment objective C) Provide a prospectus to investors D) Actively manage its portfolio

D

Which of the following statements is true regarding purchases and redemptions of mutual fund shares? A) Purchases and redemptions take place at the NAV next calculated B) Mutual funds raise additional capital through selling previously redeemed shares to new investors C) Customers that want cash can sell all or a portion of their shares in the secondary market D) Both full and fractional shares can be purchased and redeemed

D

Your client Sally owns 2,000 shares of the Omega Venture Fund, an open-end investment company. If Sally places an order to sell 1,000 of her shares, she will receive A) The best available price when her order is received B) The next computed public offer price C) The last computed net asset value D) The next computed net asset value

D

A mutual fund share that charges 12b-1 fees is which of the following? A) A, B, or C-share B) C-share C) B-share D) A-share

A

A portfolio of stocks with the goal of capital appreciation rather than distribution of income is known as a A) growth fund B) dividend fund C) mutual fund D) exchange traded fund

A

Dividend and capital gains distributions are made to investors in A) Both open-end funds and unit investment trusts B) Neither open-end funds nor unit investment trusts C) Unit investment trusts but not open-end funds D) Open-end funds but not unit investment trusts

A

The largest expense of a mutual fund is typically the A) Management fee B) Transfer fee C) Custodial fee D) Registration fee

A

When a registered rep shifts a customer from one mutual fund to a different fund with a similar investment objective, A) They are engaged in "switching", a sales practice violation. B) They are performing normal account maintenance, which typically involves the reallocation of cash from one mutual fund to another. C) They are conducting an illegal activity, which may result in a suspension from the securities industry. D) They are helping the client to achieve stronger investment returns

A

Which of the following investment company types does not have an investment advisor? A) Unit investment trust B) REIT C) Closed end company D) Open end company

A

Which of the following mutual funds is most likely a "no-load" fund? A) Index fund B) Sector fund C) High-yield fund D) Target date fund

A

All of the following mutual fund portfolios would be classified as sector funds EXCEPT A) A technology high yield bond fund B) A global equity fund C) A healthcare equity fund D) An energy bond fund

B

All of the following statements about mutual fund 12b-1 fees are true EXCEPT A) The 12b-1 fee is included in the calculation of the fund's expense ratio B) The maximum 12b-1 fee allowed by the Investment Company Act of 1940 is 2% of the fund's NAV C) They are charged to recover marketing and distribution costs D) They must be originally and annually approved by the fund's Board of Directors

B

An investor is interested in purchasing an interest in a bond fund at a price below the asset value of the portfolio holdings. Which of the following investments may be appropriate for this investor? A) A DJIA ETF B) An Investment grade corporate closed-end fund C) A high yield domestic bond mutual fund D) A fixed income UIT

B

An investor would like to invest in a growth mutual fund that holds the stock of well-known companies with a stable performance history. An appropriate recommendation for this customer is a A) Specialty Fund B) Large cap stock fund C) Hybrid fund D) Sector fund

B

The shares of which of the following investment companies are NOT redeemed by the issuing companies? I. UITs II. Open end companies III. Closed-end companies IV. ETFs A) II and III B) III and IV C) I and III D) I and II

B

When compared to the expenses associated with the purchase of mutual fund shares, the cost of investment in a UIT is A) Less expensive for large purchases only B) Substantially cheaper C) More expensive D) Usually about the same

B

A "breakpoint sale" is a(n) A) A sales practice that registered reps should practice as the result is usually a better deal for the customer B) Illegal practice of selling mutual fund shares to investors without disclosing all of the risks involved when investing. C) Prohibited practice that registered reps should refrain from as the result is usually an inferior transaction for the customer D) Industry recognized sales practice that rewards the efforts of mutual fund salespeople

C

If units of a UIT are redeemed prior to the termination of the trust, the investor will receive I. the value of the units as calculated at the end of the business day II. The current value based on the time order to liquidate the shares is entered III. more or less than the original purchase price IV. no less than the original purchase price A) II and IV B) II and III C) I and III D) I and IV

C

The benefit investors receive for reinvestment of mutual fund dividend and capital gains distributions is A) Breakpoints B) Tax deferred growth C) Reduced sales charge on reinvestment D) Tax exempt growth

C

What investment attributes are offered by virtually all mutual funds? A) Very low cost of ownership B) Tax-exempt earnings C) Diversified, professionally managed portfolios D) Low risk

C

Which of the following mutual fund types is most generally associated with clients seeking current income and stability of principal? A) International bond UIT B) Asset allocation UIT C) U.S. Government UIT D) Defensive strategy UIT

C

Which of the following securities may be traded on an exchange? I. Common stock II. Derivatives III. Mutual Funds IV. Bonds A) I only B) I and IV only C) I, II and IV only D) I, II and III only

C

Which of the following statements regarding mutual funds is not correct? A) They are inappropriate for investors seeking investments that trade intra-day B) They cannot be purchased on margin C) They are redeemed at the public offer price (POP). D) Investors can choose among many different investment styles within the universe of mutual funds.

C

A mutual fund's public offering price is A) The net asset value per share x the sales charge B) The net asset value per share - the sales charge C) The net asset value per share/the sales charge D) The net asset value per share + the sales charge

D

A letter of intent includes all of the following features EXCEPT A) The option to include a prior purchase that was made up to 90 days before the contract was established B) A term of 13 months C) A reduction in sales charges that is applicable from the first covered purchase D) The option for the mutual fund to discontinue the contract with 30 days prior notice

D