Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

Series 7 > 8: INVESTMENT COMPANIES (269) > Flashcards

8: INVESTMENT COMPANIES (269) Flashcards

(95 cards)

Start Studying
1
Q

T/F: The practice of selling dividends is prohibited

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Does a closed end fund redeem shares?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

T/F: Class B shares can offer breakpoints under certian circumstances

A

False

Class B shares never offer breakpoints, even if you invest a lot of $

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

[Class B shares] T/F: The longer the fund is held, the smaller the sales charge will be.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

T/F: Breakpoints favor those with more money to invest

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

T/F: Generally, the contingent deferred sales charge will be reduced or each year the investor holds the security

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Can deferred compensation plans be discriminatory?

A

Yes

Deferred compensation plans are not qualified plans and may be discriminatory.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Do breakpoints apply to Class B & Class C shares?

A

No

Breakpoints apply to Class A shares only

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

T/F: Class B shares convert to A-shares if held for several years

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

T/F: there is no tax free accumulation to the investor when a fund is taxed using the conduit theory of taxation

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

[Class B shares] T/F: The longer you hold the shares the lower your deferred sales charge

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

T/F: Mutual funds can call themselves “no load” as long as any 12b-1 fees don’t exceed .75%

A

False

Mutual fund can call themselves no-load as long as they do not have a 12b-1 charge that exceeds .25%.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Which has a lower yearly expense ratio: Class A shares or Class B shares

A

Class A shares

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

T/F: An unrealized gain in a mutual fund portfolio is realized by shareholders only when they redeem their shares

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is the term for fees an investor pays when he SELLS his mutual fund shares?

A

Back end loads

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

If interest rates increase, will the interest income of an open end bond fund increase/decrease?

A

Increase

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What kind of fees do Class A shares charge?

A

A comission called a “front end load”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

T/F: Mutual fund can call themselves no-load as long as they do not have a 12b-1 charge that exceeds .25%.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

[Class C shares] T/F: A back-end load is charged if funds are withdrawn within the first year

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

T/F: Class C shares charge an annual fee for distrubution and marketing costs

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

T/F: ERISA was established to protect the retirement funds of employees working in the private sector only

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

T/F: Class C shares charge front-end fees

A

False, there are no front end fees with Class C shares

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

A level load is aka as a ____ fee

A

12b-1 fee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Are private sector plans covered by ERISA guidelines

