All of the following statements are TRUE about closed-end investment companies EXCEPT that the

Under FINRA/SEC rules for mutual funds, which of the following best define gifts, prizes, and sales awards distributed to registered representatives? [A] Sales charges [B] 12b-1 fees [C] Cash compensation [D] Non-cash compensation

An open-end investment company (mutual fund) has increased in value because of a rise in the market. This would be best characterized as: [A] A capital gain [B] A profit [C] Appreciation [D] None of the above

Which of the following represents one of the best reasons for investing in an investment company? [A] Minimal market risks [B] Short-term trading opportunities [C] Guaranteed yield and return of principal [D] Diversification and professional management

Diversification and professional management

Which of the following would NOT be permitted when dealing with illustrations pertaining to yields or income levels in relation to mutual funds and variable annuities? [A] Illustrations of annualized yields [B] Illustrations pertaining to current yields [C] Illustrations of projected earnings and yields [D] Illustrations of income and yields for the preceding 5-year period

Illustrations of projected earnings and yields

When comparing a Mutual Fund to an Exchange Traded Fund which of the following is true? [A] Both are subject to market risk [B] Both are traded during the trading day [C] Both can be bought on Margin [D] Both have actively traded portfolios

Both are subject to market risk

All of the following statements would be true with regard to Hedge Funds EXCEPT: [A] They take long and short positions use derivatives and are unregulated. [B] All sophisticated investors are allowed to invest in Hedge Funds. [C] They generally offer investors the ability to sell monthly, quarterly, or annually. [D] They are not registered under the Investment Company Act of 1940.

All sophisticated investors are allowed to invest in Hedge Funds.

All of the following would be considered to be a benefit to investors purchasing ETNs EXCEPT: [A] No annual tax since ETNs do not pay interest of dividends [B] Investor fees accumulate annually [C] No tracking errors [D] Participation in market sectors ordinarily not accessible to many investors

Investor fees accumulate annually

The Net Asset Value of mutual fund shares is best defined as the

closing market value of all the securities in the fund's portfolio plus any interest or dividend income received on the securities in the portfolio.

A customer interested in income and capital gains would most likely choose which of the following investments? [A] stripped treasuries [B] growth stocks [C] zero coupon corporate bonds [D] mutual funds

A numerical measure of how much the return on a mutual fund has varied regardless of cause, from the historical average return of the fund is known as: [A] current yield. [B] standard deviation. [C] beta or alpha. [D] dividend payout ratio.

What would not be considered acceptable if received by a registered representative except

All expense paid ten day vacation to the top sellers of investment company shares paid for by the investment company.

A client recently purchased a sizeable number of mutual fund shares and knows that the Net Asset Value will change daily. The customer asks the RR how the NAV number is computed. Which of the following best describes the computation to arrive at NAV per share?

NAV per share is calculated by subtracting the liabilities of the fund from the total assets of the fund, then dividing this number by the total number of shares currently outstanding.

Which of the following investment companies issue only redeemable securities? ~open-end investment companies ~closed-end investment companies ~unit investment trusts

~open-end investment companies ~unit investment trusts

Which two of the following are correct statements regarding capital gains distributions from mutual funds? ~When payment is made, the net asset value of the shares is reduced. ~Payment must be taken in the form of additional shares. ~They are derived from realized long term gains on the portfolio. ~Payment is taxed as ordinary income to the investor.

~When payment is made, the net asset value of the shares is reduced. ~They are derived from realized long term gains on the portfolio.

The characteristic that BEST describes a sector fund is: [A] It concentrates its investments in a single industry. [B] It rotates its investments from one industrial sector to another. [C] It specializes in "special situation" stock. [D] It contains stocks of companies in a single country only.

It concentrates its investments in a single industry.

Which of the following is true of mutual fund dividend distributions that are reinvested by the investor? [A] The reinvested dividends are not taxable to the investor. [B] The entire amount of reinvested dividends are fully taxable to the investor. [C] Taxation on the dividend is deferred until the shares are sold. [D] Only the portion of the dividend that represents a capital gain is taxable.

The entire amount of reinvested dividends are fully taxable to the investor.

