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SIE > Investment Companies Quiz > Flashcards

Investment Companies Quiz Flashcards

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SIE Exam flashcards
1
Q

The average investor has limited assets but by pooling funds with other investors in an investment company the investor can receive the advantages of increased

A

Professional management and diversification

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2
Q

Which of the following investments returns are based on a market index?

A

ETNs

ETFs

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3
Q

Which of the following is a characteristic of a hybrid REIT?

A

Invests in real property
Provides potential appreciation
Invests in mortgages

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4
Q

All of the following are characteristics of Unit investment Trusts

A

Units are redeemable by the issuer
A fixed portfolio
No secondary market trading

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5
Q

Which of the following should be used when comparing mutual funds?

A

Risk factors
The funds investment policies
Quality of management

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6
Q

An investor is interested in a REIT that will provide immediate income. The investor would best be served by

A

Mortgage REIT

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7
Q

Which of the following is subject to higher maintenance requirements when purchased on margin?

A

Leveraged ETFs

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8
Q

All of the following are characteristics of an Exchange Traded Fund (ETF)

A

ETFs usually trade near their NAV
ETFs can be purchased on margin 30 days after the IPO
ETFs provide intraday liquidity

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9
Q

Which of the following would be in an equity REIT portfolio?

A

Shopping center
Office building
Vacant land

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10
Q

The Investment company concept allows the individual investor to

A

Achieve wide diversification with a small investment

Access professional portfolio management at minimal cost

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11
Q

Which type of investment companies charge a management fee?

A

Face amount certificates
Open end investment companies
Closed end investment companies

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12
Q

A broad market index ETN carries all of the following risk?

A

Loss of principal
Market Risk
Credit Risk

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13
Q

How often must performance statistics in a prospectus be updated?

A

Every 12 months

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14
Q

An emerging markets currencies ETN may be an appropriate investment for which of the following persons?

A

An experienced investor lookin for a simple way to gain exposure to a portfolio of emerging markets currencies

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15
Q

Which of the following accurately describes an ETN?

A

Principal at maturity is based on an index

Principal at maturity is uncertain

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16
Q

Which of the following is true regarding ETNs?

A

The investor may hold until maturity or trade on an exchange
Principal and interest are not guaranteed
An ETNs return is based on a market index

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17
Q

A hybrid REIT invests in

A

Mortgages

Real property

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18
Q

If you were purchasing a security on installments and the investment matured at a fixed dollar amount in the future you would own a

A

Face amount certificate

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19
Q

An equity REIT invest in

A

Real Estate

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20
Q

Which type of investment company issues certificates that can be redeemed for a fixed amount on a specified date?

A

Face amount certificate

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21
Q

Bill owns shares in a closed end investment company. He can dispose of his shares by

A

Sale on the open market

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22
Q

Face amount certificates issue debt certificates that offer predetermined interest rates. The certificates may be purchased by either periodic installments or with a lump sum payment. These certificates have a maturity of at least.

A

24 months

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23
Q

Which of the following is a privilege offered by a mutual fund family?

A

The ability to exchange shares of one mutual fund for shares in another mutual fund under the same family of funds with no additional sales charge

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24
Q

Which of the following accurately describes an ETN?

A

Principal at maturity is based on an index

Principal at maturity is uncertain

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25
Q

If you own securities that represent an undivided interest in a fixed portfolio with which type of investment company are you invested?

A

Unit investment trust

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26
Q

The average investor has limited assets but by pooling funds with other investors in an investment company the investor can receive the advantages of increased

A

Professional management and diversification

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27
Q

An investor purchased 100 shares of an investment company and paid the market price plus a commission. What did the investor purchase?

A

Closed end investment company shares

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28
Q

Due to drought conditions a high net worth experienced investor believes that the price of broad range of agricultural commodities will increase. Which of the following might be an appropriate investment for this investor?

A

Agriculture sector total return ETN

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29
Q

Which of the following is an investment company with the objective of achieving the same return as a particular market index?

A

Exchange traded fund

30
Q

A sales breakpoint for a mutual fund sale is available to

A

An individual account holder

A custodian and his minor child

31
Q

When making mutual fund recommendations a registered representative should

A

Compare standardized yields of similar funds
Explain the funds expense ratio
Consider the total return of the fund after sales charges and expenses

32
Q

The method by which a mutual fund offering price will be determined is

A

Outline in the prospectus

33
Q

A redeemable security is

A

A security with no secondary trading

34
Q

All of the following are contained in a funds prospectus

A

Method of calculating the funds net asset value
The funds policy concerning loans
Methods of redemption

35
Q

A prospectus can no longer be used if financial information is older than

A

16 months

36
Q

A new investor recently opened s mutual fund account and is planning to make a monthly investments with the goal of accumulating a sizable retirement account in the next 20 years m. What mutual fund feature best helps him in accomplishing this goal?

