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Series 10 > Chapter 07 : Products and Plans > Flashcards

Chapter 07 : Products and Plans Flashcards

1
Q

Define vesting.

A

The right an employee gradually acquires by length of service at a company to receive employer-contributed benefits

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2
Q

Are breakpoints available when investing in UITs?

A

Yes

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3
Q

What is a good way to obtain broad market exposure at a low cost?

A

Buy an index fund

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4
Q

What are the three different types of investment companies?

A

1) Face Amount Certificate Companies 2) Unit Investment Trusts (UITs) 3) Management Companies

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5
Q

Letters of Intent may be back-dated for _____ days.

A

Letters of Intent may be back-dated for 90 days.

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6
Q

What is the maximum annual contribution to a 401(k)?

A

$19,000

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7
Q

May a person contribute to her own 529 plan?

A

Yes

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8
Q

IRA rollovers must be completed within ____ days.

A

IRA rollovers must be completed within 60 days.

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9
Q

Is a letter of intent binding on the investor?

A

No. However, the letter is binding on the investment company.

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10
Q

How are distributions from a zero cost basis investment taxed?

A

As ordinary income

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11
Q

Sales charge is always expressed as a percentage of the ________.

A

Sales charge is always expressed as a percentage of the POP (public offering price).

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12
Q

True or False: Dollar cost averaging (DCA) is a supervisory red flag.

A

False. DCA represents a systematic method of making investments in mutual funds.

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13
Q

What is the maximum annual IRA contribution for a 58-year-old who only has investment income?

A

$0, since he has no earned income

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14
Q

Identify the acronym: IRA

A

Individual Retirement Account

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15
Q

What is forfeited if an investor redeems his open end shares within seven business days of purchase?

A

The sales charge is forfeited by the fund underwriter and dealer.

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16
Q

Variable contract assets are placed in the insurance company’s ___________ account.

A

Variable contract assets are placed in the insurance company’s separate account.

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17
Q

What funds are similar to an index fund, but trade in the secondary market like stock?

A

Exchange-Traded Funds (ETFs)

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18
Q

True or False: Earnings generated in a non-qualified retirement plan are tax-deferred.

A

True

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19
Q

On Monday at 11:00 a.m., a customer places a call to sell (redeem) her mutual fund shares. What price will she receive?

A

Monday’s NAV since she placed the order before 4:00 p.m.

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20
Q

What price is paid for closed-end management company shares?

A

Market price plus a commission

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21
Q

When is an individual (single filer) eligible to make tax-deductible contributions to a Traditional IRA?

A

When not covered by an employer-sponsored plan or when covered by a plan and below an adjusted gross income limit.

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22
Q

An OID is sold prior to maturity. Is the capital gain (or loss) based on the original cost basis or accreted value?

A

The accreted value of the bond.

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23
Q

According to industry rules, _____% is the maximum sales charge on mutual funds.

A

According to industry rules, 8.5% is the maximum sales charge on mutual funds.

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24
Q

A father establishes a 529 plan for his son. Who is the owner of the account?

A

The father is the owner, while the son is the beneficiary.

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25
Q

Identify the acronym: FAC

A

Face-Amount Certificate

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26
Q

Only one IRA rollover is allowed per rolling ____ months.

A

Only one IRA rollover is allowed per rolling 12 months.

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27
Q

What is the tax consequence if a municipal bond is purchased at a secondary market discount and held to maturity?

A

The gain is taxed as ordinary income.

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28
Q

Letters of Intent are valid for ____ months.

A

Letters of Intent are valid for 13 months.

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29
Q

True or False: A structured product may be based on any type of security.

A

True

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30
Q

Is a mutual fund switch a taxable event?

A

Is a mutual fund switch a taxable event?

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31
Q

In a qualified annuity, how is the payout taxed?

A

The entire payout is taxed as ordinary income, since the annuity was funded with pre-tax dollars.

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32
Q

What share class carries a front-end load?

A

Class A

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33
Q

Identify the acronym: ETF

A

Exchange-Traded Fund

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34
Q

Is switching between annuity sub-accounts taxable?

A

No

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35
Q

When must IRA withdrawals begin in order to avoid the late withdrawal penalty?