Each of the following would be potential ways to distinguish between different classes of mutual fund shares, EXCEPT: [A] Sales load percentages [B] Investment objectives [C] Fund fees and expenses [D] Timing of the assessment of sales loads

An investor is reviewing their portfolio & calls in to discuss their investments. The customer holds equal amounts of 3 separate investment companies from the same family of funds in their portfolio, all of which have the same overall investment objective & all of which invest in similar corporate securities. The customer wants to know why the sales loads & fees charged by the three funds vary so widely despite all three having so many similarities in terms of objective, portfolio, and performance. Which of the following is the MOST probable reason for the differences?

has purchased three different classes of mutual fund shares.

Redeemable shares are issued by which of the following types of investment companies? ~open-end investment companies ~closed-end investment companies ~unit investment trusts ~no load mutual funds

~open-end investment companies ~unit investment trusts
~no load mutual funds

Following are the prices of two mutual funds published at the end of the day on April 18. Investor A buys 300 shares of the Athens Fund at 10 a.m. April 18. He would pay a total of?                                       NAV          Offering Price          NAV Change Athens Fund            $5.72            $6.08                            $-.02 Troy Fund                  $8.65            $9.25                                -.04

$1,824 only When purchasing fund shares, investors pay the next calculated Offer Price after the order is entered. $6.08 Offer Price x 300 Shares *$1,824 * There is no commission on open end funds, but there may be a sales charge/load.

An investment company which maintains a diversified portfolio of bonds, preferred stocks, and common stocks would be classified as a(n) [A] Income Fund [B] Specialized Fund [C] Balanced Fund [D] Leveraged Fund

All of the following are correct about a LOI except [A] The time limitation of the purchase period is 13 months. [B] Redemption privileges are suspended during the LOI time period. [C] The LOI may be backdated up to 90 days. [D] Some of the shares purchased under the LOI may be held in escrow by the fund

Redemption privileges are suspended during the LOI time period.

An investment company that provides debt capital to small and mid-sized companies that generally cannot easily raise capital is best described as a: [A] Mutual fund [B] Business Development Company [C] Private equity fund [D] Hedge fund

Business Development Company

The safekeeping of securities held by a mutual fund is done by the: [A] transfer agent [B] custodian [C] underwriter [D] syndicate manager

In relation to the federal taxation of mutual funds, it is correct to state that:

Most mutual funds distribute at least 90% of their net investment income so that they may acquire "conduit" status and avoid taxation of distributed income.

If an investor buys shares of a closed-end investment company, which of the following will directly influence the price paid for the shares?

The bid and ask for the fund in the secondary market, along with any commissions or mark-ups/mark-downs

All of the following securities are issued at a discount and mature at par EXCEPT: [A] Face-Amount Certificates [B] Zero-coupon bonds [C] Treasury Bills [D] Unit Investment Trusts:

Supply and demand will determine the price paid for all of the following securities EXCEPT: [A] Closed-End Investment Companies [B] Open-End Investment Companies [C] Corporate Debt Instruments [D] Equity Securities like Common and Preferred Stock

Open-End Investment Companies

Which of the following are types of mutual funds categories? growth funds sector funds global funds gold funds

All choices listed are different types of mutual funds available to investors.

Concerning public communications about investment companies all of the following statements are true EXCEPT: [A] Performance comparisons are prohibited. [B] Performance comparisons should cover the same period of time. [C] Performance comparisons should be for similar investment objectives. [D] The purpose of a performance comparison should be stated when comparing an investment company and a market index.

Performance comparisons are prohibited.

Athens Fund has an ask price of $19.25, while the ask price of the Troy Fund is $18.50. The net asset value per share of the Athens Fund is $20.25, while the Troy Fund has a net asset value per share of $17.02. Which of the following is probably true? [A] Both funds are closed-end. [B] Both funds are open-end. [C] Athens is a closed-end fund, while Troy is an open-end fund. [D] Troy is a closed-end fund, while Athens is an open-end fund

Athens is a closed-end fund, while Troy is an open-end fund.

Which of the following statements about mutual funds is (are) correct? ~A reduced sales charge is available to investors signing a Letter of Intent to purchase a certain amount of shares during a 10-month period. ~The maximum sales charge is 7%. ~Under rights of accumulation, the sales charge on new purchases is reduced when the total worth of already held shares exceeds the sales charge breakpoint within a specific period. ~No load funds may charge a liquidation fee.