A

Automatic reinvestment of dividends and capital gains at NAV

37
Q

The shareholders of a mutual fund have certain rights associated with the ownership interests they hold in the company

A

Approval of investment advisory agreement
Voting rights/ proxy rights regarding company issues
Election of board

38
Q

Regarding CDSCs which of the following is true

A 
They represent alternate methods of recovering fund marketing costs
For  holding period const associated with each class will differ
The different share class options should always be pointed out by the rep
39
Q

An investment advisor receives a fee for his services. This fee is classified as

A

An operating expense of the fund

40
Q

Registered investment companies are required to have directors on their board that are independent of the management company. What is the required minimum percentage of disinterested directors?

A

40%

41
Q

Which type of investment company issues debt instruments that offer the investor a predetermined rate of interest?

A

Face amount certificate

42
Q

A closed end management company has shares that

A

Are not redeemable

43
Q

Mutual fund sales breakpoints are allowable only if the following conditions are met

A

Information concerning schedule breakpoints is given to shareholders and prospective investors
Breakpoints apply uniformly to all offerers

44
Q

A customer owns 500 shares of XYZ mutual fund A shares. She can redeem her shares at

A

The NAV

45
Q

Which of the following statements is correct with respect to closed end investment companies?

A

They are listed and traded on exchanges
There exists a fixed number of outstanding shares
The issuing company does not redeem its own shares

46
Q

UITs have fixed portfolios which means that

A

The content of the portfolio is fixed for the life of the trust

47
Q

A client with $1000 to invest a mutual fund for his IRA account is concerned about front end loads reducing the size of the already small investment. The client plans on holding the investment until retirement (20 years or more). Class B shares may be more appropriate for this client than Class A shares for all of the following reasons.

A

Class B shares CDSC declines over time
Class B shares have no front end load
After a specified holding period of time Class B shares convert to Class A shares

48
Q

An investor purchasing a mutual fund will pay what price?

A

The next calculated public offering price after purchase

49
Q

A mutual funds custodian

A

Safeguards fund cash and securities

50
Q

What is the maximum front end sales charge for a mutual fund?

A

8 1/2 % of the public offering price

51
Q

The total expenses divided by the average net assets is the formula used in determining the mutual funds

A

Expense ratio

52
Q

ABC Equity Fund charges a 12b-1 fee. The funds Board of Directors must be made up at least

A

51% unaffiliated directors

53
Q

Registered investment companies are required to have directors on their board that are independent of the management company. What is the required minimum percentage of disinterested directors?

A

40%

54
Q

All of the following are duties of a transfer agent

A

Issuing new shares book entry
Canceling redeemed shares
Distributing capital gains to shareholders

55
Q

The responsibilities of the investment adviser include all of the following

A

Providing research on market and economic trends
Making decisions on the diversification of the fund
Timing investment decisions to take advantage of market swings

56
Q

Which of the following is true concerning exchange privileges within a family of funds?

A

It is a taxable event

There may be an exchange fee involved

57
Q

A mutual fund that charges the maximum sales charge of 8 1/2% allowable by the investment company act of 1940 have to offer

A

Distribution reinvestment at NAV
Breakpoints
Rights of accumulation

58
Q

Publications reporting total return data for an investment should use the recommended reporting period of

A

1 year 5 years and the lesser of 10 years or life of the investment

59
Q

Which of the following statements regarding an LOI is true

A

Maximum time limit of letter is 13 months
The letter is not binding on the investor
Backdating of 90 days to include prior purchases is allowable

60
Q

Mutual fund shareholders rights include

A

Election of directors
Voting by proxy
Approving changes in investment objectives and policies

61
Q

A client makes an initial deposit of $10,000 into his mutual fund account and at the same time signs a letter of intent for $50,000. All of the following statements are correct concerning this situation

A

He has 13 months to fulfill the deposit requirement of the letter of intent
The fund will probably hold some of the initial shares in escrow
If he fails to deposit the additional money he will be required to send a check for the additional sales charges due

62
Q

What’s are the tax consequences of changing from one fund to another within a family of funds?

A

Will have a taxable consequence because it is a purchase and sale

63
Q

One of the significant advantages of investing in mutual funds is

A

Automatic reinvestment of dividends and capitals gains at NAV

64
Q

The statistic that measures fund performance and includes reinvested distribution and share appreciation net of sales charges and expenses for the period is

A

Total return

65
Q

The purpose of breakpoints is to

A

Give the investor a reduced sales charge

66
Q

The NAV of a mutual fund is $15 per share and the sales charge is 8%. The POP

A

$16.30

67
Q

Sales breakpoints are allowable if which of the following conditions are met?

A

Breakpoints uniformly apply to all offerees

The investment company advises existing shareholders of any schedule changes within 1 year

68
Q

According to the investment company act of 1940 the maximum sales charge is

A

8 1/2%

69
Q

The NAV will not change it

A

The portfolio sells securities and retains the cash

70
Q

An investment company can perform certain activities only Be approval of majority of shareholders. Which of the following is a board of directors activity that is allowable without a shareholder vote?

A

Appointments of officers of the investment company

SIE (23 decks)

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