Chapter 3 Terms

Question 1

closed-end fund

Answer 1

mgt company that has a fixed capitalization and a fixed # of shares outstanding which may be traded in the secondary market but cannot be sold back ot the company

Question 2

Whole life insurance

Answer 2

ins that remains in force as long as the policy owner pays the premium

also build a cash value

Question 3

12-b1 fee

Answer 3

an annual fee charged by a mutual fund for its marketing and distribution costs. also called a maintenance fee or distribution fee

Question 4

‘A’ shares

Answer 4

class of mf shares that ahve a front-end sales charge, expressed as a percentage of its net asset value

Question 5

ETFs

Answer 5

an investment fund that contains stocks, bonds or other assets, typically tracking an index and is traded on a stock exchange

Question 6

Variable universal life ins

Answer 6

combo of variable and universal life insurance. Policyholder is still able to invest in separate accounts as a way to grow cash value, but the monthly premiums are flexible

Question 7

open end management company

Answer 7

mgt company whose shares are not traded on the secondary market but are bought and sold directly from the fund an dwhose size varies with every purchase or sale

Question 8

load fund

Answer 8

mutual fund that charges a sales commission

Question 9

tax qualified variabel annutities

Answer 9

annuities in which contributions are made with pre tax dollars

Question 10

variable life insuracnce

Answer 10

permanent life insurance policy that allows policy owner to invesst the cash value in securitieis

Question 11

life income

Answer 11

annuity pmt option in which the insurer pays annuitant an incoem during his lifetime

Question 12

Assumed interest rate

Answer 12

projected estimate of the rate of return on an annuity contrat at the market offering

Question 13

what is the role of an underwriter

Answer 13

they assist an inssuer in issuance by purchasing the comp’s shares and reselling them to investors

Question 14

mutual fund market timing

Answer 14

Mutual fund market timing
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A practice in which traders buy and sell mutual funds to profit from the differences between the daily closing NAV and the next day’s NAV due to events that occur between the two days.

Question 15

front-end load

Answer 15

sales charge that customers are charged up front upon purchasing the shares

Question 16

surrender period

Answer 16

the length of time that investors in an annuity are reqd to wait brefore making withdrawals without incurring a surrencder fee

Question 17

C shares issuance and fees

Answer 17

issued with a 1% back-end sales charge if sold within the first year and a higher annual expense than A and B shares

Question 18

surrender value

Answer 18

amount of cash paid by a lifer insurance policy or annuity to a policy holder who voluntarily terminates a policy before its maturity

Question 19

bonus annuity

Answer 19

annuity that offers either an upfront bonus or a higher first-year interest rate to entice investors

Question 20

face amount certificates

Answer 20

debt securities backed by assets such as real property or other securities

Question 21

life with period certain

Answer 21

annuity pmt option in which insurer pys for a designated amount of time. If the annuitant dies before that times end, the payments are madeto a beneficiary

Question 22

equity index annuity

Answer 22

annuity that allows the owner to partiicapte in some of the return of the broad investment markets

Question 23

non-exchange traded REITs

Answer 23

REITs whose unit shares can only be bought through a broker that has been engaged to participate in the non-traded REIT’s offering. Like publicly traded REITs, they must register with the SEC.

Question 24

target-date fund

Answer 24

asset allocation becomes more conservative as a preselected target date approaches… saving for college or retirement

Question 25

contingent deferred sales charge

Answer 25

back-end sales charge for a mutual funds B shares paid when shares are sold and that declines toward zero the longer the shares are held

Question 26

universal life insurance

Answer 26

whole life ins that allows owner to adjust premium and death benefit depending on the amount of coverag desired

Question 27

non-traditional ETF

Answer 27

funds selected to either exceed performance of a stock index (leveraged) or do the opposite (inverse)

Question 28

combination privilege

Answer 28

ability to add together an investor’s diff mutual fund holdings that are all a part of the same family to achieve a breakpoint

Question 29

joint life w last survivor

Answer 29

a life ins or annuity payout option that pays out over two people’s lives

Question 30

exchange privilege

Answer 30

The right of a mutual fund investor to sell shares of one type of fund and buy shares of a different fund within the same “family of funds” without paying a sales charge.

Question 31

no load funds

Answer 31

mfs that don’t charge a sales commission usually purchased directly from the mf company or through a discount brokerage