A

By April 1st of the year after an individual turns age 72

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36
Q

What is the formula for determining the number of shares able to be purchased when reaching a breakpoint?

A

Dollars invested ÷ newly calculated offering price (based on the reduced sales charge)

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37
Q

After what age may traditional IRA plan contributions no longer be made?

A

As long as an individual has earned income, she’s able to contribute to a Traditional IRA regardless of her age.

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38
Q

In a 529 Plan, what happens if the funds are withdrawn, but not used for qualified education expenses?

A

The earnings would be subject to ordinary income tax plus a 10% penalty.

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39
Q

What ETF uses the Dow Jones Industrial Average as its benchmark index?

A

The DIA (diamonds)

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40
Q

What terms are synonymous with a mutual fund’s Net Asset Value (NAV)?

A

Bid price or Redemption price

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41
Q

In a 529 plan, a donor may contribute up to $75,000 to be spread over how many years?

A

5 years

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42
Q

If an employer makes a Keogh contribution on its own behalf, what must be done for its employees?

A

A contribution at the same percentage must be made for the employee.

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43
Q

True or False: Contributions made to qualified retirement plans are tax-deductible.

A

True

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44
Q

How may a mutual fund be capitalized?

A

Mutual (open-end) funds may only issue common stock to raise capital.

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45
Q

A savings plan which funds both elementary and higher education is referred to as the ____________________________.

A

A savings plan which funds both elementary and higher education is referred to as the Coverdell Education Savings Plan.

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46
Q

At maturity, what will investors receive if a reverse convertible’s underlying asset is priced below the knock-in price?

A

The interest payments received and the ownership of shares in the devaluated asset

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47
Q

What type of investment company is priced once per business day?

A

Open-end investment companies (mutual funds)

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48
Q

May a brokerage firm conduct a mutual fund sales contest?

A

Yes, but the contest must not encourage the sale of specific funds.

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49
Q

Typically, investment companies are allowed no more than ____ days from request to complete a redemption.

A

Typically, investment companies are allowed no more than 7 days from request to complete a redemption.

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50
Q

If an employer made all of the contributions into a pension plan, what is the employee’s cost basis?

A

Zero

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51
Q

In a one-year period, how many times may a qualified plan be transferred via a trustee transfer?

A

There is no limit to the number of trustee transfers.

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52
Q

In a non-qualified annuity, how is a return of capital taxed?

A

Tax-free, since it is part of the client’s basis

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53
Q

True or False: Keogh plans follow a vesting schedule.

A

True. A scale would indicate how long an employee must remain with the employer to be fully vested.

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54
Q

Identify the acronym: LOI

A

Letter of Intent

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55
Q

A qualified annuity contract or retirement plan is typically funded with _____- tax funds.

A

A qualified annuity contract or retirement plan is typically funded with pre-tax funds.

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56
Q

True or False: The compensation for selling open-end investment company shares is larger than for publicly-offered DPPs.

A

False. The maximum sales charge on open-end investment companies is 8.5%, while DPPs have a 10% maximum.

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57
Q

Is a gift of $15,000 per person, per year, exempt from gift tax?

A

Yes

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58
Q

Mutual fund investors have an __________ interest in the securities in the portfolio.

A

Mutual fund investors have an undivided interest in the securities in the portfolio.

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59
Q

If not needed for a child’s education, may the funds in a 529 Plan be transferred to a relative’s 529 Plan?

A

Yes

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60
Q

When an individual reaches age ______, they may begin withdrawing from an IRA without penalty.

A

When an individual reaches age 59 1/2, they may begin withdrawing from an IRA without penalty.

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61
Q

The POP of a mutual fund is like the _____ price of a stock.

A

The POP of a mutual fund is like the ask price of a stock.

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62
Q

What type of insurance and annuity contracts require the delivery of a prospectus?

A

All contracts containing the word “variable” in their title

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63
Q

Contributions to a Keogh plan are solely based on _________________ income.

A

Contributions to a Keogh plan are solely based on self-employment income.

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64
Q

May an RR create her own breakpoint schedule?

A

No. RRs must follow the schedule found in the fund’s prospectus.

