sie chapter 2 pt 3

Question 1

facs and uits are managed or not managed

once the portfolios are composed they are changed or not changed

Answer 1

no managed

not changed

Question 2

do facs and uits trade in the secondary market

they are redeemable only through the

Answer 2

no

issuer

Question 3

actively manages a securities portfolio to achieve a stated investment objective

Answer 3

managed investment company

Question 4

raise capital for its portfolio by conducting common stock offering, much like any publically traded company that raises capital to invest in its business

initial offering of shares is limited

Answer 4

closed end investment companies(publically traded funds)

Question 5

what determines the bid price(price at which investor can sell and ask price(price at which investor can buy)

Answer 5

supply and demand

Question 6

closed end investment companies only investment company security that trades in secondary market

T or F

Answer 6

T

Question 7

Closed end investment companies may issue

Answer 7

common stock, preferred stock, and debt securities

Question 8

only issues one class of security, which is common stock

Answer 8

open end investment companies(mutual funds)

Question 9

mutual funds themselves can purchase

Answer 9

common stock, preferred stock, and bonds

Question 10

an insurance contract designed to provide retirement income

Answer 10

annuity

Question 11

because an annuity can provide an income for the rest of someone’s life, the contract has a

Answer 11

mortality guarantee

Question 12

if the investment manager of an insurance company is responsible for selecting the securities to be held in the separate account, the second account is

Answer 12

directly managed and must be registered under the investment company act of 1940 as an open end management investment company

Question 13

if the investment manager of the insurance company passes the portfolio management responsibility to another party, the separate account is

Answer 13

indirectly managed and must be registered as a unit investment trust under the investment company act of 1940

Question 14

fixed annuity promises

who is at risk

Answer 14

a stated rate of return

insurance company

Question 15

mutual funds are redeemable or not redeemable

Answer 15

redeemable

Question 16

redeemable securities means that

Answer 16

they do not trade in the secondary market

Question 17

class a(front end load) shares

Answer 17

have front end sales charges loads, the sales charges are paid at the time an investor buys shares and the sales charge is taken from the total amount invested.

Question 18

Class b(back end load shares)

Answer 18

back end sales charge is paid at the time an investor sells shares previously purchased(has them redeemed)

Question 19

Class c(level load Shares)

Answer 19

have a one year 1% cdsc, a 75% 12b-1 fee and a .25% shareholder service fee

Question 20

no load shares

Answer 20

fund does not charge any type of sales charge.

Question 21

short term buying and selling of mutual fund shares to take advantage of inefficiencies in mutual fund pricing

Answer 21

market timing

Question 22

NAV=

Answer 22

total assets- total liabilities

Question 23

a prospectus can or cannot be altered

Answer 23

cannot

Question 24

Statement of additional information

Answer 24

Mutual funds(open end) and well as closed end funds are required tp have an sai available for delivery within 3 business days on an investors request without charge

Question 25

Financial reports

Answer 25

the investment act of 1940 requires that shareholders receive financial reports at least semiannually.

Question 26

an investment company must send a copy of

Answer 26

its balance sheet to any shareholder who requests one in writing between semiannual reports

Question 27

fund companies are permitted to charge up to how much

Answer 27

8.5%

Question 28

operating expenses

Answer 28

include salaries and administrative fees.

Question 29

fund portfolio management fee

Answer 29

paid to those hired to manage the investments in the fund portfolio

Question 30

every funds single greatest expense is the this is charged as a percentage of what

Answer 30

annual fee annually as a percentage of the total assets under management

Question 31

Permits a mutual fund to collect a fee for promoting, selling, or undertaking activity in connection with the distribution of its shares

Answer 31

12-1 asset- based fee

Question 32

direction participation programs

Answer 32

unique forms of business that raise money to invest in real estate, oil and gas, equipment leasing, and other similar business ventures.

Question 33

capital growth potential is achieved through

Answer 33

appreciation of property

Question 34

cash flow income generated through

Answer 34

rent

Question 35

tax deductions

Answer 35

from mortgage interest expense and depreciation allowances for "wearing out the building" and capital improvements

Question 36

tax credits are

Answer 36

very strong incentives as they reduce tax liability dollar for dollar

Question 37

intangible drilling costs

Answer 37

costs such as wages, supplies,, fuel, and insurance that have no salvage value when the program ends

Question 38

depletion allowances

Answer 38

tax deductions that compensate the program for the decreasing supply of oil or gas after it is taken out of the ground and sold

Question 39

limited partnerships

Answer 39

investment opportunities that permit the economic consequences of a business to flow or pass through to investors.

