unit 4

Question 1

what are the 3 types of investment companies

Answer 1

1. face-amount companies 9FAC)
2. unit investment trusts (UITs)
3. management investment companies

Question 2

face-amount companies (FAC)

Answer 2

contract between issuer and investor which guarantees payment of states sum to investor. Unmanaged.

Question 3

unit investments trusts (UITs)

Answer 3

create a portfolio of debt or equity securities designed to meet company’s objectives. a fixed UIT is a bond portfolio that terminates at bond maturity. nonfixed UIT is an equity portfolio that terminates on a predetermined date. Unmanaged.

Question 4

Management investment companies

Answer 4

Actively manages securities portfolio to achieve investment objective. Can be close or open ended.

Close-end investment companies can issue common stock, preferred stock, and debt securities.

Open- end (aka mutual fund) investment companies can only issue common stock. profit from mutual fund can be used to buy other stocks and bonds for their investment portfolio.