Investment Companies Quiz

Question 1

The average investor has limited assets but by pooling funds with other investors in an investment company the investor can receive the advantages of increased

Answer 1

Professional management and diversification

Question 2

Which of the following investments returns are based on a market index?

Answer 2

ETNs

ETFs

Question 3

Which of the following is a characteristic of a hybrid REIT?

Answer 3

Invests in real property
Provides potential appreciation
Invests in mortgages

Question 4

All of the following are characteristics of Unit investment Trusts

Answer 4

Units are redeemable by the issuer
A fixed portfolio
No secondary market trading

Question 5

Which of the following should be used when comparing mutual funds?

Answer 5

Risk factors
The funds investment policies
Quality of management

Question 6

An investor is interested in a REIT that will provide immediate income. The investor would best be served by

Answer 6

Mortgage REIT

Question 7

Which of the following is subject to higher maintenance requirements when purchased on margin?

Answer 7

Leveraged ETFs

Question 8

All of the following are characteristics of an Exchange Traded Fund (ETF)

Answer 8

ETFs usually trade near their NAV
ETFs can be purchased on margin 30 days after the IPO
ETFs provide intraday liquidity

Question 9

Which of the following would be in an equity REIT portfolio?

Answer 9

Shopping center
Office building
Vacant land

Question 10

The Investment company concept allows the individual investor to

Answer 10

Achieve wide diversification with a small investment

Access professional portfolio management at minimal cost

Question 11

Which type of investment companies charge a management fee?

Answer 11

Face amount certificates
Open end investment companies
Closed end investment companies

Question 12

A broad market index ETN carries all of the following risk?

Answer 12

Loss of principal
Market Risk
Credit Risk

Question 13

How often must performance statistics in a prospectus be updated?

Answer 13

Every 12 months

Question 14

An emerging markets currencies ETN may be an appropriate investment for which of the following persons?

Answer 14

An experienced investor lookin for a simple way to gain exposure to a portfolio of emerging markets currencies

Question 15

Which of the following accurately describes an ETN?

Answer 15

Principal at maturity is based on an index

Principal at maturity is uncertain

Question 16

Which of the following is true regarding ETNs?

Answer 16

The investor may hold until maturity or trade on an exchange
Principal and interest are not guaranteed
An ETNs return is based on a market index

Question 17

A hybrid REIT invests in

Answer 17

Mortgages

Real property

Question 18

If you were purchasing a security on installments and the investment matured at a fixed dollar amount in the future you would own a

Answer 18

Face amount certificate

Question 19

An equity REIT invest in

Answer 19

Real Estate

Question 20

Which type of investment company issues certificates that can be redeemed for a fixed amount on a specified date?

Answer 20

Face amount certificate

Question 21

Bill owns shares in a closed end investment company. He can dispose of his shares by

Answer 21

Sale on the open market

Question 22

Face amount certificates issue debt certificates that offer predetermined interest rates. The certificates may be purchased by either periodic installments or with a lump sum payment. These certificates have a maturity of at least.

Answer 22

24 months

Question 23

Which of the following is a privilege offered by a mutual fund family?

Answer 23

The ability to exchange shares of one mutual fund for shares in another mutual fund under the same family of funds with no additional sales charge

Question 24

Which of the following accurately describes an ETN?

Answer 24

Principal at maturity is based on an index

Principal at maturity is uncertain

Question 25

If you own securities that represent an undivided interest in a fixed portfolio with which type of investment company are you invested?

Answer 25

Unit investment trust

Question 26

The average investor has limited assets but by pooling funds with other investors in an investment company the investor can receive the advantages of increased

Answer 26

Professional management and diversification

Question 27

An investor purchased 100 shares of an investment company and paid the market price plus a commission. What did the investor purchase?

Answer 27

Closed end investment company shares

Question 28

Due to drought conditions a high net worth experienced investor believes that the price of broad range of agricultural commodities will increase. Which of the following might be an appropriate investment for this investor?

Answer 28

Agriculture sector total return ETN

Question 29

Which of the following is an investment company with the objective of achieving the same return as a particular market index?

Answer 29

Exchange traded fund

Question 30

A sales breakpoint for a mutual fund sale is available to

Answer 30

An individual account holder | A custodian and his minor child

Question 31

When making mutual fund recommendations a registered representative should

Answer 31

Compare standardized yields of similar funds Explain the funds expense ratio Consider the total return of the fund after sales charges and expenses

Question 32

The method by which a mutual fund offering price will be determined is

Answer 32

Outline in the prospectus

Question 33

A redeemable security is

Answer 33

A security with no secondary trading

Question 34

All of the following are contained in a funds prospectus

Answer 34

Method of calculating the funds net asset value The funds policy concerning loans Methods of redemption

Question 35

A prospectus can no longer be used if financial information is older than

Answer 35

16 months

Question 36

A new investor recently opened s mutual fund account and is planning to make a monthly investments with the goal of accumulating a sizable retirement account in the next 20 years m. What mutual fund feature best helps him in accomplishing this goal?

