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Series 7 > Unit 8 > Flashcards

Unit 8 Flashcards

1
Q

An investment company that continuously offers new equity shares in an actively managed portfolio of securities

A

Mutual fund

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2
Q

An investment company, either open or closed end, that trades various types of securities under the direction of its portfolio manager, in accordance with specific objectives stated in the prospectus

A

Management Company

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3
Q

An investment company that sells redeemable shares in a professionally selected portfolio of securities

A

Unit investment trust (UIT)

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4
Q

A company engaged in the business of pooling investors money and investing and reinvesting in securities.

Ex: face amount certificate companies, unit investment trusts, management companies

A

Investment company

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5
Q

An investment company that issued certificates obligating it to pay an investor a stated amount of money on a specific future date. The investor pays into the certificate in periodic payments or in a lump sum

A

Face amount certificate company (FAC)

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6
Q

A security that the issuer redeems upon the holders request.

Ex: shares in an open end investment company or Treasury Notes

A

Redeemable security

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7
Q

NAV per share plus any applicable sales charge

A

Public offering price (POP)

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8
Q
  1. An indication by an investor, trader or dealer of a willingness to buy a security or commodity; the price at which an investor can sell to a BD
  2. The price at which an investor can redeem shares of a mutual fund
A

Bid price

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9
Q

An indication by a trader or dealer of a willingness to sell a security or a commodity; the price at which an investor can buy a security

A

Ask price

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10
Q

An investment company that issued a fixed number of shares in an actively managed portfolio of securities. The shares may be of several classes and they are trades in the secondary marketplace either on an exchange or over the counter. The market price of the shares if determines by supply and demand

A

Closed end management company

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11
Q
  1. A class of mutual fund shares issued with a front end load
  2. Shares of a company that have differing characteristics from other classes of stock
A

Class A share

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12
Q

A no binding agreement between a purchaser of mutual funds and the fund underwriter that allows the investor up to 13 months to reach a specified dollar purchase

A

Letter of intent (LOI)

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13
Q

The sale of mutual fund shares in an amount just below the level at which the purchaser would qualify for reduced sales charge. This violates the Conduct Rules

A

Breakpoint sale

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14
Q

The schedule of sales charge discounts a mutual fund offers for lump sum or cumulative investments. Available to any person. Investment clubs or associations forms for the purpose of investing do not qualify.

A

Breakpoint

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15
Q

A fee that is charged when mutual fund shares or variable annuity contracts are redeemed. It is typically found with Class B shares (and for one year with Class C shares). It declines annually, decreasing to zero over an extended holding period, up to 8 years, as described in the prospectus

A

Back end load

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16
Q

A mutual fund commission or sales charge that is included in the purchase price

A

Front end load

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17
Q

A class of mutual fund shares issued with both a level load and a back end load

A

Class D

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18
Q

A class of mutual fund shares issued with a level load

A

Class C

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19
Q

A class of mutual fund shares issued with a back end load. A mutual fund offers different classes of shares to allow investors to choose the type of sales charge they will pay

A

Class B

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20
Q

The term used to describe a mutual fund whose shares are offered without a sales charge

A

No load fund

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21
Q

Fees used to cover the costs of marketing and distributing a fund to investors. Used to compensate registered representatives for servicing an account but should t be confused with sales charges

A

12b-1 Fees

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22
Q

The source of an investment company’s dividend payments

A

Net investment income (NII)

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23
Q

A mutual fund account where the investor commits to depositing amounts on a regular basis in addition to the initial sum invested

A

Voluntary accumulation plan

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24
Q

A system of buying mutual fund shares in fixed dollar amounts at regular fixed intervals regardless of the shares price. The investor purchases more shares when prices are low and fewer shares when prices are high thus lowering the average cost per share over time

A

Dollar cost averaging

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25
Q

A ratio for comparing a mutual funds efficiency by dividing the funds expenses by its net assets

A

Expense ratio

26
Q

The amount earned by a taxpayer when an asset is sold for a profit

A

Realized gain

27
Q

An investment company to which Subchapter M of the Internal Revenue Code grants special status that allows the flow through of tax consequences on a distribution to shareholders

A

Regulated investment company (RIC)

28
Q

A means for an investment company to avoid taxation on net investment income distributed to shareholders. If a mutual fund acts as a conduit for the distributor of net investment income, it may qualify as a regulated investment company and be taxed only on the income the fund retains

