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Series 6 > Introduction to Investment companies > Flashcards

Introduction to Investment companies Flashcards

1
Q

municipal fund securites

A

funds or trusts offered by individual states or local governments

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2
Q

Plans regulated by the MSRB

A

municipal fund securites

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3
Q

Program disclosure document is required to sell

A

municipal funds

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4
Q

Inverse ETF

A

strategy to hedge against market declines

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5
Q

“short” funds

A

Inverse ETF

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6
Q

Investment company act of 1940

A

defines an investment company to hold and manage a portfolio of securities for its investors

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7
Q

Asset requirements of an investment company

A

40% of total assets in investment securities

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8
Q

529 prepaid tuition plans

A

lock in tuition prices for the future

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9
Q

To receive full benefits of these plans students need to attend in state public college

A

529 prepaid tuition plans

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10
Q

NAV ( Net Asset Value)

A

price investors receive when they redeem mutual fund shares

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11
Q

Calculated at the end of each business day

A

NAV and POP

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12
Q

Diversified company rule

A

75 - 5 - 10 rule

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13
Q

The 75- 5 - 10 rule

A
  • 75% of assets invested
  • no more than 5% of fund assets invested in 1 issue
  • no more than 10% of any corporation’s voting stock
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14
Q

Diversification

A

reduces nonsystematic risk

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15
Q

business risk

A

the decline of value for an individual security

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16
Q

hedge funds

A

limited partnerships only available to accredited investors. limited to 99 investors and do not register with the SEC

17
Q

These securities are high risk, expensive and aggressive

A

hedge funds

18
Q

mutual fund requirements

A
  • clearly defined investment objective
  • minimum net assets of $100K
  • minimum 100 investors
19
Q

Fund can only issue common stock

A

Mutual funds

20
Q

Section 529 plans

A

state- sponsored qualified tuition programs (QTPs)

21
Q

investors can contribute up to 15k per year to this plan without incurring a gift tax.

A

Section 529 plans

22
Q

Local Government Investment Pools

A

established by state or local government entities to allow for investment of public funds

23
Q

investment objectives include safety of principle and daily liquidity. Not available to the general public

A

LGIP ( local government investment pools)

24
Q

Leveraged ETF

A

these ETFs use derivatives and bonds ro magnify the return of an underlying index. ( short term investing, has higher costs and risks)

25
Q

529 plan transfer/ rollover

A

plan assets can roll over to another 529 plan every 12 months without tax consequence.

26
Q

Who can have 529 plan asset be transferred over to?

A

Plan assets can be transferred from one relative to another without tax consequence.

27
Q

closed-end fund

A

one-time issuance of a fixed number of shares. trades on exchanges or OTC. (common stock, preferred stock and bonds)

28
Q

shares may trade at, above or below NAV

A

Closed- end fund

29
Q

ABLE program (529A)

A

account for a disabled person can hold up to $100k in account without losing eligibility for social security, Medicaid and Medicare

30
Q

Exchange traded funds (ETFs)

A

investment company that invests in stocks in a benchmark index.

31
Q

ETFs are actively managed. True or False

A

False. ETFs are NOT actively managed

32
Q

Interval Funds

A

registered as closed-end funds, they do not trade on an exchange. (often makes tender offers)

33
Q

2 types of investment companies

A
  • unit investment trusts

- management investment companies

34
Q

Investment company registration requirements

A

must register with the SEC and a prospectus must be provided to all investors

35
Q

mutual fund

A

an open- end management company that is a continuous primary offering

36
Q

Shares of this fund are issued and redeemed and do not trade

A

mutual funds

37
Q

customer must be given a prospectus prior or at time of sale of this fund

A

mutual funds

38
Q

customers buy this fund at POP and sell at NAV

A

mutual funds

Series 6 (6 decks)

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