Chapter 7 - Packaged Products Flashcards

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1
Q

If a mutual fund investor chooses to implement a systematic withdrawal plan from the fund, the withdrawals result in a _____ of capital.

A

reduction

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2
Q

A provision that provides a sales charge discount for making mutual fund repurchases without initially depositing the entire amount required.

A

Letter of intent

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3
Q
A contingent deferred sales charge (CDSC) is associated with:
A) Class A shares
B) Class B shares
C) Class C shares
D) transfer agents
A

B) Class B shares

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4
Q

The purchase price of a no-load fund is determined by the:

A

net asset value as computed at the end of the business day.

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5
Q

An investment company that diversifies its portfolio with stocks, bonds, and money market instruments, but will always hold some of each, is called:

A

Balanced fund

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6
Q

___% must of total assets must be specifically structured to qualify as diversified.

A

75%

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7
Q

Of diversified portfolios, no more than ___% can be invested in any one company.

A

5%

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8
Q

Of diversified portfolios, no more than ___% of a company’s voting stock is owned.

A

10%

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9
Q

If the value of a position grows to above 5%, the mutual fund may represent itself as _____.

A

diversified

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10
Q

An individual’s interest in a specific mutual fund is represented by:

A

common stock

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11
Q

Provides an investor with the ability to invest a small amount and obtain an interest in a large number of securities.

A

Diversification

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12
Q

A _____ must precede or accompany any solicitation of mutual fund shares.

A

prospectus

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13
Q

Determines investments to meet the fund’s objectives.

A

Investment Adviser

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14
Q

Sets the fund’s objectives and deals with administrative manners.

A

Board of Directors

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15
Q

Issues, redeems, and cancels a fund’s shares.

A

Transfer Agent

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16
Q

Responsible for the safekeeping of the fund’s assets.

A

Custodian Bank

17
Q

Receives a portion of the sales charge for selling shares to the public.

A

Underwriter

18
Q

Industry rules prohibit assessing charges in excess of ___% of the public offering price.

A

8.5%

19
Q

A no-load fund may have a:

A

redemption fee

20
Q

The largest expense for a fund is typically the:

A

management fee

21
Q

An annual fee charged against fund assets to finance advertising expenses.

A

12b-1 fee

22
Q

(True or False) A no-load fund cannot include a 12b-1 fee.

A

False.

Can include a .25% fee of the funds average net assets per year.

23
Q

(True or False) A redemption fee is an additional sales charge assessed on certain sales.

A

False.

Not a sales charge.

24
Q

(True or False) A mutual fund’s expense ratio will decline if the assets under management increase.

A

True

25
Q

(True or False) Mutual funds allow the purchase of fractional shares.

A

True

26
Q

A letter of intent has a _____ month time period.

A

13

27
Q

A letter of intent may be back dated _____ days.

A

90

28
Q

_____ are based on the total investments within the same complex of funds.

A

Sales charges

29
Q

(True or false) The ability to reduce sales charges as the value of shares reaches a breakpoint is referred to as rights of accumulation.

A

True

30
Q

(True or False) The use of dollar cost averaging assures long-term growth.

A

False

31
Q

Assessed against investors who redeem their shares after holding them for a short period ( often one year or less).

A

Redemption fee

32
Q

(True or False) A client should not be engaged in a withdrawal plan while systematically purchasing shares.

A

True

33
Q

(True or False) Class B shares should not be recommended to an investor who is considering purchasing a large amount of shares.

A

True

34
Q

(True or False) Switching from one fund to another within the same family is a tax-free exchange.

A

False