A

Yes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Is the employer allowed to tax tax deductions for contributions made to an employee's SEP IRA
Yes
26
Do Class A shares offer breakpoint discounts?
Yes
27
Do Clas C shares offer any opportunities for discounts?
No
28
T/F: under the pipeline theory of taxation, income from a fund is only taxed twice
True | Once at corporate level & once at individual level
29
Which has more complicated rules for employers to follow: ERISA or SEP IRA
ERISA is more complicated | That's why ppl use SEP IRA
30
Do Class B shares charge high exit fees?
Yes
31
Do Class A shares offer right of accumulation?
Yes
32
T/F: under the pipeline theory of taxation, the income is taxed once at the corporate level and once at the fund level.
False | Income is taxed twice but it’s at the corporate and individual level. (Not the fund level)
33
Does ERISA apply to employees of public sector entities (likes city & state governments)
No | ERISA was established to protect the retirement funds of employees working in the private sector only
34
T/F: Level load shares, or Class C shares, come with annual charges, set at a fixed percentage.
True
35
Which class of shares is best for investors who will redeem the shares soon?
Class C shares
36
What is beneficial about Class B shares converting to Class A after the specific holding period?
The fact that Class A shares have a lower yearly expense ratio
37
Mutual funds sell at NAV plus ____
Mutual funds sell at NAV plus sales charge.
38
Can a closed end fund trade at a premium/discount compared to it's NAV?
Yes The NAV of the fund is calculated regularly. However, the price that it trades for on the exchange is determined entirely by supply and demand
39
Do qualififed retirement plans have to segregate funds from corporate or union assets
Yes
40
T/F: Class B shares charge Back-End loads
True
41
T/F: Class B shares convert to Class A after a certian period of time
True
42
Are Back-End Loads paid when buying/selling mutual fund shares?
Selling
43
A contingent deffered sales charge (CDSC) is also known as what?
A "back-end load" or "sales charge"
44
T/F: Closed-end investment companies are allowed to issue debt securities
True
45
How long does a letter of intent last for?
13 months
46
Is a manager needed for a unit investment trust?
No The securities in the portfolio are not traded, so no manager is needed.
47
Can an open-end investment company issue debt securities?
No, it can purchase debt securities for it’s portfolio but it can’t issue them
48
Two other names for a closed-end fund
"closed-end investment" and "closed-end mutual fund."
49
T/F: Class C shares have a small exit fee which is usually waved after one year
True
50
The largest type of closed-end fund, evaluated by assets under management, is _______
a municipal bond fund
51
What does SEP IRA stand for
Simplified employee pension IRA
52
Are 401(K) plans covered by ERISA guidelines
Yes
53
T/F: A unit investment trust is supervised, not managed
True, | The securities in the portfolio are not traded, so no manager is needed
54
T/F: Class C shares are level load funds
True
55
Are profit sharing plans covered by ERISA guidlines
Yes
56
Why is Rights of Accumulation helpful when saving for retirement?
Because working-age adults are often able to invest more each year
57
Can employers contribute to employees SEP IRA
Yes
58
T/F: If an investor holds class B shares until the end of the holding period, he can avoid paying the CDSC
True
59
Is the sales charge included in the public offering price (POP)
Yes
60
T/F: Under the conduit, or pipeline theory of taxation, a fund is liable for taxes only on the income retained if it distributes at least 90% of its net investment income
True
61
Rights of Accumulation
Allows you to revieve a discount on the front-end load if you reach the first breakpoint with your second installment Example: Suppose that the first breakpoint is $25,000, but your initial investment was $10,000. If you invest another $15,000 to reach the breakpoint on the second installment, you will receive a discounted front-load fee
62
Do class C shares offer any opporunities for conversions?
No
63
Does the conditional deferred sales charge apply to Class B & Class C shares?
Yes
64
Does the price of a closed end fund fluctuate throuhgout the trading day?
Yes
65
12b-1 fees
Marketing and distribution fees included in the fund's expense ratio
66
What does ERISA protect?
The retirement funds of employees working in the private sector
67
Are closed-end investment companies allowed to issue preferred stock?
Yes
68
Do Class B shares charge a front end fee?
No
69
Are class A shares a good choice for wealthy investors?
Yes | Due to the fact that they reduce upfront fees for larger investments
70
Does the portfolio of a UIT change after it’s established?
No
71
Are front and back end loads part of the expense ratio?
No
72
Are public sector plans covered by ERISA guidlines
No
73
T/F: the payment structure for level load funds continutes for as long as the investor owns shares in the fund
True
74
T/F: Class C shares a not very popular with retail investors
False, Class C sares ARE popular with retail investor
75
T/F: Under the pipeline (or conduit) theory of taxation, an investor’s income accumulates tax free.
False Under the conduit theory of taxation, the income is taxes twice (once at corp level & once a individual level) but not at the fund level
76
The contingent deferred sales charge (CDSC) is aka as _____
“Back-end load” or “sales charge”
77
[Class A shares] Can investors who provide a letter of intent to invest above a breakpoint recieve a discount?
Yes
78
T/F: Most business development companies (BDCs) are classified as a closed end investment-company.
True
79
If am employer is matching conributions in an ERISA-qualified retirement plan, what does the vesting schedule tell you?
When the employer contribtions (the money they matched) become the employees
80
What is a drawback about Class B shares for wealthy investors?
There are no breakpoints
81
Can a closed end fund trade at a premium/discount compared to it's NAV?
Yes The NAV of the fund is calculated regularly. However, the price that it trades for on the exchange is determined entirely by supply and demand
82
T/F: Class A shares require low initial investments
False, | Class A shares require a HIGH initial investement
83
Do shares of a closed-end investment company trade in the secondary market?
Yes
84
Do Class C shares tend to have high/low expense ratios
High expense ratios
85
Under MSRB rules what is the max dollar amount of business related gratuities and gifts an RR can give to one person in a year?
$100
86
T/F: Most business development companies (BDCs) are classified as an open-end investment company
False
87
T/F: Closed-end funds do not trade actively in the secondary market
False | Closed-end funds do trade actively in the secondary market
88
ERISA sets minimum standards for these 4 things regarding qualified retirement plans
1. Participation 2. Vesting 3. Benefit accrual 4. Funding of the plans
89
What is the term for what it costs an investment company to operate the fund
Yearly expense ratio
90
Are Class A shares good for investors with short time horizons?
No
91
T/F: Standard IRAs usually have higher annual contribution limits than SEP IRAs
False | SEP IRAs usually have the higher limit
92
Which shares charge the highest expense ratio?
``` Class B shares (at least until converted into class A) ```
93
T/F: A unit investment trust buys securities and holds them until redemption or until a specified future date.
True
94
Best Class of shares for investors with little cash and long time horizons
Class B shares
95
Are most business development companies classified as open end or closed end investment companies?
Closed end Most business development companies are closed end

Series 7 (64 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions