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If a customer purchases shares in a municipal bond fund, which of the following statements are TRUE?
An investor redeems 200 shares of ABC Fund, which has no redemption fee. If the quote is $12.05 bid $13.01 asked, what amount will the investor receive?A) 2410. B) 1098. C) 2275.5. D) 2602.
The transfer agent of a mutual fund:
The net asset value of an international bond fund can be expected to increase if:
Your answer, II and IV., was correct!.
Exchange traded funds:
All of the following are redeemable securities EXCEPT:A) variable annuities. B) REITs. C) unit investment trusts. D) mutual funds.
Which of the following mutual funds should an investment adviser representative recommend to a corporate client whose objective is current income with moderate risk?A) Money market fund. B) High-yield bond fund. C) Preferred stock fund. D) Aggressive growth fund.
Which of the following statements are TRUE of mutual fund dividend distributions?
Your answer, I and III., was correct!.
A broker/dealer selling open-end investment company shares will be required to return its entire selling concession if the principal underwriter has to repurchase those shares from a customer within how many business days of trade date?A) 15. B) 7. C) 30. D) 60.
An investment company that holds which of the following does NOT meet the definition of a diversified investment company under the 1940 Investment Company Act?A) 33% of its assets in securities issued by a small-cap new issue. B) 80% of its assets in securities of 50 health care companies. C) 4% of its assets invested in stock of a major publicly held corporation. D) 8% of a given corporation's voting stock in its portfolio.
In which of the following markets would an investor expect to find closed-end investment company shares traded?
Five years ago, the ABCD mutual fund bought 200,000 shares of Comet Industries at an average price of $42.25. After a series of accounting scandals, the shares are now trading at $6. If the fund decides to sell its shares, what will be the impact of the sale of Comet shares on the NAV of the ABCD fund?A) The NAV will rise. B) The NAV will fall. C) This depends on whether the fund can claim a tax loss on the sale. D) The NAV will not change.
A mutual fund's expense ratio is found by dividing its expenses by its:A) average annual net assets. B) public offering price. C) dividends. D) income.
An open-end investment company may do all of the following EXCEPT:A) borrow money. B) continuously offer shares. C) issue bonds. D) redeem shares.
The monies and securities of a mutual fund company are held by the:A) investment adviser. B) transfer agent. C) custodian bank. D) underwriter.
Your answer, custodian bank., was correct!.
Which of the following statements regarding a unit investment trust is NOT true?A) It invests according to stated objectives. B) It charges no management fee. C) It is considered an investment company. D) Overall responsibility for the fund rests with the board of directors.
Your answer, Overall responsibility for the fund rests with the board of directors., was correct!.
Which of the following types of mutual funds has capital appreciation as its investment objective?A) Balanced. B) Income. C) Municipal bond. D) Specialized.
All of the following describe the price of a no-load mutual fund EXCEPT:A) NAV. B) bid. C) POP. D) book value.
If an investor is in a low tax bracket and wishes to invest a moderate sum to gain some protection from inflation, which of the following would you recommend?A) Municipal unit investment trust. B) Growth mutual fund. C) GNMA fund. D) Money market mutual fund.
A mutual fund that charges 12b-1 fees may use the money to cover all of the following EXCEPT:A) sales fees. B) printing costs. C) promotion costs. D) management fees.
The principal underwriter of an open-end investment company is also known as the:A) dealer. B) sponsor. C) trustee. D) registrar.
If a customer submits a redemption order to her broker/dealer after the close of the New York Stock Exchange, she will receive a price based on the net asset value computed:A) within the next 2 business days. B) the previous business day. C) the next time the fund computes it. D) the same day regardless of when the order is received.
A mutual fund must, at a minimum, provide which of the following periodic reports to shareholders?
If an open-end investment company wishes to change its investment objective, it may only do so with a:A) unanimous vote of the board of directors. B) majority vote of the outstanding shares. C) two-thirds vote of the outstanding shareholders . D) majority vote of the outstanding shareholders .
Encouraging a customer to purchase mutual fund shares in an amount just under the next dollar volume bracket (which entitles the customer to a reduction in sales charges) or remaining silent on the matter is called:A) front running. B) a breakpoint sale. C) selling away. D) interpositioning.
A mutual fund's unrealized loss last month results in which of the following?
The fee received by the management company from an investment company depends on the:A) type of securities in the fund's portfolio. B) net assets of the fund. C) volume of new shares sold. D) profits of the fund.
Your answer, net assets of the fund., was correct!.
For a mutual fund that collects a 12b-1 fees, which of the following statements are TRUE?
Your answer, I and IV., was correct!.
A mutual fund prospectus must be sent when sending all of the following information about a mutual fund EXCEPT:A) a letter that states only the fund's objectives. B) a research report. C) an annual report. D) sales literature.
A stock mutual fund wishes to advertise itself as diversified. To be able to do so, the fund must invest:A) no more than 5% of its assets in any one target company. B) All of these. C) so that it holds no more than 10% of the voting stock of any one company. D) at least 75% of its assets in securities other than its own.
Your answer, All of these., was correct!.
Customers could pay a commission, rather than a sales charge, for shares of a(n):A) open-end investment company. B) front-end load fund. C) mutual fund. D) closed-end investment company.
A customer is interested in an exchange-traded fund (ETF). With regard to the trading of ETFs, the customer should be aware that:
Your answer, I and III., was correct!.
Last year, ABC Mutual Fund paid dividends of $1.50 per share and distributed $.80 per share in capital gains. The fund has a bid price of $13.50 and an asked price of $14.20. What is the fund's current yield?A) 0.1056. B) 0.1. C) 0.0492. D) 0.162.
Your answer, 0.1056., was correct!.
The open-end investment company share price quoted in the newspaper is the:A) bid price. B) confirmed price. C) underwriter's concession. D) dealer's price.
Your answer, bid price., was correct!.
A registered representative (RR) has just explained to a customer that to purchase a particular security the customer would pay the asking price plus a commission, not a sales charge. The RR is speaking of:A) a mutual fund. B) an open-end fund. C) a closed-end fund. D) all management company offerings.
Your answer, a closed-end fund., was correct!.
If a mutual fund's net asset value is $9.30 and its sales charge is 7%, its offering price is:A) 9.97. B) 10. C) 9.95. D) 10.7.
A customer wishes to redeem 1,000 shares of a mutual fund. The NAV and POP are $10, and a redemption fee of 0.5% will be charged. How much will the customer pay in redemption fees?A) 500. B) 50. C) 9950. D) 9500.
If a customer's portfolio is heavily invested in common stock mutual funds, what is the customer's greatest risk?A) Loss of diversification. B) Loss of liquidity. C) Loss of principal. D) Changes in interest rates.
Your answer, Loss of principal., was correct!.
An investment company share purchased at its NAV that can always be redeemed later at its then-current NAV is a:A) Class C share. B) Class D share. C) Class B share. D) Class A share.
Capital gains distributed by a mutual fund to shareholders are taxed:A) when accrued. B) never. C) when paid by the fund. D) when received.
Your answer, when accrued., was correct!.
If an investment company invests in a fixed portfolio of municipal or corporate bonds, it is classified as a:A) unit investment trust. B) closed-end company. C) utilities fund. D) growth fund.
Your answer, unit investment trust., was correct!.
A customer wishes to invest $800,000 in the Ajax Fund, an open-end company with a long-term growth objective. In order to take advantage of breakpoints, you recommend that the customer purchase:A) Class C shares. B) Class A or Class C shares. C) Class B shares. D) Class A shares.
Your answer, Class A shares., was correct!.
A FINRA member broker/dealer trading in shares of an open-end investment company may NOT buy shares of the fund:A) to cover existing orders. B) for the firm's own investment purposes. C) for the purpose of resale at a later date. D) at a discount from the public offering price.
All of the following would qualify as management companies EXCEPT:
Which of the following constitutes selling dividends?A) Withdrawing dividends, rather than reinvesting them in additional shares. B) Enticing customers to buy mutual fund shares just before the ex-dividend date. C) Encouraging customers to sell their mutual fund shares just before the ex-dividend date. D) Encouraging investors to postpone purchases of mutual fund shares until after the ex-date for a dividend distribution.
Your answer, Enticing customers to buy mutual fund shares just before the ex-dividend date., was correct!.