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65
Q

Which plans impose income limitations on the contributors, 529 plans or Coverdell ESAs?

A

The Coverdell ESA

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66
Q

To which clients is an RR required to disclose breakpoints?

A

All clients, regardless of the size of the proposed investment

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67
Q

_____ Plans are college savings plans with high contribution limits set by the state sponsor.

A

529 Plans are college savings plans with high contribution limits set by the state sponsor.

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68
Q

The maximum contribution to an IRA is ____% of earned income up to $_______.

A

The maximum contribution to an IRA is 100% of earned income up to $6,000.

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69
Q

In a 529 plan, if the funds are not used by the beneficiary, to whom may the funds be transferred?

A

Other family members

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70
Q

Which is more expensive to own, a variable annuity or a mutual fund?

A

A variable annuity, since it typically has greater expenses due to the death benefit and mortality expenses

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71
Q

True or False: Excess contributions made to an IRA will still be deductible and will grow tax-deferred.

A

False. Excess contributions are non-deductible and will not grow on a tax-deferred basis.

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72
Q

How may taxation be deferred on a lump sum distribution from a qualified plan?

A

By rolling into another qualified plan within 60 days

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73
Q

May an aunt set up a 529 plan for her niece?

A

Yes. The donor is not required to be a parent.

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74
Q

Is a gift of $30,000 per married couple, per year, exempt from gift tax?

A

Yes

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75
Q

Describe the employees who must be eligible to contribute to an ERISA qualified plan.

A

Employees who are 21 years or older with one year of full-time service

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76
Q

What are some of the acceptable investments for IRA contributions?

A

Stocks, bonds, mutual funds, and CDs

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77
Q

The NAV of a mutual fund is like the _____ price of a stock.

A

The NAV of a mutual fund is like the bid price of a stock.

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78
Q

What does it mean to say “a limited partnership is a pass-through investment?”

A

The results of the business venture (profits and losses) flow through directly to the investor.

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79
Q

What is the main concern when an RR recommends that a client diversify among several fund families?

A

The client may lose out on the opportunity to receive a breakpoint.

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80
Q

With structured products, at what participation rate will investors receive all of the market increase?

A

100% participation rate

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81
Q

An investor has been purchasing mutual fund shares using dollar cost averaging. Is she guaranteed against loss?

A

No. The market may never recover.

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82
Q

Hank is a 71-year-old who has a Roth IRA. What penalty is assessed if Hank has failed to begin taking distributions?

A

There is no penalty, since Roth IRAs do not have RMDs.

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83
Q

For what reasons may an individual take an early withdrawal from his IRA without penalty?

A

Death, disability, qualified higher education, home buyer ($10,000 limit), birth or adoption of a child ($5,000 limit)

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84
Q

How is the discount on a municipal secondary market discount bond treated for tax purposes?

A

As ordinary income

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85
Q

If a gift to a 529 plan is made from joint property, what is the maximum amount that may be spread over a 5-year period?

A

$150,000 ($75,000 times 2)

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86
Q

What issues does the Russell 2000 ETF track?

A

Small-cap issues

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87
Q

May a Class B share be referred to as a “no-load” share?

A

No. This is a violation of FINRA rules.

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88
Q

What is the maximum permissible 12b-1 fee?

A

.75% (75 basis points). However, for no-load funds, the maximum 12b-1 fee is capped at .25%.

89
Q

In an non-qualified annuity, how is a single distribution taxed?

A

Earnings first (LIFO)

90
Q

If Joe is 55 years old, how much could he contribute to his IRA?

A

For anyone 50 or older, an additional $1,000 is allowed, making the maximum contribution $7,000.

91
Q

True or False: Mutual fund shares may be purchased and sold in the secondary market.

A

False. Mutual funds are always considered new issues and are bought and sold through the fund.

92
Q

True or False: Class B mutual fund shares offer a sales charge breakpoint.

A

False. B shares do NOT offer breakpoints of large purchases.

93
Q

The annuity with growth dependent on the performance of securities in a separate account is called a __________ annuity.

A

The annuity with growth dependent on the performance of securities in a separate account is called a variable annuity.

