Chapter 9 Flashcards
An investor who cashes out mutual fund shares too early may be subject to a:
redemption fee
The result of selling mutual fund shares just below the amount that qualifies for a reduced sales charge.
Breakpoint Sale
Moving assets from one fund family to another family is referred to as _____ and is a _____ event.
switching; taxable
Mutual funds make _____ distributions only once per year.
capital gains
Serves as a pipeline for income distributions to be taxed to the shareholder.
Regulated investment company
An investment company that can issue preferred stock and bonds is considered a(n):
closed-end fund
An investment company that continually issues new shares sold by prospectus is considered a(n):
open-end fund
An investment company that may trade shares at a discount or premium to NAV with commission or mark-up added.
closed-end fund
An investment company that trades shares at the NAV plus a sales charge.
open-end fund
If a sponsor does not stand ready to redeem shares traded in the secondary market, this most likely describes a:
closed-end fund
If a sponsor does stand ready to redeem shares at the next calculated NAV in the primary market, this most likely describes a:
open-end fund
Regarding short sales, what may a closed-end fund do that open-end funds cannot?
Closed-end fund shares can be sold short, while open-end fund shares cannot
According to the Investment Company Act of 1940, which three different types of investment companies are there?
Face Amount Certificate Companies, Management Companies, and Unit Investment Trusts
In order to qualify as an diversified company, no more than ___% of the invested assets may be invested in one company.
5%
In order to qualify as an diversified company, no more than ___% of the voting stock of any one company may be owned.
10%
Money managers looking over mutual funds must be registered under the:
Investment Advisers Act of 1940
A fund that is suitable for younger, risk-taking investors who have the risk tolerance for swings in value that do not typically provide income.
Aggressive Growth Funds
A fund that is suitable for investors who are seeking to speculate on a particular industry of the economy.
Specialized or Sector Funds
A fund that is suitable for investors with long-term investment objectives and those able to tolerate fluctuations in their principal.
Growth Funds
Provides beneficial tax treatment to regulated investment companies that operate on a conduit or pass-through basis by distributing a substantial percentage of their income to shareholders (90%).
Subchapter M of the IRS Code
Company that issues debt certificates that pay a predetermined rate of interest.
Face-Amount Certificate Company
The balancing of investment classes according to an investor’s investment objectives.
Asset Allocation
A domestic company that distributes at least 90% of its net investment income.
Regulated Investment Company
When analyzing a mutual fund’s expenses, an analyst does NOT consider:
The sales load charged to buy fund shares
