Chapter 7 - Packaged Products Flashcards
If a mutual fund investor chooses to implement a systematic withdrawal plan from the fund, the withdrawals result in a _____ of capital.
reduction
A provision that provides a sales charge discount for making mutual fund repurchases without initially depositing the entire amount required.
Letter of intent
A contingent deferred sales charge (CDSC) is associated with: A) Class A shares B) Class B shares C) Class C shares D) transfer agents
B) Class B shares
The purchase price of a no-load fund is determined by the:
net asset value as computed at the end of the business day.
An investment company that diversifies its portfolio with stocks, bonds, and money market instruments, but will always hold some of each, is called:
Balanced fund
___% must of total assets must be specifically structured to qualify as diversified.
75%
Of diversified portfolios, no more than ___% can be invested in any one company.
5%
Of diversified portfolios, no more than ___% of a company’s voting stock is owned.
10%
If the value of a position grows to above 5%, the mutual fund may represent itself as _____.
diversified
An individual’s interest in a specific mutual fund is represented by:
common stock
Provides an investor with the ability to invest a small amount and obtain an interest in a large number of securities.
Diversification
A _____ must precede or accompany any solicitation of mutual fund shares.
prospectus
Determines investments to meet the fund’s objectives.
Investment Adviser
Sets the fund’s objectives and deals with administrative manners.
Board of Directors
Issues, redeems, and cancels a fund’s shares.
Transfer Agent
Responsible for the safekeeping of the fund’s assets.
Custodian Bank
Receives a portion of the sales charge for selling shares to the public.
Underwriter
Industry rules prohibit assessing charges in excess of ___% of the public offering price.
8.5%
A no-load fund may have a:
redemption fee
The largest expense for a fund is typically the:
management fee
An annual fee charged against fund assets to finance advertising expenses.
12b-1 fee
(True or False) A no-load fund cannot include a 12b-1 fee.
False.
Can include a .25% fee of the funds average net assets per year.
(True or False) A redemption fee is an additional sales charge assessed on certain sales.
False.
Not a sales charge.
(True or False) A mutual fund’s expense ratio will decline if the assets under management increase.
True
(True or False) Mutual funds allow the purchase of fractional shares.
True
A letter of intent has a _____ month time period.
13
A letter of intent may be back dated _____ days.
90
_____ are based on the total investments within the same complex of funds.
Sales charges
(True or false) The ability to reduce sales charges as the value of shares reaches a breakpoint is referred to as rights of accumulation.
True
(True or False) The use of dollar cost averaging assures long-term growth.
False
Assessed against investors who redeem their shares after holding them for a short period ( often one year or less).
Redemption fee
(True or False) A client should not be engaged in a withdrawal plan while systematically purchasing shares.
True
(True or False) Class B shares should not be recommended to an investor who is considering purchasing a large amount of shares.
True
(True or False) Switching from one fund to another within the same family is a tax-free exchange.
False