94
Q

To calculate the sales charge percentage for a mutual fund, the formula is: (______-______) ÷ ______

A

To calculate the sales charge percentage for a mutual fund, the formula is: (POP - NAV) ÷ POP

95
Q

When rolling over a distribution from a qualified plan, when must the participant complete the transfer?

A

Within 60 days from the receipt of the funds from the old plan

96
Q

If a contribution is to be made to a Coverdell, by what date is it required?

A

April 15th

97
Q

To avoid income tax or penalties, by what age must funds in a Coverdell be used?

A

By age 30

98
Q

True or False: A Coverdell Education Savings Account may only be used for college funding.

A

False. Coverdell contributions may be used for elementary, secondary, and post-secondary expenses.

99
Q

What is the annual fee levied against a fund’s assets and used to pay expenses of commissions and retail communications?

A

12b-1 fee

100
Q

On Monday at 2:00 p.m., a customer places a call to sell her closed-end fund shares. What price will she receive?

A

The current bid price. Closed-end funds are traded throughout the day.

101
Q

To calculate the POP for a mutual fund, the formula is: ______ ÷ (______ - ___________)

A

To calculate the POP for a mutual fund, the formula is: NAV ÷ (100% - Sales Charge %)

102
Q

How often may a 529 plan be rolled over?

A

Once per year

103
Q

The _________________________ is synonymous with the ask for a mutual fund.

A

The public offering price (POP) is synonymous with the ask for a mutual fund.

104
Q

With a structured product, which party assumes an obligation?

A

The BD offering the structured product

105
Q

With a structured product, who is responsible for repayment ?

A

The issuer of the product, not the issuer of the underlying securities.

106
Q

True or False: The interest rate reset periods on Auction Rate Securities range from 7, to 28, or 35 days.

A

True

107
Q

What privilege is utilized when mutual fund balances are combined in related accounts to obtain lower sales charges?

A

Rights of accumulation

108
Q

The maximum 12b-1 fee on a no load fund is ___ basis points.

A

The maximum 12b-1 fee on a no load fund is 25 basis points.

109
Q

A fund’s management fee is typically calculated based on a percentage of _________________________.

A

A fund’s management fee is typically calculated based on a percentage of assets under management.

110
Q

How may a closed-end fund be capitalized?

A

Closed-end funds may issue bonds, common stock, or preferred stock to raise capital.

111
Q

True or False: The market price of closed-end shares could be higher, lower, or equal to the NAV.

A

True. Shares can trade at a premium or discount to NAV based on supply and demand forces.

112
Q

Anyone with __________ income may contribute to an IRA.

A

Anyone with earned income may contribute to an IRA.

113
Q

What is the tax treatment of the distributions made by qualified retirement plans?

A

They are entirely taxed at ordinary income rates, since these plans have a zero cost basis.

114
Q

A nonqualified annuity is funded with ______-tax dollars.

A

A nonqualified annuity is funded with after-tax dollars.

115
Q

True or False: The investments in a Coverdell IRA are self-directed.

A

True

116
Q

For what products is the participation rate important when determining the final payout at maturity?

A

Structured products

117
Q

What is the tax consequence if a municipal Original Issue Discount (OID) bond is held to maturity?

A

Since the basis must be accreted up to par, there is no capital gain or loss when an OID is held to maturity.

118
Q

What is the typical cost basis for a participant in a qualified retirement plan?

A

$0, since these plans are typically funded pre-tax.

119
Q

What is a municipal OID?

A

An Original Issue Discount (OID) bond.

120
Q

Describe the tax treatment of contributions made to a 529 Plan.

A

They are after-tax contributions that may possibly grow tax-free.

121
Q

401(k) plans are used by _____-profit employers.

A

401(k) plans are used by for-profit employers. (Think traditional corporations.)

122
Q

ERISA gave the U.S. Government jurisdiction over ___________________ plans.

A

ERISA gave the U.S. Government jurisdiction over private pension plans.

123
Q

When must IRA rollovers be completed?

A

Within 60 days

124
Q

What is the name of the fee paid to the fund’s investment adviser?

A

Management fee

125
Q

May an 85-year-old continue to contribute to a Roth IRA?

