Unit 3

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

When comparing 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

A customer w an aggressive growth investment objective and short term 6-12 month time horizon wants to invest 50,000 in a mutual fund. He has a substantial net with 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 fun family 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

Asset based sales charges will generally be lowest when holding

Class A shares

When comparing mutual funds and etfs the disadvantages of investing in ETFs include which of the following

Commissions both when purchasing and liquidating shares

Which of the following is the most importantly 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

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

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

"An investment company with a low expense ratio and a portfolio that doesn't change" is a description of

a UIT

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

If an investment company invests in a fixed portfolio of municipal or corporate bonds it is classified as

unit investment trust

Which of the following statements regarding investment companies is NOT true

A 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

The term private fund would apply to all of the following except

A unit investment truwt

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 portfolios diversification

As defined in the investment company act of 1940, investment companies include

Face amount certificate companies, management companies, and unit investment trusts

Examples of private funds include

Hedge funds and private equity funds

By investing in a REIT, you are provided all of the following except; ownership of real property without management responsibilities, pass through tax treatment of operating losses, pass through tax treatment of income, diversification of real estate investment capital

Pass through tax treatment of operating losses

All of the following characteristics are advantages of a REIT except; tax deferral, diversification, professional management, liquidity

Tax deferral

An investor is studying the prospectus received fro. 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

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

A mutual fund must redeem its tendered shares within how many days after receiving a request for their redemption?

7

One reason that a private equity fund may operate under the section 3c7 exemption of the investment company act of 1940 is that

It would be able to have more than 100 investors

Hedge funds are issued by

Limited partnerships

All of the following are characteristics of exchange traded funds except; they are redeemable securities, they are typically designed to track an index, the generally have a lower expense ratio than comparable mutual funds, they are priced by supply and demand continuously during the trading day

They are redeemable securities

In a mutual fund portfolio you might find all of the following except

Short stock

All of the following are true of REITs except; they must take equity or debt positions never both, in most cases their shares are publicly traded, they must distribute at least 90% of their net taxable income for favorable tax treatment, they must invest at least 75% of their assets in real-estate related activities

They must take equity or debt positions never both

A client wishing to invest $10,000 in a tax-exempt unit investment trust would be acquiring

Units