Chapter 4

Question 1

Pools and invests the funds of individual investors in securities or other assets

• Record keeping and administration
• Diversification and divisibility
• Professional management
• Lower transaction costs

Answer 1

What is an Investment Company?

Question 2

Pools of money invested in a portfolio that is fixed for the life of the fund

Answer 2

What are Unit Investment Trusts?

Question 3

What is the item below describing?

• Stand ready to redeem or issue shares at the NAV

Answer 3

Open-End Managed Investment Companies

Question 4

What are the items below describing?

• Do no redeem or issue shares
• Shares outstanding constant; investors cash out by selling to new investors

Answer 4

Closed-End Managed Investment Companies

Question 5

Partnerships of investors that pool funds

Answer 5

What are Commingled Funds?

Question 6

Similar to a closed-end fund but with mortgage trusts

Answer 6

What is a REIT?

Question 7

Vehicles that allow private investors to pool assets to be invested by a fund manager

Answer 7

What are Hedge Funds?

Question 8

Offshoots of mutual funds that allow investors to trade index portfolios just as they do shares of stock

Answer 8

What are ETF’s?

Question 9

What are the items below describing?

• Trade continuously like stocks
• Can be sold short or purchased on margin
• Cheaper than mutual funds
• Tax efficient

Answer 9

Advantages of ETF’s

Question 10

What are the items below describing?

• Prices can depart from NAV
• Must be purchased from a broker

Answer 10

Disadvantages of ETF’s