Chapter 7 Review

Similarities with ETFs and Closed End IC

Traded on registered stock exchanges Investors pay commissions to purchase and liquidate

When an open-end management investment company computes its net asset value per share, each of the following occurrences would have an impact EXCEPT

a greater value of shares being redeemed than purchased Because shares are purchased and redeemed at NAV, net redemptions (this case) or net purchases have no effect on the net asset value of the fund's shares. However, receipt of cash in the form of interest payments causes assets to increase while falling equity prices leads to a decrease.

What happens if at the end of the 13 months, the investor hasnt reached the letter of intent

liquidate funds to meet the ammount. also, if they have a 20k contribution, and theyve only contributed 16k but the value is 21k, they would still have to add the 4k to meet the letter of intent

The biggest difference between a listed and unlisted REIT

liquidity - the unlisted REIT is not liquid at all

What if an investor over contributes to the letter of intent

then they get the sales charge on the whole amount contributed

What is the best mutual fund vehicle to dollar cost average

A no load fund because buying a loaded fund again and again will result in higher sales charges

The GEMCO Asset Allocation Fund is in registration. In order for the fund to charge the maximum allowable sales charge on its Class A shares, the fund's prospectus must allow which of the following? I. Rights of accumulation. II. The privilege to exchange shares of this fund with other GEMCO funds at NAV. III. Price breakpoints offering reduced commissions for larger purchases. A) I and III. B) I, II and III. C) II and III. D) I and II.

A. Industry rules prohibit sales charges in excess of 8-½% on mutual fund purchases. However, in order to do so, shareholders must be given rights of accumulation and breakpoints must be available for larger purchases (generally starting at $10,000 or $15,000). There is no requirement to offer the exchange privilege.

Formula for NAV

Assets - Liabilities

The primary difference between an open-end and a closed-end investment company is:

Captalization

What kind of shares are elligable for a breakpoints

Class A shares only

What class would be best for a client that wants to generate income with as little risk and expense as possible

Class C shares, no front end load, and CDSCs go away after 1 year

When shares of a closed-end investment company are purchased by an investor, the price paid is based upon the

Current Asking Price the are sold based on supply and demand

What are the tax implications of a REIT Dividends Cap gains

Div- Taxed at ordinary Income CAP Gains- taxed as long term capital gains

A debt instrument, which may or may not be exchange traded, and where the final payment at maturity is based on the return of a single stock, a basket of stocks, or an equity index is known as

Exchange Traded Note

Net asset value per share for a mutual fund can be expected to decrease if the:

If fund paid distributions to shareholders

Regarding open-end investment companies, which of the following sales charges is based on the NAV per share Commission Redemption Fee 12-b1 Sales Load

Redemption Fee

All of the following are redeemable securities except: Variable Annuities REITS Mutual Funds UIT's

Reits, they have no active secondary market.

Features available in ETFs that are NOT found in the mutual funds would include

Sell short Be Bought and sold on margin

What is the tax consequence of transferring from one mutual fund family to another

Taxed as a gain or loss at the date of transaction