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Series 6 > Chapter 6 > Flashcards

Chapter 6 Flashcards

1
Q

Find objective we’re fund managers six dogs of established large cap companies that are thought to be undervalued in price

A

Value objective

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2
Q

Objective fund that have growth as their objective invest in a portfolio of stocks that seek capital appreciation as the primary goal. Typically invest in common stock.

A

Growth objective

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3
Q

Find objective that have income has their objective or conservative finds out invest in fixed-income securities. Seek to provide investors with a stream of income.

A

Income objective

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4
Q

Fund objective that is usually the most conservative type of fund. It is designed for investors who only concern is to not lose money.

A

Capital preservation objective

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5
Q

Large cap company market capitalization amount

A

10 billion or more

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6
Q

A company that has a market capitalization from 2 billion up to 10 billion

A

Mid-cap company

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7
Q

A small cap company has market capitalization of how much?

A

300 million up to 2 billion

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8
Q

A micro cab company has market capitalization of how much

A

Less than 300 million

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9
Q

A growth fund is typically invested in what

A

Common stock

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10
Q

This type of fund invests in large cap companies with strong product lines robust financial positions and a long history of dividends.

A

Blue chip funds

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11
Q

These funds seek capital appreciation with the objective to achieve rapid growth in the shortest time period possible. Typically purchase by younger investors with the financial resources and risk tolerance to handle volatility with this type of investment.

A

Aggressive growth fund

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12
Q

An equity fund that combines the investing styles of value stock and growth stock

A

Blended funds

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13
Q

Stock based mutual fund that pays consistent dividends. Invested with common and preferred stock.

A

Equity income fund

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14
Q

Type of mutual fund that focused on investing in specific concentrated groups of securities in a particular industry such as utilities electronics financial services and healthcare.

A

Sector funds

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15
Q

What type of fund looking to make investments in companies that are undergoing a major change or that have a specific event coming up that could dramatically affect their fortune. A company may be considering a murderer or acquisition or have pending lawsuit that is about to be settled

A

Special situation fund

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16
Q

Funds that purchase common stock. Once the stocks are purchased and owned the fund manager will write a call option against the portfolio. Covered call writing strategy designed to increase income pay out to investors

A

Option income fund

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17
Q

A mutual fund can own what type of securities?

A

Any security that is consistent with the funds stated objectives

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18
Q

Type of fund for investors seeking capital preservation and or liquidity

A

Money market fund

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19
Q

True or false:Hybrid funds Provide a combination of asset classes including stocks bonds money market instruments and cash

A

True

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20
Q

To accomplish this portfolio portfolio managers invested large-cap stocks such as blue chip stocks or utility stocks. They also invested portion of the portfolio and preferred stock to increase the potential for dividend payout and increased income

A

Growth and income funds

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21
Q

Target date funds are sometimes referred to as what?

A

Life cycle funds

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22
Q

And this type of fund six to maintain a ratio of stocks to bonds that reflect a more conservative investment style for investors who are willing to except a moderate level of risk the principal while obtaining income and capital appreciation.

A

Balanced fund

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23
Q

Types of funds that invest in non-US stock or bonds throughout the world.

A

International funds

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24
Q

Will invest in foreign and domestic stock in order to take advantage of which ever market is performing well at a specific time

A

Global funds

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25
Q

Funds that have portfolios made up of stocks or bonds from issuers located in a specific area. Carry significant risk as they are exposed to risks that may affect an entire geographic areas such as earthquake or hurricane

A

Country/regional funds ( geographic)

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26
Q

Invest in mining companies that produce gold silver platinum or other precious metals but can also invest in commodities themselves. Appropriate for an investor who wishes to protect against inflation

A

Precious metal funds

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27
Q

That’s fun intends to mirror as closely as possible the movement of a specific index. Appropriate for an investor who is skeptical that portfolio managers consistently can meet or exceed the performance of the overall market

A

Index funds

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28
Q

What is considered a passive investment strategy?

A

An index fund

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29
Q

The practice of placing orders to buy already mutual fund shares after the NAV is calculated after the close of the NYSE the receiving the price of the previously calculated and 80 determined for that day

A

Late trading

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30
Q

Redemptions of mutual funds received the next calculated in a be. Buyers pay the next calculated POP.

A

Forward pricing

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31
Q

The charge of a mutual fund that is the primary compensation paid to the underwriter and broker dealer for marketing advertising and selling funds chairs to the public

A

Sales charge

32
Q

POP formula

A

NAV + SC = POP

33
Q

Sales charge formula

A

POP-NAV=SC

34
Q

Sales charge percentage formula Calculating the sales charge percentage when the NAV and POP are given

A

(Pop-nav) / pop= sales charge %

35
Q

Calculating POP when the NAV and sales charge percentage are given

A

POP = NAV / (100%-SC%)

36
Q

Calculating the NAV when the POP and sales charge percentage are given

A

POP$ x sales charge %= sales charge $

POP $ - sales charge $= NAV $

37
Q

A mutual funds POP cannot exceed the NAV by more than what percent ?

