Unit 3&unit4

Under investment company act of 1940, no public offering may commence unless the fund has at least ____ in net assets

$100,000

Under investment company act of 1940, no registered investment company may own more than ___ of the voting shares of another registered investment company

3%

Tne of the differences between call options, rights, and warrants is that A) a corporation can't issue call options on its own stock. B) holders of call options stand to profit if the market price of the underlying stock increases. C) warrants generally have a strike price below the current market value of the underlying stock. D) rights generally have the longest "life" of these three.

A) Although a corporation can issue stock rights and warrants, they cannot issue call options. Listed call options (the only type that will be on the exam), are issued by the Options Clearing Corporation (OCC).

An investor goes short five soybean futures contracts on the Chicago Mercantile Exchange (CME). When the contract expires, A) only the seller is obligated to perform. B) both the buyer and the seller are obligated to perform. C) only the exchange is obligated to perform. D) only the buyer is obligated to perform.

B Among the ways in which futures differ from options is that both parties, long and short, are obligated to execute the contract.

A farmer entered into a forward contract to sell his produce at $2.25 per bushel. At the expiration date of the contract, the price was $2.00 per bushel. The farmer would receive A) $2.125 per contract. B) $2.25. C) a price negotiated between the buyer and the seller. D) $2.00.

C

Mark's company, which is located in Oregon, makes unfinished wood furniture. His company sells this furniture directly to the public from a large warehouse. Theresa's company, which is located in southern Georgia, grows cotton for t-shirt manufacturers. Which of the following statements correctly identify hedging strategies for Mark and Theresa? Mark should buy lumber futures. Theresa should sell cotton futures. Mark should sell lumber futures. Theresa should buy cotton futures.

Mark should buy lumber futures, Theresa should sell cotton futures.

Open end funds' share are sold at

NAV+ sales charges

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? A) The net asset value per share B) The exchange on which the fund is listed C) The fund manager's tenure D) The date of the annual shareholders meeting

c

under the Investment Company Act of 1940, Only the ____ is legally permitted to issue senior securities (preferred stock and bonds).

closed-end company

Nonsecurities derivatives include futures and forwards. Among the differences between futures and forwards is that ___are rarely exercised, while ____ generally are.

futures contracts

Under investment companies, only __ and __ provides for redemption by the issuer

mutual fund and UIT

The most common form of investment vehicle for venture capital is

the limited partnership.

As defined in the Investment Company Act of 1940, the term investment company would not include A) a unit investment trust. B) a management company. C) a holding company. D) a face-amount certificate company.

C) it oversees and manages the companies in which it holds a stake.

If a fund's ask price is different from the NAV, that fund would be referred to as

Closed End fund

A customer with no other mutual fund investments wishes to invest $47,000 in the XYZ Technology Fund. If the Class A shares are eligible for a breakpoint sales charge discount at the $50,000 investment level, the action least appropriate for an agent is to A) inform the customer that he can reduce his sales charge through a letter of intent. B) inform the customer that he can reduce his sales charge by combining purchases in other funds offered by XYZ group. C) inform the customer that he can reduce his sales charge by investing an additional $3,000. D) place the order as instructed.

D

The offering document for a fund states that the minimum initial investment is $500,000. This is most likely what type of fund? A) Small-cap growth B) Specialized C) Balanced D) Hedge

D

A speculator, believing that a drought in the Midwest will lead to a weak corn crop, would probably A) take a long position in orange juice futures. B) take a short position in corn futures. C) take a long position in corn forwards. D) take a long position in corn futures.

D) take a long position in corn futures.A weak corn crop means a shortage in the supply. That will lead to an increase in prices.