PART I: Chapter 3 - Investment Vehicles

Question 1

What do Investment Companies offer investors?

Answer 1

Diversification, Liquidity, Professional Management

Question 2

Who regulates Investment Companies?

Answer 2

SEC

Question 3

What requires Investment Companies to register?

Answer 3

Investment Company Act of 1940

Question 4

What is a UIT?
In what does a UIT invest?

Answer 4

Unit Investment Trust
Muni and Corp Bonds

Question 5

Are a UITs assets managed?

Answer 5

No

Question 6

How are UIT investors paid?

Answer 6

Interest

Question 7

When is a UIT terminated?

Answer 7

When all Bonds have matured

Question 8

What are the 4 types of Investment Companies?

Answer 8

Open-End
Closed-End
Diversified
Non-Diversified

Question 9

What is another name for a Open-End Investment Company?

Answer 9

Mutual Fund

Question 10

A Diversified fund can have no more than ____% of its assets in one company and no more than ____% of voting stock in any one company.

Answer 10

5%

10%

Question 11

An Open-End Investment Company issues _________________ shares.

Answer 11

Redeemable

Question 12

Are Mutual Funds FDIC insured?

Answer 12

No

Question 13

Formula for Mutual Fund NAV

Answer 13

Total Fund Assets - Liabilities /
Outstanding Mutual Fund Shares

Question 14

What’s the difference between the Bid and Ask price?

Answer 14

Bid = NAV
Ask = NAV + Sales Load

Question 15

Investment Companies DO NOT include …

Answer 15

Brokerage Companies
Insurance Companies
Banks

Question 16

Mutual Funds investors get ____________ pricing. This is calculated on the price at the OPEN (or) CLOSE of market.

Answer 16

Forward
CLOSE

Question 17

What do you call an increase in the NAV of a Mutual Fund?

Answer 17

Appreciation. It’s NOT Capital Gains until the assets are SOLD.

Question 18

If an investment trades with a commission, NOT a load, you know it’s a ____________-End fund?

Answer 18

Closed

Question 19

What is a No-Load fund?

What is unique about them?

Answer 19

A mutual fund with no sales charge.

Bid = Ask

Question 20

What is the maximum sales charge per the Investment Company Act of 1940?

Per FINRA?

Answer 20

9%

8 1/2%

Question 21

Is NAV fixed or flexible on Open-End and Closed-End funds?

Answer 21

Open-End = Flexible

Closed-End = Fixed

Question 22

What does “Fixed Capitalization” mean?

Answer 22

It means a fixed amount of shares have been issued.

Question 23

What is the major difference between Open and Closed-End funds?

Answer 23

Capitalization

Question 24

Explain the Fund: Diversified Common Stock Fund

Answer 24

Invest in many different companies in many different industries.

Question 25

Explain the Fund: Specialized / Sector Fund

Answer 25

Invest in a particular industry or geographic area. RISKIEST

Question 26

Explain the Fund: Balanced Fund

Answer 26

Invest in a diversified list of Bonds, Preferred and Common stock. The most conservative and least volatile type of fund

Question 27

Explain the Fund: Income Fund

Answer 27

Objective is to maximize income. Invest in high-yield stocks and bonds.

Question 28

Explain the Fund: Growth Fund

Answer 28

Goal is capital appreciation and thus reinvest dividends and have lower yields.

Question 29

Explain the Fund: Blue Chip Fund

Answer 29

Only invest in Blue Chip stocks.

Question 30

Explain the Fund: Gold Fund

Answer 30

Invest primarily in the gold industry.

Question 31

Explain the Fund: International Fund

Answer 31

Invest in stocks and bonds of foreign companies and governments. NOT the USA

Question 32

Explain the Fund: Global Fund

Answer 32

Invest in stocks and bonds of US and foreign companies.

Question 33

Explain the Fund: Index Funds

Answer 33

Invest in funds that mirror a particular index.

Question 34

Explain the Fund: Bond Funds

Answer 34

Invest in portfolios that consist of bonds.

Question 35

Explain the Fund: Municipal Bond Fund

Answer 35

Invest in portfolios of municipal bonds only.

Question 36

Explain the Fund: Asset Allocation Fund

Answer 36

Combines multiple asset classes of stocks, bonds and cash equivalents.

Question 37

Explain the Fund: Money Market Fund

Answer 37

Invest in low risk securities with short term maturities of 12-months or less. Most liquid Mutual Fund.

Question 38

Money Market funds must do these 3 things ...

Answer 38

Average weighted maturity of 90 days or less Minimal credit risk 95% of assets in top 2 ratings

Question 39

What is a 12b-1 fee on a Mutual Fund?

Answer 39

An annual charge against the fund assets to pay for marketing.

Question 40

If a person uses a website that uses an algorithm to provide investment advice, does that person need to register as an Investment Adviser?

Answer 40

YES