Question 40

reits that are subject to disclosure documents(registered with the sec) are ____ the ones that are not registered with the sec are

Answer 40

public reits private reits

Question 41

if a reit is traded on the stock exchange then its

Answer 41

listed reit

Question 42

an owner of a real estate investment trust holds

Answer 42

an undivided interest in a pool of real estate investments

Question 43

reits are or are not investment companies

Answer 43

are

Question 44

reits are or are not to be considered dpps

Answer 44

not

Question 45

hedge funds are regulated or unregulated

Answer 45

considered unregulated as they currently do not have to be registered with the sec

Question 46

hedge funds are unregulated but do require

Answer 46

investors to be a sophisticated investor(accredited investor)

Question 47

it is unusual for hedge fund organizers to

Answer 47

also be investors in the fund

Question 48

Exchange traded funds

Answer 48

invests in a specific group of stocks and generally does so to mimic a particular index

Question 49

disadvantages of etfs

Answer 49

commissions overtrading market influences on price

Question 50

advantages of etfs

Answer 50

pricing and ease of trading margin can be sold short (MF cannot) operating costs lower than MF Tax efficiency

Question 51

senior unsecured debt securities issued by a bank or financial institution.

Answer 51

exchange traded notes

Question 52

company that manages a portfolio if real estate, mortgages, or both to earn profits. organized as a trust in which investors buy shares or certificates of beneficial interest, either on stock exchanges or in the over the counter market

Answer 52

real estate investment trust

Question 53

an open end management company may charge what amount annually and still advertise itself as a no-load fund

Answer 53

.25%

Question 54

an investment established by states to provide other government entities such as cities or counties a place to invest funds short term is

Answer 54

LGIP

Question 55

Variable annuities are ____ fixed annuities are ___

Answer 55

securities, not

Question 56

a private unregulated investment company organized in such a way so as to invest and achieve high returns utilizing debt leverage and derivative products such as options and margin is

Answer 56

a hedge fund

Question 57

risk that changes in the overall economy will have adverse effect on individual securities regardless of the company's circumstances Generally cause by factors that affect all businesses, such as war, global security threats, or inflation

Answer 57

systematic risk

Question 58

no matter how diversified a portfolio of investments is, it will still be subject

Answer 58

systematic risk, you cannot diversify this away

Question 59

risk that when overall market declines, so too will any portfolio made of securities the market comprises

Answer 59

market risk

Question 60

a potential change in bond prices caused by change in the market interest rates after an issuer offers its bonds.

Answer 60

interest rate risk

Question 61

risk that future cash flows – either coupons (the periodic interest payments on the bond) or the final return of principal – will need to be reinvested in lower-yielding securities

Answer 61

reinvestment risk

Question 62

the effect of continually rising prices on investment returns

Answer 62

inflation risk

Question 63

measures the volatility of an asset

Answer 63

beta

Question 64

beta < 1= ___stable than the market

Answer 64

more

Question 65

beta>1__stable than the market

Answer 65

less and would be more volatile than the market

Question 66

the potential for an investor o lose some or all of her money--under circumstances unrelated to an issuers financial strength

Answer 66

capital risk

Question 67

this is an operating risk, generally caused by poor management decisions

Answer 67

business risk

Question 68

relates primarily to those companies that use debt financing

Answer 68

financial risk

Question 69

risk that a bond might be called before maturity and an investor will be unable to reinvest the principal at a comparable rate of return

Answer 69

call risk

Question 70

a period during which a bond cannot be called

Answer 70

call protection

Question 71

the risk that a borrower will repay the principal on a loan or debt instrument(bond) before its maturity and thus

Answer 71

prepayment risk

Question 72

the possibility that an investment denominated in one currency could decline if the value of that currency declines in its exchange rate with the us dollar.

Answer 72

currency risk

Question 73

currency is quoted at the

Answer 73

spot rate

Question 74

the risk that an investor might not be able to sell an investment quickly at a fair market price

Answer 74

liquidity risk or market ability risk

Question 75

changes in the rules that a business must comply.

Answer 75

regulatory risk

Question 76

results from changes in the law

Answer 76

legislative risk

Question 77

potential instability in the political underpinnings of the country

Answer 77

political risk

Question 78

capture the risk of country defaulting on its commercial debt obligations.

Answer 78

sovereign risk