Answer 36

Automatic reinvestment of dividends and capital gains at NAV

Question 37

The shareholders of a mutual fund have certain rights associated with the ownership interests they hold in the company

Answer 37

Approval of investment advisory agreement Voting rights/ proxy rights regarding company issues Election of board

Question 38

Regarding CDSCs which of the following is true

Answer 38

``` They represent alternate methods of recovering fund marketing costs For holding period const associated with each class will differ The different share class options should always be pointed out by the rep ```

Question 39

An investment advisor receives a fee for his services. This fee is classified as

Answer 39

An operating expense of the fund

Question 40

Registered investment companies are required to have directors on their board that are independent of the management company. What is the required minimum percentage of disinterested directors?

Answer 40

40%

Question 41

Which type of investment company issues debt instruments that offer the investor a predetermined rate of interest?

Answer 41

Face amount certificate

Question 42

A closed end management company has shares that

Answer 42

Are not redeemable

Question 43

Mutual fund sales breakpoints are allowable only if the following conditions are met

Answer 43

Information concerning schedule breakpoints is given to shareholders and prospective investors Breakpoints apply uniformly to all offerers

Question 44

A customer owns 500 shares of XYZ mutual fund A shares. She can redeem her shares at

Answer 44

The NAV

Question 45

Which of the following statements is correct with respect to closed end investment companies?

Answer 45

They are listed and traded on exchanges There exists a fixed number of outstanding shares The issuing company does not redeem its own shares

Question 46

UITs have fixed portfolios which means that

Answer 46

The content of the portfolio is fixed for the life of the trust

Question 47

A client with $1000 to invest a mutual fund for his IRA account is concerned about front end loads reducing the size of the already small investment. The client plans on holding the investment until retirement (20 years or more). Class B shares may be more appropriate for this client than Class A shares for all of the following reasons.

Answer 47

Class B shares CDSC declines over time Class B shares have no front end load After a specified holding period of time Class B shares convert to Class A shares

Question 48

An investor purchasing a mutual fund will pay what price?

Answer 48

The next calculated public offering price after purchase

Question 49

A mutual funds custodian

Answer 49

Safeguards fund cash and securities

Question 50

What is the maximum front end sales charge for a mutual fund?

Answer 50

8 1/2 % of the public offering price

Question 51

The total expenses divided by the average net assets is the formula used in determining the mutual funds

Answer 51

Expense ratio

Question 52

ABC Equity Fund charges a 12b-1 fee. The funds Board of Directors must be made up at least

Answer 52

51% unaffiliated directors

Question 53

Registered investment companies are required to have directors on their board that are independent of the management company. What is the required minimum percentage of disinterested directors?

Answer 53

40%

Question 54

All of the following are duties of a transfer agent

Answer 54

Issuing new shares book entry Canceling redeemed shares Distributing capital gains to shareholders

Question 55

The responsibilities of the investment adviser include all of the following

Answer 55

Providing research on market and economic trends Making decisions on the diversification of the fund Timing investment decisions to take advantage of market swings

Question 56

Which of the following is true concerning exchange privileges within a family of funds?

Answer 56

It is a taxable event | There may be an exchange fee involved

Question 57

A mutual fund that charges the maximum sales charge of 8 1/2% allowable by the investment company act of 1940 have to offer

Answer 57

Distribution reinvestment at NAV Breakpoints Rights of accumulation

Question 58

Publications reporting total return data for an investment should use the recommended reporting period of

Answer 58

1 year 5 years and the lesser of 10 years or life of the investment

Question 59

Which of the following statements regarding an LOI is true

Answer 59

Maximum time limit of letter is 13 months The letter is not binding on the investor Backdating of 90 days to include prior purchases is allowable

Question 60

Mutual fund shareholders rights include

Answer 60

Election of directors Voting by proxy Approving changes in investment objectives and policies

Question 61

A client makes an initial deposit of $10,000 into his mutual fund account and at the same time signs a letter of intent for $50,000. All of the following statements are correct concerning this situation

Answer 61

He has 13 months to fulfill the deposit requirement of the letter of intent The fund will probably hold some of the initial shares in escrow If he fails to deposit the additional money he will be required to send a check for the additional sales charges due

Question 62

What’s are the tax consequences of changing from one fund to another within a family of funds?

Answer 62

Will have a taxable consequence because it is a purchase and sale

Question 63

One of the significant advantages of investing in mutual funds is

Answer 63

Automatic reinvestment of dividends and capitals gains at NAV

Question 64

The statistic that measures fund performance and includes reinvested distribution and share appreciation net of sales charges and expenses for the period is

Answer 64

Total return

Question 65

The purpose of breakpoints is to

Answer 65

Give the investor a reduced sales charge

Question 66

The NAV of a mutual fund is $15 per share and the sales charge is 8%. The POP

Answer 66

$16.30

Question 67

Sales breakpoints are allowable if which of the following conditions are met?

Answer 67

Breakpoints uniformly apply to all offerees | The investment company advises existing shareholders of any schedule changes within 1 year

Question 68

According to the investment company act of 1940 the maximum sales charge is

Answer 68

8 1/2%

Question 69

The NAV will not change it

Answer 69

The portfolio sells securities and retains the cash

Question 70

An investment company can perform certain activities only Be approval of majority of shareholders. Which of the following is a board of directors activity that is allowable without a shareholder vote?

Answer 70

Appointments of officers of the investment company