A

Yes, provided she has earned income.

126
Q

How is the phantom interest on an OID treated for tax purposes?

A

It is considered interest income on a municipal bond, and therefore, tax exempt.

127
Q

Since mutual funds are considered primary market issues, they must be sold by ____________.

A

Since mutual funds are considered primary market issues, they must be sold by prospectus.

128
Q

A fund can be purchased below its NAV. What type of fund is it?

A

The fund must be a closed-end fund that is trading at a discount

129
Q

May an individual with a Keogh Plan also fund an IRA?

A

Yes, but since the Keogh is a qualified plan, the IRA contributions may not be tax-deductible.

130
Q

True or False: Promoting the purchase of certain fund shares due to an impending dividend payment is acceptable.

A

False. Selling dividends is prohibited. Since the dividend is imbedded in the share price, there is no monetary benefit.

131
Q

What restrictions exist in describing a fund as no load?

A

It may have no front-end or deferred sales charge, and a 12b-1 fee cannot exceed .25%.

132
Q

The Russell 2000 Index measures the performance of the ______-cap segment of U.S. equities.

A

The Russell 2000 Index measures the performance of the small-cap segment of U.S. equities.

133
Q

How often will VRDOs adjust their interest rate?

A

At specified intervals such as daily, weekly, or monthly. VRDOs may allow owners to put (sell) back to the issuer.

134
Q

An RR attends a training meeting for her firm. What must be obtained for her to be reimbursed for attendance costs?

A

She must have obtained her firm’s approval to attend the meeting.

135
Q

She must have obtained her firm’s approval to attend the meeting.

A

True

136
Q

True or False: Variable annuities are subject to registration requirements of the Act of 1933 and sold by prospectus.

A

True

137
Q

What is a mutual fund’s largest expense?

A

The management fee paid to its investment adviser

138
Q

How is a Roth IRA contribution different from a Traditional IRA contribution?

A

The Roth IRA contribution is always made on an after-tax basis.

139
Q

To what is a reverse convertible structured product linked?

A

To the performance of an unrelated reference asset - often a single stock or basket of stocks, or an index

140
Q

The ___________________ is synonymous with the bid for a mutual fund.

A

The net asset value (NAV) is synonymous with the bid for a mutual fund

141
Q

A reverse convertible typically contains what two components?

A

A debt instrument that pays an above-market coupon and a derivative (often a put option)

142
Q

True or False: To lower sales charges, investors add mutual fund purchases in all accounts using Rights of Accumulation.

A

True. However, the purchases must all be from the same fund family.

143
Q

A ______ is a type of investment company which has a fixed portfolio of securities and is supervised, not managed.

A

A UIT is a type of investment company which has a fixed portfolio of securities and is supervised, not managed.

144
Q

True or False: Funds invested in a college savings plan may be used in any state.

A

True

145
Q

True or False: To avoid a late withdrawal penalty, IRAs have a required minimum distribution (RMD) provision.

A

True

146
Q

Identify the acronym: UIT

A

Unit Investment Trust

147
Q

A mutual fund family is also referred to as a mutual fund __________.

A

A mutual fund family is also referred to as a mutual fund complex.

148
Q

True or False: 529 plans allow for a five-year front-end contribution of $75,000, which avoids gift tax.

A

True ($15,000 x 5 years)

149
Q

What is the tax consequence if a municipal bond is purchased at a premium and sold prior to maturity?

A

A capital gain or loss determined by the difference between the adjusted basis and the proceeds of the sale

150
Q

What is a mutual fund switch?

A

The redemption of one fund and the purchase of another (It may be within the same or different fund families.)

151
Q

What share class carries a level load?

A

Class C

152
Q

What is the tax consequence if a municipal bond is purchased at a premium and held to maturity?

A

Since the basis must be amortized down to par, there is no capital gain or loss when a premium bond is held to maturity.

153
Q

On Monday at 10:00 a.m., a customer places a call to buy an ETF. What price will she pay?

A

The current ask (offer). ETFs are traded throughout the day.

154
Q

Name the two types of 529 plans.

A

Pre-paid college tuition plans and college savings plans

155
Q

A non-qualified annuity contract is typically funded with ______-tax funds.

