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Series 7 > Investment Companies - Test Questions > Flashcards

Investment Companies - Test Questions Flashcards

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Series 7 Top-off Exam flashcards
1
Q

Money market funds typically are _______

A

no load

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2
Q

Open end mutual funds are purchased at the offering price, so there is no _______

A

additional load - the sales charge is included in the offering price

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3
Q

The formula to compute a lower offering price for a mutual fund based on breakpoints =

A

= Bid (NAV) / (100% - Sales Charge %)

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4
Q

After the LOI is completed, any additional NAV is _____ to the balance and establishes a ______ base level

A

NAV is added to the balance and establishes a new, higher base level from which sales charge will be calculated

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5
Q

The LOI operates ______ from the ROA and takes _____

A

operates separately and takes precedence

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6
Q

The max 12b-1 fee is _____

A

.75%

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7
Q

Dividends and capital gains reinvested in a mutual fund are done so at what price basis, NAV or POP?

A

NAV

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8
Q

Can a corporate purchaser qualify for breakpoints?

A

Yes. Investment clubs and omnibus accounts cannot

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9
Q

Can you receive a breakpoint if you have funds in separate BDs?

A

Yes, it doesn’t matter where you purchase the funds - just the total amount you own

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10
Q

A “breakpoint” sale is a good thing. T/F

A

FALSE - this is when a rep sells a customer just under the breakpoint amount and is prohibited

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11
Q

Regulated muni mutual funds distribute income to investors and retain some in the fund. Both these actions are federally tax-free. T/F

A

True.

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12
Q

Whether or not an investor reinvests dividends or capital gains back into a fund, the monies are ______

A

taxable and must be included on that year’s tax returns

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13
Q

The redemption of mutual fund shares affects the NAV per share. T/F

A

False - it is redeemed proportionally so no change

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14
Q

Maximum sales charges for mutual fund purchases are set by ______

A

FINRA, NOT the Act of 1940

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15
Q

Mutual funds send their financial statements to shareholders ________

A

semi-annually

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16
Q

To adopt a 12b-1 fee, it requires a _______

A

majority vote of shareholders, the BOD, and the disinterested members of the BOD

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17
Q

To discontinue a 12b-1 fee, it requires _____

A

a majority vote of shareholders OR the disinterested members of the BOD

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18
Q

Breakpoints are available on both ____ and ____

A

mutual funds and fixed UITs

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19
Q

Variable annuities are sold without a prospectus. T/F

A

False - since the purchaser has the investment risk they are non-exempt and sold with a prospectus

20
Q

The AIR for a variable annuity is the _______

A

assumed interest rate (not guaranteed)

21
Q

Distributions from variable annuities are taxable at _______ above the customer’s cost basis

A

ordinary income (NOT capital gains)

22
Q

If a customer surrenders a var annuity contract prematurely, the surrender fee imposed is _____ tax deductible

A

NOT

23
Q

In a 1035 exchange (a “like-kind” exchange), a var annuity can be exchanged for ______ but not for _____ products

A

can be exchanged for other var/fixed annuities, but NOT for insurance products

24
Q

The only exception to the 1035 exchange is when a _____ is exchanged for a _____

A

a life insurance contract is exchanged for a var annuity contract

25
Q

The owner of a var annuity has the right to vote for:

A
  • the board of trustees
  • changing the investment objectives
  • dissolving the trust
  • CANNOT vote for distributing income and capital gains
  • CANNOT vote for a sales charge
26
Q

Dividends from REITs are taxed at ______, while dividends from common stock (including mutual funds) qualifies for taxation at _____

A

REIT dividends taxed at ordinary income, other dividends eligible for 15-20% rate

27
Q

Funds paid into “tax qualified” retirement plans are _____ taxable upon distribution

A

100% - since they were tax qualified, they were never taxed going in

28
Q

If a person is NOT covered by another retirement plan, contributions to an IRA are _____ without any _____

A

they are tax deductible without any income limit

29
Q

If you are COVERED by another retirement plan and make more than ________, contributions to an IRA are ______ tax deductible. The deduction phases out beginning at _______.

A

@ $71,000 they are not tax deductible. deductions phase out at $61,000

30
Q

Tax deductions begin to phase out for a joint account (covered by another retirement plan) beginning at _______ and completely gone by ______

A

Beginning at $98,000 and completely gone by $118,000

31
Q

Do alimony and child support count as earned income according to the IRS?

A

Yes - can be used to contribute to an IRA

32
Q

Contributions to an IRA can ONLY be made in ______

A

cash

33
Q

Are gold coins minted by the US gov’t allowed as investments in IRAs?

A

Yes - because they were minted by the US govt

34
Q

Rolling over an inherited IRA to either an existing IRA for the bene or a new IRA for the bene is only available to _______

A

surviving spouses

35
Q

A person inheriting an IRA from a non-spouse can ______, ________

A

can either take all the proceeds immediately or elect to receive them over i) 5 years or ii) spread them over the beneficiary’s remaining life (if longer than 5 years) - on each annual distribution income tax must be paid (no 10% penalty tax if the recipient is under age 59.5)

36
Q

Anyone with an earned income can open a ROTH IRA. T/F

A

False - they are not available for high-earning individuals. Individuals that earn over $132k and couples that earn over $194k cannot open Roth IRAs

37
Q

If you contribute the max to a traditional IRA, can you contribute then to a Roth IRA in the same year?

A

NO

38
Q

Is there a mandatory distribution for Roth IRAs?

A

NO

39
Q

Can you count investment income towards a Keogh plan contribution?

A

NO - only for personal service income

40
Q

IF you contribute the max ($53k) to a Keogh plan as the employer, you must contribute ______ of “after Keogh earnings” for employees

A

25%

41
Q

Contributions to qualified retirement plans (other than IRAs) must be made no later than ______

A

the date the tax return is filed (even if this is with an extension)

42
Q

Contributions to IRAs must be made no later than _____ of the tax year after the year for which the deduction is claimed

A

April 15th

43
Q

Under a Keogh plan, distributions must commence on ______ of the ______ the individual reaches age 70.5

A

April 1st of the following year after they hit 70.5

44
Q

A person with a 401(k) can contribute up to ____ of his salary or ______ in dollars

A

25% of his salary or $18,000 cap

45
Q

Funds in a 529 plan can ONLY be used for ______

A

higher education expenses; whereas Coverdell ESA funds can be used for any qualifying education expense (much more liberal)

Series 7 (34 decks)

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