Management Companies

Question 1

How long is the investment adviser’s contract initially set at?

Answer 1

2 years

Question 2

What is the 75-5-10 rule for diversified funds?

Answer 2

75% or more of assets in securities

5% maximum of its assets invested in any one issuer

10% maximum holding of voting securities in one issuer

Question 3

Growth fund

Answer 3

invests primarily in equities of rapidly growing companies

Question 4

Growth and income

Answer 4

invests in “blue chip” equities that provide dividends and growth potential

Question 5

Income fund

Answer 5

invests in fixed income securities such as preferred stock and bonds

Question 6

5 types of income funds

Answer 6

US Government Securities
Municipal Bonds
Preferred Stock
Corporate Bonds
Money Market Securities

Question 7

Balanced fund

Answer 7

balances between equities and fixed income securities

Question 8

Index fund

Answer 8

matches portfolio composition to a recognized index; management fees are lower

Question 9

Specialized fund (sector fund)

Answer 9

invests in a particular industry or geographic area

Question 10

Special situation fund

Answer 10

invests in companies in bankruptcy or takeover candidates

Question 11

How is Net Asset Value calculated?

Answer 11

Total market value of underlying securities divided by number of common shares outstanding

Question 12

What does it mean if a fund is no-load?

Answer 12

Sold directly by sponsor, so there is no sales charge

Question 13

What is a money fund?

Answer 13

All shares prices locked at $1. As NAV increases, additional shares given out

Question 14

What does FINRA impose as the maximum sales charge for a open-ended fun?

Answer 14

8.5% of Public Offering Price

Question 15

How do you compute a sales charge?

Answer 15

Ask Price - Bid Price(NAV) / Ask Price

Question 16

If an open-ended fund share is redeemed, when must payment occur?

Answer 16

within 7 calendar days

Question 17

What is the limit to the Redemption fee a fund can charge?

Answer 17

Redemption fee + sales charge must not exceed 8.5% of POP

Question 18

Breakpoints

Answer 18

Reduced sales charge for large dollar purchase

Question 19

3 Breakpoint levels

Answer 19

0-$10k = 8.5%
$10k-$25k = 7.75%
$25k & over = 6.5%

Question 20

Offering price formula with breakpoints

Answer 20

NAV/

100%-Sales Charge %

Question 21

Letter of Intent

Answer 21

Allows a customer to indicate they will purchase a large amount of a fund over a period of time and they then get the breakpoint price

Question 22

Can a letter of intent allow for backdating of past purchases?

Answer 22

Yes, up to 90 days

Question 23

How long does a letter of intent last?

Answer 23

13 months

Question 24

Can the breakpoint be met by asset appreciation?

Answer 24

yes

Question 25

What are rights of accumulation?

Answer 25

Allow a customer to include current value of owned shares of a mutual fund when determining breakpoint pricing

Question 26

What are 2 situations when a customer would not be charged a sales charge?

Answer 26

Reinvestment of profit into fund and moving to another fund in the same "fund family"

Question 27

What are Rule 12b-1 fees?

Answer 27

Fees charged to mutual fund shares for purposes of promoting fund

Question 28

What is the maximum sales charge for a Rule 12b-1 fund?

Answer 28

7.25% if no account maintenance fee; 6.25% if there is an account maintenance fee

Question 29

Maximum of 12b-1 fee

Answer 29

.75%

Question 30

Class A Shares

Answer 30

High sales charge; very low 12b-1 charge; good for long-term investment

Question 31

Class B Shares

Answer 31

Contingent deferred sales charge, higher 12b-1 fee; good for intermediate term investors

Question 32

Class C Shares

Answer 32

No sales charge, high 12b-1 fee; only suitable for short term investment

Question 33

How does ETF pricing differ from mutual fund pricing?

Answer 33

Adjusted constantly, no sales charge

Question 34

how to calculate a fund's expense ratio?

Answer 34

Total Expenses/Total Net Assets

Question 35

How much income must a fund distribute to avoid taxation on that income?

Answer 35

97% of net investment income | 98% of capital gains

Question 36

Formula for current yield before ex-date

Answer 36

Annual income/offering price

Question 37

Current yield after ex-date

Answer 37

Annual income/ | offing price + prior year distributions

Question 38

Front-end load fund vs no-load fund

Answer 38

Front-end load funds have a sales charge

Question 39

Are ETFs open-end or close-end?

Answer 39

Open-end, but trade on exchanges

Question 40

Which is more tax-efficient: ETFs or Mutual funds

Answer 40

ETFs because they do not pay out capital gains on a yearly basis

Question 41

how often must mutual funds send our financial statements to shareholders?

Answer 41

2x per year