A

A non-qualified annuity contract is typically funded with after-tax funds.

156
Q

True or False: Contributions made to non-qualified retirement plans are tax-deductible.

A

False. The contributions are non-deductible.

157
Q

____________________ is the prohibited practice of RRs encouraging clients to buy a fund to capture a dividend.

A

Selling dividends is the prohibited practice of RRs encouraging clients to buy a fund to capture a dividend.

158
Q

How much may be contributed to a Coverdell each year?

A

An after-tax contribution of $2,000 is allowed per year.

159
Q

What is the tax treatment of distributions made by non-qualified retirement plans?

A

Since contributions are made after-tax, only the earnings portion is taxable at ordinary income rates.

160
Q

What periods must be covered in retail communication regarding mutual fund performance?

A

One, five, and 10 years

161
Q

True or False: A breakpoint sale is a prohibited action of selling shares at just under where breakpoints are available.

A

True

162
Q

True or False: In the same year, funds may be contributed to both a 529 plan and a Coverdell account.

A

True

163
Q

What are Auction Rate Securities (ARS)?

A

Long-term bonds (municipal or corporate) with a variable interest rate set periodically through a Dutch Auction

164
Q

For what items may soft dollars be used?

A

Research reports and educational seminars, but not for items that does not benefit the client

165
Q

What do the differences in mutual fund share classes represent?

A

The different methods by which the sales charge is collected

166
Q

True or False: Class B shares are eligible for breakpoints.

A

False. Only Class A shares are eligible for breakpoints.

167
Q

True or False: The accretion of the cost basis on a municipal original issue discount is tax-free.

A

True

168
Q

How much may a married couple earning $325,000 contribute to a Roth IRA?

A

$0, since the couple’s income exceeds the income threshold

169
Q

What is the tax consequence if a municipal Original Issue Discount (OID) bond is sold prior to maturity?

A

A capital gain or loss determined by the difference between the adjusted basis and the proceeds on the sale

170
Q

A contribution of $_______ can be made to a Spousal IRA for a non-working spouse.

A

A contribution of $6,000 can be made to a Spousal IRA for a non-working spouse.

171
Q

After the initial offering, where are shares of a closed-end management company purchased?

A

In the secondary market (like shares of stock)

172
Q

May clients invest in an out-of-state 529 plan?

A

Yes. Clients may choose to invest either in-state or out-of-state.

173
Q

What price is paid for mutual fund shares?

A

The Public Offering Price (POP). POP = NAV + Sales Charge (if applicable).

174
Q

Which type of annuity is considered a security, fixed or variable?

A

Variable

175
Q

The _______ fee is assessed against the fund’s assets to pay for marketing and distribution costs.

A

The 12b-1 fee is assessed against the fund’s assets to pay for marketing and distribution costs.

176
Q

What does the following quote indicate about the fund? NAV: $9.20 POP: $9.20

A

It’s a no-load fund.

177
Q

True or False: A BD may NOT make a market in mutual fund shares.

A

True. Member firms may only buy fund shares to fill a existing customer order or for its own investment account.

178
Q

The process of adjusting the basis of an Original Issue Discount bond up to par over its life is called ____________.

A

The process of adjusting the basis of an Original Issue Discount bond up to par over its life is called accretion.

179
Q

True or False: Earnings generated in a qualified retirement plan are tax-free.

A

False. The earnings are tax-deferred.

180
Q

Name some of the different types of Direct Participation Programs (DPPs).

A

General partnerships, limited partnerships, joint ventures, Subchapter S corporations

181
Q

Who funds a 529 plan?

A

The donor

182
Q

How does the Dutch Auction set the interest rate on Auction Rate Securities?

A

It sets the lowest interest rate at which all the securities being offered will clear the market (net clearing rate).

183
Q

Who receives the benefit from a 529 plan?

A

The beneficiary

184
Q

With what should a client be concerned if an RR recommends changing fund families?

A

The specific motivation. For example, the RR may be involved in churning.

185
Q

A reverse convertible is a type of ___________ product.

A

A reverse convertible is a type of structured product.

186
Q

There is a ____% penalty for early withdrawals from an IRA.