Which of the following trade actively in the secondary market?
If two customers wish to combine their purchases of a mutual fund to take advantage of the fund's breakpoints, you should advise them that they may:A) do so, provided that they have no business connection with the fund sponsor. B) not do so, because they both have accounts with the same broker/dealer. C) do so, provided that they indicate the proportion that goes into each separate account. D) not do so, because two unrelated buyers may not receive a breakpoint.
If a client prefers mutual fund investments in companies that primarily generate capital appreciation to companies that pay a steady dividend, what type of mutual fund and associated investment objective would you recommend?A) An index fund. B) A growth and income fund. C) A growth fund. D) An income fund.
Your answer, A growth fund., was correct!.
XYZ Technology Fund permits rights of accumulation. A shareholder has invested $9,000 and signed a letter of intent for a $15,000 investment. If his reinvested dividends during the 13 months total $720, how much money must he contribute to fulfill the letter of intent?A) 15000. B) 9000. C) 5280. D) 6000.
If ABC Fund pays regular dividends, offers a high degree of safety of principal, and appeals especially to investors seeking tax advantages, ABC is a(n):A) corporate bond fund. B) aggressive growth fund. C) money market fund. D) municipal bond fund.
In a mutual fund portfolio, it is permissible to buy all of the following EXCEPT:A) index options. B) stock on margin. C) shares of other mutual funds. D) junk bonds.
All of the following statements regarding money market funds are true EXCEPT:A) investors pay a management fee. B) dividends accrue daily. C) specified rates are guaranteed. D) investors can buy and sell shares quickly and easily.
Your answer, specified rates are guaranteed., was correct!.
The main purpose of dividend reinvestment in a mutual fund accumulation plan is to:A) avoid taxes. B) compound the growth of a mutual fund investment. C) protect against capital loss. D) avoid commissions or sales charges.
Your answer, compound the growth of a mutual fund investment., was correct!.
The management fees paid by an investment company are part of:A) the sales load. B) the operating expense of the fund. C) the custodial fees. D) the underwriting agreement.
Which of the following funds is most likely to contain within its portfolio securities of issuers who have NOT specified the use of the capital they are raising?A) Income fund offered by an investment company registered under the 1940 Investment Company Act B) No-load fund offered by a no-load mutual fund company C) Hedge fund containing blank-check and blind-pool offerings in its portfolio D) Exchange-traded growth fund
Closed-end investment company shares may be:
Which of the following funds would you recommend to a moderate-risk client seeking long-term capital gains who also values professional stock selection?A) S&P 500 Index fund. B) A large-cap growth fund. C) An international index fund. D) A small-cap growth fund.
Your answer, A large-cap growth fund., was correct!.
After a mutual fund's tenth year, performance statistics must show results for each of the following periods EXCEPT:A) 3 years. B) 5 years. C) 10 years. D) 1 year.
Your answer, 3 years., was correct!.
A shareholder invested in a mutual fund and has signed a letter of intent to invest $25,000. Her original investment was $13,000, and her current account value is $17,000. For her to complete the letter, she must deposit:A) 27000. B) 12000. C) 8000. D) 13000.
Your answer, 12000., was correct!.
A fund must inform its shareholders of their right to reinvest dividends at NAV:A) annually. B) at the time of each distribution. C) only at the time of original purchase. D) quarterly.
An investment adviser representative may describe dollar cost averaging to a customer as:A) a means of purchasing more shares when share prices are high. B) a form of a mutual fund withdrawal plan. C) a funding technique that will cause the average cost per share to be less than the average price per share. D) a program for investing that will ensure profits even in a declining market.
Your answer, a funding technique that will cause the average cost per share to be less than the average price per share., was correct!.
When discussing mutual funds with a customer, each of the following statements are prohibited EXCEPT:A) The income yield of the fund consists of both dividends and capital gains. B) Get a few friends to join with you to form an investment club and you may qualify for a breakpoint. C) Buy shares of different funds in the same fund family and you may qualify for a breakpoint on the total purchase. D) Buy the shares on record date in order to receive the dividend. .
Unrealized gain in a mutual fund portfolio does which of the following?
Your answer, II and III., was correct!.