~Under rights of accumulation, the sales charge on new purchases is reduced when the total worth of already held shares exceeds the sales charge breakpoint within a specific period. ~No load funds may charge a liquidation fee.

Which of the following would be the most important factor to consider when determining the suitability of an investment in a mutual fund? [A]  Exchange privileges [B] NAV track record [C] Fund objectives [D] Reinvestment privileges

A Money Market fund will normally:

Credit dividends to customers daily and pays them out to customer monthly.

One of your customers calls and is seeking a fund that has a high level of capital appreciation. Of the following, which BEST fits this customer's objectives?

The best choice would be a fund made up of small cap stocks.

A mutual fund investor elects to reinvest a dividend rather than take it in cash. The tax consequence is: [A] The dividend is not taxable [B] The dividend is taxable as a capital gain [C] The dividend is taxable as ordinary income [D] The dividend will be taxable when withdrawn in cash later.

The dividend is taxable as ordinary income

In the securities industry, what is meant by the term "Net Change"? [A] It is the after tax return received by an investor. [B] It is the difference between the current bid and ask price. [C] It is the difference between the closing price on the reported trading date and the previous day's closing price. [D] It is a fund's net assets (total assets minus total liabilities).

It is the difference between the closing price on the reported trading date and the previous day's closing price.

Which of the following investments would provide an investor with the most liquidity? [A] money market funds [B] limited partnership participation [C] certificate of deposit [D] long-term convertible corporate bond

Which of the following would be responsible for the safekeeping of the securities of a mutual fund? [A] Underwriter [B] Manager [C] Transfer Agent [D] Custodian

Which of the following is not true regarding Exchange Traded Funds (ETF's)? [A] They are similar to index mutual funds [B] They cannot be bought on margin or sold short [C] They generally have low annual expenses [D] They are traded through the trading day.

They cannot be bought on margin or sold short

Which of the following mutual funds would generally be considered the MOST liquid? [A] Aggressive Growth Fund [B] Money Market Fund [C] Balanced Fund [D] Bond Fund

A mutual fund that requires investments in a diversified list of bonds, preferred stocks and common stocks is classified as a [A] growth fund. [B] specialized fund. [C] balanced fund. [D] income fund.

Exchange Traded Notes provide which of the following to investors? [A] Protection of the investors principal that was invested [B] Allows investors access to market sectors that would ordinarily be unsuitable [C] An equity position in the index [D] Shares which represent ownership in the issuing bank

Allows investors access to market sectors that would ordinarily be unsuitable

Operating expenses from mutual funds are paid from which of the following? [A] gross profits earned in the most current quarter [B] capital gains distributions [C] investment income or dividends [D] a percentage of the net assets of the fund

investment income or dividends

Concerning open-end investment companies, it is correct to state that they: [A] Are not regulated in any way by the Investment Company Act of 1940. [B] Cannot sell more than the number of shares they have initially registered. [C] Are required to redeem their shares when so requested by their shareholders. [D] Do not usually have specific stated investment objectives.

Are required to redeem their shares when so requested by their shareholders.

Dividends are paid by all of the following types of securities EXCEPT: [A] American Depository Receipts [B] Unit Investment Trusts [C] Money Market Funds [D] Preferred Stock

A registered representative has been calling his clients advising them to buy a stock since it will trade ex-dividend tomorrow and if they buy today, they will get the dividend. This is: [A] a good practice since the investor will receive the dividend [B] exempt from the short sale lipstick rule [C] prohibited under sales practice rules [D] not beneficial or detrimental to the client

prohibited under sales practice rules

An investor wishing to switch from his growth fund to an income fund within the same family would do so by using the: [A] Reinvestment Privilege [B] Sale and Repurchase Plan [C] Redemption Reinvestment Plan [D] Conversion Privileges

Which of the following types of mutual funds would ordinarily be considered the LEAST volatile? [A] Specialized Fund [B] Growth Fund [C] Income Fund [D] Balanced Fund

When could one expect changes in the net asset value of a mutual fund? [A] When there are changes in the value of securities within the fund's portfolio [B] When customers redeem fund shares [C] When customers exchange fund shares for another fund's shares within the same family [D] When shares of the fund are split

When there are changes in the value of securities within the fund's portfolio

Which of the following statements about a closed

Which of the following are characteristics of closed

Which of the following is a characteristic of closed

What is a closed