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Flashcards in investment company products Deck (44):
1

3 types of investment companies

-face amount certificates
-UITs
-management companies

2

describe a UIT

unit investment trust
-selects but does not manage assets
-fixed trust

3

describe a management company

-company with a manager making decisions based on specified objectives

4

what are the two types of management companies?

-open-ended
-closed-ended

5

describe purchasable shares of an open-ended company

continuous primary offerings; every share is an IPO

6

describe purchasable shares of a closed-ended company

the number of shares is fixed

7

describe prospectus requirements with open-ended companies?

prospectus is required

8

describe prospectus requirements with closed-ended companies?

no prospectus required after IPO

9

describe what kind of shares open-ended companies can issue?

common shares only

10

describe what kind of shares closed-ended companies can issue?

common, preferred, and bonds

11

describe how customers can redeem shares with an open-ended company?

when a customer sells shares, the management company must buy them back. cannot sell on the open market

12

describe how customers can redeem shares with a closed-ended company?

shares are not redeemable. to sell, customer has to sell on the open market

13

describe secondary trading of shares in an open-ended company?

there is no secondary trading since company has to redeem shares.

14

describe secondary trading of shares in a closed-ended company?

can trade in the secondary market in exchanges or OTC since shares are not redeemable by management company

15

how do open-ended companies determine price?

priced by formula, forward pricing
net asset value + sales charge = POP

16

how do closed-ended companies determine price?

priced by supply and demand

17

how do open-ended companies make money on account?

they charge an 8.5% max sales charge

18

how do closed-ended companies make money on account?

charge commissions

19

describe how diversification of management company using the 75 5 10 rule

-75% of assets invested so that:
---no more than 5% of assets are invested in one issuer
---fund owns no more than 10% of securities of any one issuer
-no restrictions on other 25%

20

describe the 4 types of stock funds

-growth-low dividends but will grow
-income-pays good dividends, low growth
-growth and income-mix of both
-specialized-25% invested in one industry

21

what is a balanced fund?

portfolio contains stocks and bonds

22

describe money market funds

-stable values ($1 per share) -yield varies
-have management fees
-safe, liquid

23

describe hedge funds

-not regulated by SEC
-aggressive investment techniques (short selling, margin)
-sophisticated investors only

24

describe index funds

S&P index 500 securities

25

describe global funds

portfolio contains both foreign/domestic stocks

26

describe international funds

portfolio contains foreign stocks only

27

how are ETFs classified?

legally classified as open-end funds but are not mutual funds

28

how are ETFs priced?

continuous pricing
-can buy sell throughout day
-no forward pricing

29

are ETFs marginable?

yes can buy on margin

30

tax consequences of ETFs?

no tax until shares are sold

31

describe a leveraged ETF

-very risky
-4X investment gains and losses

32

describe an inverse ETF

-bearish

33

describe the structure of the board of directors for a mutual fund

-minimum 40% noninterested (public)
-if 12b-1 fee charged, public directors must make up more than 50%

34

describe the custodian bank for a mutual fund

they are the safekeeper of fund assets

35

describe the transfer agent for a mutual fund

they are the record keepers and customer service department for the fund

36

describe underwriters of a mutual fund

-they market fund to broker/dealer
-share in sales charge with broker

37

formula for NAV per share

(assets-liabilities) / number of common shares

38

formula for POP

NAV / sales charge = POP

39

what is the bid and ask in a mutual fund's pricing

NAV-bid price
POP-ask price

40

describe the three share types

-a shares- front end load
-b shares- back end load
-c shares- level load (annual charge)

41

describe break point quatities

1-9999 = 8.5%
10000-24999- 7%
25000-49999-6%
50000-99999-4%

42

letter of intent is good for?

13 months

43

letter of intent can be backdated how many days?

90

44

funds who charge 8.5% must offer what?

-breakpoints
-rights of accumulation
-reinvestments at NAV