Letters of intent may be backdated up to how many days?A) 120. B) 30. C) 60. D) 90.
A board of directors member for a mutual fund must serve a minimum term of:A) 3 months. B) 1 year. C) 2 years. D) 6 months.
Your answer, 1 year., was correct!.
Which of the following investment company portfolios is supervised rather than managed?A) Closed-end bond fund. B) Unit investment trust. C) Regulated open-end fund. D) Real estate investment trust.
Your answer, Unit investment trust., was correct!.
Closed-end investment companies:
Your answer, II and III., was correct!.
A prospectus must be delivered to customers in all of the following transactions EXCEPT the sale of a:A) new issue of registered common stock. B) publicly or exchange traded fund (ETF) in the secondary market. C) mutual fund. D) unit investment trust.
Which of the following is true regarding a "summary section" and a "statement of additional information" for management investment companies?A) Neither are required to be in the prospectus of a mutual fund. B) A summary section need not be included in the prospectus of a mutual fund. C) Both must be included in the prospectus of a management company. D) A statement of additional information (SAI) need not be included in the prospectus of a management company.
A tax-exempt bond fund may invest in:A) corporate bonds. B) short-term money market instruments. C) common stock. D) municipal bonds.
Your answer, municipal bonds., was correct!.
One of your clients purchased shares of the Ajax Mutual Fund several months ago. At that time, the NAV of the fund was $17.20. Today, the NAV is $17.56 and your client wants to know what accounts for the difference. You should advise him that the difference likely represents:A) capital gains. B) capital losses. C) realized appreciation. D) unrealized appreciation.
According to the Investment Company Act of 1940, a diversified mutual fund may hold, at most, what percentage of a corporation's voting securities?A) 75%. B) 50%. C) 5%. D) 10%.
Mutual fund shareholders are NOT taxed on:A) unrealized capital gains. B) reinvested dividends. C) capital gains distributions. D) interest distributions.
Your answer, unrealized capital gains., was correct!.
To qualify for the quantity discount, which of the following may NOT be joined together under the definition of "any person" ?A) Husband and wife investing in a joint account. B) Father and son in an UTMA account. C) Trust officer working on behalf of a single trust account. D) Father and his 35-year-old son investing in separate accounts.
According to the Investment Company Act of 1940, an open-end investment company must compute its NAV:A) monthly. B) annually. C) no less frequently than once per day. D) weekly.
A purchase or redemption order for investment company shares must be executed at a price based on the:A) net asset value next computed after the fund receives the order. B) net asset value computed at the close of trading on the NYSE the day before the fund receives the order. C) <i>best</i> net asset value computed the same day the fund receives the order. D) net asset value last computed before the fund receives the order.
If the ABCD mutual fund has a $25,000 breakpoint on its Class-A shares where the sales charge decreases from 5% to 4%, which of the following purchases would likely represent a breakpoint sale?A) 26000. B) 18000. C) 24000. D) 32000.
Your answer, 24000., was correct!.
SEC rules require that open-end management companies distribute dividends to their investors from the firm's:A) gross revenue. B) net investment income. C) capital gains. D) portfolio earnings.
Your answer, net investment income., was correct!.
FINRA rules require that, if a customer redeems mutual fund shares within 7 business days of purchase:A) the member firm must forfeit the concession earned. B) the customer is entitled to receive the original NAV or the current NAV, whichever is higher. C) the fund must report the redemption promptly to the SEC. D) the representative who sold the shares will be subject to a Code of Procedure hearing.
Your answer, the member firm must forfeit the concession earned., was correct!.
The exchange privilege offered by open-end investment companies allows investors to:A) delay the payment of taxes on shares. B) exchange shares of one open-end fund for another in the same fund family at a net asset value basis. C) purchase new fund shares from dividends. D) exchange personally owned securities for shares of the investment company.
Your answer, exchange shares of one open-end fund for another in the same fund family at a net asset value basis., was correct!.
The prospectus of the ABC Fund contains the phrase "will have at least one-quarter of common stock investments in the field of business machines." The ABC Fund is:A) a balanced fund. B) a specialized fund. C) a diversified fund. D) a growth and income fund.
Your answer, a specialized fund., was correct!.
