4: Packaged Investments Flashcards
______ is a corporation or trust that pools investors’ money and then invests that money in securities on their behalf.
Investment Company
By selling share to the public, a corporation or investment company _________?
Raises capital
provides a framework for the operation of investment companies, with the goal of protecting investors and ensuring that investment companies operate in a transparent and fair manner.
Investment Company Act of 1940
Face-Amount Certificate (FAC)
Unit Investment Trusts (UITs)
& Management Investment Companies are considered the 3 types of ________ ?
Investment Companies
_______ annuities have subaccounts that are defined as either UITs or Open-End management investment companies
Variable
_______ is a contract between an investor and an issuer in which the issuer guarantees payment of a stated (Face amount) sum to the investor at some set date in the future.
Face-amount certificates (FACs)
This classification of an investment company entails that the investor, in return for future payment, agrees to pay the issuer a set amount of money, either as a lump sum or in periodic installments.
Face-amount certificates (FACs)
Define the term “Fully paid FAC”
When the investor pays for the certificate in a lump sum.
________ an investment company organized under a trust indenture.
- Do not have a BoD (They have Trustees)
Unit Investment Trusts (UITs)
_______ create a portfolio of debt or equity securities designed to meet the company’s objectives.
- They then sell redeemable interests, also known as units or shares of beneficial interest
UITs
A ____ may be fixed or nonfixed.
UIT
a _____ UIT typically purchases a portfolio of bonds and terminates when the bonds in the portfolio mature.
Debt-Fixed UIT
a ____ UIT purchases a portfolio of stocks and, because stocks don’t have a maturity date, terminates at a predetermined date.
Equity-Fixed UIT
_____ do not typically assess management fees because there is no need to hire an investment adviser to monitor and trade positions within the portfolio.
Fixed Unit Investment Trust (UITs)
A ____ purchases shares of an underlying mutual fund.
A Nonfixed UIT
is a type of investment vehicle that pools money from multiple investors to purchase a portfolio of securities, typically stocks or bonds. Unlike a traditional fixed UIT, which invests in a predetermined portfolio of securities with a fixed investment objective, a nonfixed UIT has a more flexible investment approach and allows for changes to the portfolio holdings over time.
____ and ____s are not managed, once the portfolios are composed, they do not change.
- Also do not trade in the secondary market; they are redeemed only through the issuer
FACs and UITs
Name the 2 types of managed investment companies
Closed and Open End
Both ____ and _____ managed companies sell shares to the public in an initial public offering (IPO)
Closed and Open End
A ______ company’s initial offering of shares is limited
Closed-End
A _____ investment company is perpetually offering new shares to the public.
Open-End
The investment company issues a fixed number of shares to investors through an initial public offering (IPO).
- Once sold the fund is closed to new investors
- After the IPO, the shares of the closed-end fund are traded on an exchange like stocks. The price of the shares is determined by supply and demand in the market.
- The net asset value (NAV) of the closed-end fund is calculated by subtracting the fund’s liabilities from the value of its assets, and dividing by the number of outstanding shares.
- may pay dividends to their shareholders out of the income generated by their portfolio
Closed-end investment companies
are often called publicly traded funds and are the only investment company security that trades in the secondary market.
Closed-end investment companies
How do we calculate NAV per share?
the funds NAV
_______________________ =
# outstanding shares
- Shares in the hands of investors
A mutual fund is what type of managed investment company?
Open-End
an _______ company only issues one class of security, which is common stock (No preferred shares or bonds)
- Does not specify the exact number of shares it intends to issue but does register with the SEC
Open-End Company
T or F
One of the key differences between an open-ended fund and a closed-ended fund is that an open-ended fund, can raise an unlimited amount of capital by continuously issuing new shares.
True
What does the acronym POP mean?
Public Offering Price. This is the price paid for example when a client acquires mutual fund shares.