A

There is a 10% penalty for early withdrawals from an IRA.

187
Q

Prospectus delivery is required for all ___________ insurance contracts.

A

Prospectus delivery is required for all variable insurance contracts.

188
Q

What is the typical life of a reverse convertible security?

A

One year or less

189
Q

Identify the acronym: CDSC

A

Contingent Deferred Sales Charge

190
Q

What technique can be used to roll assets from one annuity into another without taxation?

A

A 1035 Exchange

191
Q

Identify the acronym: POP

A

Public Offering Price

192
Q

The sale of a mutual fund is also known as a share _____________.

A

The sale of a mutual fund is also known as a share redemption.

193
Q

When showing mutual fund returns, what time periods must be included?

A

1, 5, and 10 years or life of the fund if less

194
Q

May closed-end funds issue more than one type of security?

A

Yes. Closed-end funds may issue common stock, preferred stock, or bonds.

195
Q

Forward pricing is used in the redemption of _________ investment company shares.

A

Forward pricing is used in the redemption of open-end investment company shares.

196
Q

May a wholesaler sponsor a seminar for RRs?

A

Yes, but only reasonable expenses of the RR may be reimbursed.

197
Q

At maturity, what will investors receive if a reverse convertible’s underlying asset is priced above the knock-in price?

A

The high coupon for the life of the investment plus the full principal amount

198
Q

Funds offer ______________________ to allow buyers to add all purchases made from a fund family to reduce sales charge.

A

Funds offer Rights of Accumulation to allow buyers to add all purchases made from a fund family to reduce sales charge.

199
Q

What share class carries a back-end load?

A

Class B

200
Q

True or False: A self-employed individual with a Keogh plan is not required to make contributions for others.

A

False. Full-time employees who are 21 or older must receive contributions at the same percentage as the employer.

201
Q

May an employee of a corporation who contributes to a corporate pension plan also contribute to a Keogh plan?

A

Yes, provided the Keogh contribution is solely based upon the employee’s self-employment income.

202
Q

Clients redeeming mutual fund shares must be paid within ___ calendar days.

A

Clients redeeming mutual fund shares must be paid within 7 calendar days.

203
Q

True or False: If a mutual fund investor chooses to reinvest dividends, taxes will be deferred.

A

False

204
Q

Grandparents contributing to a grandchild’s 529 plan may give how much money and still avoid gift tax consequences?

A

Front-loading five years of contributions is allowed; therefore, each could contribute $75,000 for a total of $150,000.

205
Q

What determines the value of an ETF in the secondary market?

A

Supply and demand

206
Q

True or False: Mutual fund retail communication must show the maximum sales charge and include all fees and expenses.

A

True

207
Q

For every rolling 12 months, how many times may a qualified plan be transferred via a rollover?

A

Once

208
Q

True or False: A single filer earning more than $110,000 may NOT contribute to a Coverdell account.

A

True. Additionally, the ceiling for joint filers is $220,000.

209
Q

Define the term rollup.

A

The combining of several smaller DPPS into one larger partnership or trust

210
Q

What are some of the investments that are not suitable for IRA contributions?

A

Collectibles, insurance, and metals (except U.S. gold and silver coins)

211
Q

A structured product often contains a _____ and an _______ component.

A

A structured product often contains a debt and an equity component.

212
Q

Identify the acronym: NAV

A

Net Asset Value

213
Q

Breakpoints are calculated based on all purchases made within a single ______________.

A

Breakpoints are calculated based on all purchases made within a single fund family.

214
Q

A 1035 exchange is a process used to rollover a college savings plan.

A

False. A 1035 exchange is used in the insurance industry and the variable contract market.

215
Q

According to ERISA, are there any standards that must be followed regarding how money is invested?

A

Yes. The plan’s trustee must abide by the Uniform Prudent Investor Act.

216
Q

The strike price for conversion on a reverse convertible is also called the _________ price.

A

The strike price for conversion on a reverse convertible is also called the knock-in price.

217
Q

Define breakpoint.

A

Dollar levels of investment purchases that qualify for a reduced sales charge

218
Q

Does ERISA permit the writing of covered calls in retirement plans?

A

Yes

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