The capital structure of an open-end investment company might include:A) only capital issues with no bank borrowing. B) preferred stock, common stock, and bonds. C) preferred and common stock with no bank borrowing. D) only one capital issue with limited bank borrowing.
All of the following events will affect the NAV per share of a mutual fund EXCEPT:A) Wholesale redemption of fund shares . B) The fund receives cash dividends on the securities in its portfolio . C) The fund pays dividends to its shareholders. D) Changes in the market value of the fund's portfolio of securities .
In the sale of open-end investment company shares, the prospectus must be delivered:A) before the sales solicitation . B) to the client either before or during the sales solicitation. C) at or before redemption. D) within 7 days of request.
Your answer, to the client either before or during the sales solicitation., was correct!.
The primary objective of a particular mutual fund is the payment of dividends, regardless of the market's current state. Capital growth is a secondary objective. Which of the following industry groups would be appropriate for the fund's portfolio?A) Computer technology. B) Aerospace. C) Consumer appliances. D) Public utilities.
Net asset value per share for a mutual fund can be expected to decrease if the:A) issuers of securities in the portfolio have made dividend distributions. B) fund has made dividend distributions to shareholders . C) securities in the portfolio have appreciated in value. D) fund has experienced net redemption of shares .
Which of the following statements regarding fixed municipal unit trusts are TRUE?
A customer has been following several investment company quotes in the newspaper. She notices that the GEM Fund has an NAV of $12 and a POP of $12.50, and that the ABC Fund has an NAV of $11.50 and a POP of $10.98. The customer should conclude that:A) both are open-end funds. B) ABC is an open-end fund and GEM is a closed-end fund. C) ABC and GEM are both unit investment trusts. D) GEM may be an open- or closed-end fund and ABC is a closed-end fund.
When speaking to a customer about exchange-traded funds (ETFs), a registered representative could CORRECTLY state that these funds:A) cannot be bought on margin. B) cannot be purchased using traditional limit or stop orders. C) can be purchased only by paying a sales charge added to the NAV. D) do not have the same potential tax consequences as mutual funds, such as annual capital gains distributions.
Last year, the bond market was profitable and ABC Fund had 70% of its assets in bonds. Next year, the fund's managers expect the stock market to do well, and will adjust the fund's portfolio so 60% of its assets will be invested in stock. ABC is probably what type of fund?A) Balanced. B) Specialized. C) Aggressive growth. D) Hedge.
Your answer, Balanced., was correct!.
Which of the following statements regarding 12b-1 fees is TRUE?A) These fees are charged to customers who redeem their shares within six months of purchase. B) These fees are assessed on Class-B shares only. C) These fees are charged against the assets of the fund to defray distribution expenses. D) These fees are assessed on Class-A shares only.
Your answer, These fees are charged against the assets of the fund to defray distribution expenses., was correct!.
All of the following could be a redeemable security under the Investment Company Act of 1940 EXCEPT a(n):A) security sold on an exchange at the market price buyers and sellers have established. B) investment company security sold as a continuous initial public offering. C) security issued by an open-end investment company. D) security that pays out each investor's proportionate share of the company's assets.
In the sale of open-end investment company shares, the prospectus:A) must be delivered at, or before, the delivery of the fund share certificate. B) must be delivered to the client either before or during the sales solicitation. C) must be delivered before the sales solicitation . D) is not necessary.
Your answer, must be delivered to the client either before or during the sales solicitation., was correct!.
The maximum sales load may be charged on the purchase of shares from an open-end investment company that offers all of the following EXCEPT:A) quantity discounts. B) rights of accumulation. C) dividend reinvestment at NAV. D) exchange privileges.
Mutual fund Class B shares assess:A) no load. B) a deferred sales load. C) a level load. D) a front-end load.
Under the Investment Company Act of 1940, redemption payments for mutual fund shares must be made within how many days?A) 5. B) 15. C) 10. D) 7.
Your answer, 7., was correct!.
A broker/dealer with a sales agreement with a mutual fund must return all concessions to the underwriter if a customer redeems his shares:A) within 5 business days of purchase. B) under no circumstances. C) within 7 business days of purchase. D) within 10 business days of purchase.
Your answer, within 7 business days of purchase., was correct!.
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