A

Conduit theory

29
Q

NII Formula

A

Dividends + interest - expense of fund

(D+1-E)

30
Q

A diversified common stock funds that has capital appreciation as its primary goal. It invests in companies that reinvest most of their earnings for expansion, research or development

A

Growth fund

31
Q

Total number of shares of common stock outstanding multiplied by the current market value per share

A

Market Capitalization

32
Q

Portfolio consists of companies with a market capitalization of more than $10 billion

A

Large cap Fund

33
Q

Also known as aggressive growth funds they are willing to take greater risk to maximize capital appreciation

A

Performance fund

34
Q

Less aggressive and have in their portfolios shares of companies with a market capitalization between $2 billion and $10 billion

A

Mid cap funds

35
Q

Focuses on companies whose stocks are currently undervalued

A

Value funds

36
Q

Primarily composed of stocks that stresses current income over growth

A

Equity income funds

37
Q

Buys securities of companies that may benefit from a change within the companies or in the economy

Speculative

A

Special situation funds

38
Q

Offer high appreciation potential but may also pose higher risks to the investor as a result of the concentration of investments

Speculative

Includes gold, technology, pharmaceutical, biotechnology, geographic funds

A

Sector funds

39
Q

Invests in securities on which call options can be sold

A

Option income funds

40
Q

Stock funds with a portfolio comprising a number of different classes of stock. Allows investors to diversify their investment via management and securities in a single fund

A

Blend/Core funds

41
Q

Invests in securities that mirror a market index. Buys and sells securities in a manner that mirrors the composition of the selected index.

Lower management costs

A

Index funds

42
Q

Worldwide funds that invest in securities of both the US and foreign countries

Currency risk
Political risk

Purchased to diversity portfolio

A

Global funds

43
Q

Invest only in the securities of foreign companies. Headquarters is outside the US. Primary objective is long term appreciation

Some seem current income

A

International funds

44
Q

Invest in stocks for appreciation and bonds for income. Securities purchased according to formula the manager can adjust to reflect market conditions.

Conservative

Aka: hybrid funds

A

Balanced funds

45
Q

Offers investors a guarantee of principal, adjusted for fund dividends and distributions on a set future date (maturity) while providing opportunities for higher returns through investment in higher risk and higher expected return asset classes such as equities

A

Principal protected mutual funds

46
Q

Corporations created by congress to foster a public purpose such as affordable housing

A

Government sponsored enterprises (GSE)

47
Q

A mutual fund whose investment objective is to provide current income while preserving safety of capital through investing ins e Curitiba backed by the US Treasury or issued by a government agency

A

US government and agency bond fund

48
Q

A mutual fund whose investment objective is to provide stable income with a minimal capital risk. It invests in come producing instruments that may include corporate, government or municipal bonds

A

Bond fund

49
Q

Designed to manage investment risk

Does not provide guaranteed income

Not risk free

Date set closest to year an investor anticipates needing the money

Aka: life cycle fund

A

Target date fund

50
Q

A mutual fund that splits its investment assets amount stocks, bonds and other vehicles with a view to provide a consistent return for the investor

A

Asset allocation fund

51
Q

What are the risks of ETFs?

A

Index risk

Tracking risk

52
Q

What are the risks of CEFs?

A

Pricing risk

Leverage risk

53
Q

What are the risks of UITs?

A

Market risk

Interest rate risk

54
Q

What’s re the risks of mutual funds?

A

Market risk

Interest rate risk

Net redemptions

Expense risk

Tenure risk

55
Q

What are benefits of ETFs?

A

Taxation

Expense ratio

Portfolio specificity

Exchange traded

Leverage and inverse

56
Q

What are benefits of CEFs?

A

Exchange traded

Pricing

Leverage

57
Q

What are benefits of UITs?

A

Income

Liquidity

Rolling over proceeds

58
Q

What are the benefits of mutual funds?

A

Choice of objectives

Convenience

Liquidity

Minimum initial investment

Automated investing and withdrawal

Convenient tax info

Combination privilege

Exchanges within family of funds

Leveraged and inverse funds

59
Q

What are the uses of ETFs?

A

Asset allocation

Following industry trends

Balancing a portfolio

Speculative trading

Hedging

60
Q

A mutual fund that invests in short term debt instruments. Funds objective is to earn interest while maintaining a stable net asset value of $1 per share. Usually sold with no load, the fund may also offer draft writing privileges and low opening investments

A

Money market fund

Series 7 (12 decks)

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