A

8.5%

38
Q

12 B-1 distribution fee Includes:

A

Marketing advertising and other cost of distributing find shares advertising includes the printing and mailing a perspective and sales literature to new investors but not existing investors

39
Q

Who can approve 12 B-1 fee changes ?

A

A majority of outstanding shares

40
Q

Class B shares are also referred to as

A

Contingent deferred sales charge (CDSC)

41
Q

Maximum 12 B1B or a no load fund

A

.25%

42
Q

If a fund is advertised as pure no load fund what is the max sales charge?

A

0 it can not have any form of sales charge or 12b1 fee

43
Q

An investment strategy in which the investor purchases a fixed dollar amount of a mutual fund on a regular basis without concern for the share price

A

Dollar cost averaging

44
Q

If he redemption of mutual fund occurs within seven days of purchase the broker dealer or representative must do what?

A

Return at the selling concession to the fund underwriter

45
Q

Withdrawal plan that involves sending a check out each month for a designated amount

A

Fixed dollar amount

46
Q

Withdraw plan that involves liquidating the same number of shares each month and sending the customer the proceeds the prices will most likely fluctuate

A

Fixed share amount

47
Q

Withdrawal plan that involves liquidating a fixed percentage of the customers portfolio. The amount of his check May vary.

A

Fixed percentage

48
Q

Withdrawal plan that the investor instructs the fund to systematically liquidate all holdings with any specified time. Example 5 years.

A

Fixed time period

49
Q

A fee usually charged by the fund to discourage short term traders biases in the field clients who have not held their shares for some minimum designated time.

A

Redemption fee

50
Q

The practice of purchasing or redeeming mutual funds to profit from differences between the daily closing NAV and the next days and events that occur between calculations

A

Mutual fund market timing

51
Q

A fund company must transmit redemption proceeds to the investor within how many days of request?

A

Seven calendar days

52
Q

Provision that allows mutual funds to make it easier for people to replace money that they have a previously withdrawn.

A

Reinstatement provision

53
Q

How long is the typical reinstatement provision?

A

30 days

54
Q

How long is considered short term in regards to a capital gain event

A

12 months or less

55
Q

How long is considered a long-term capital gain

A

12 months and one day

56
Q

What rate short-term gains taxed at?

A

Ordinary Income rates

57
Q

What rates are long-term capital gain taxed at ?

A

Preferential mean usually 15%

58
Q

Event for a mutual fund investor occurs when the investor redeems fund shares for less than a cost basis

A

Capital loss event

59
Q

What form must a taxpayer used to report mutual fund distributions?

A

1040 or 1040A

60
Q

Includes the total purchase price of the investment if purchased with after tax dollars.

A

Cost basis

61
Q

What happens when an investor automatically and reimburse its dividends and capital gains in the investment company?

A

The number of outstanding shares in both the management company and the investors own shares will increase

62
Q

When the investor reinvest dividends back into the fund or takes out in cash when are the distributions taxable?

A

Taxable in the year received

63
Q

Average cost per share formula

A

Total dollars invested divided by total numbers of shares held

64
Q

Determines the cost basis by identifying First shares purchased as the first shares redeemed.

A

FIFO (first in first out)

65
Q

Maximum shelf life for a prospectus

A

16 months

66
Q

An abridged form of the statutory prospectus provides the essential information investor would need to decide to buy. Includes an application and is an offer to sell . is known as:

A

Summary prospectus

67
Q

Permits the publication containing a summary of information found in a prospectus for a mutual fund. Must contain the funds goals investment strategies rest of the fund and a toll-free number so investors can call to obtain the prospectus

A

Omitting prospectus

68
Q

Annual report that explains the auditors finding another their opinion is qualified or nonqualified

A

Auditors disclosure document

69
Q

States that the auditor agrees with the company’s financial information

A

Nonqualified opinion

70
Q

The auditor disagrees with some or all of the company’s financial reporting

A

Qualified opinion

71
Q

Contain supplementary information on many of the items found in the perspective such as fund holdings transactions and fees. No requirement for periodic mailing must be furnished upon request

A

A statement of additional information

72
Q

A prohibited practice suggesting a find is guaranteed or approved by the US government or that a find invest in certain securities or industries

A

Misstatement of fund name a.k.a. names rule

73
Q

A prohibited practice suggesting that the fund focuses its investments in a particular country or geographic region is not allowed

A

Geographical focus funds

74
Q

Prohibited practice stating that funds are federally exempt. Must have at least 80% of its investments and tax exempt vehicles

A

Tax exempt funds

75
Q

Hey mutual fund must invest at least one percent of the value of its assets and investment based on the name of the fund.

A

80%

Series 6 (10 decks)

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