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SERIES 7 > Unit 10- Investment Products > Flashcards

Unit 10- Investment Products Flashcards

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Series 7 Top-off Exam flashcards
1
Q

UIT

A

Unit Investment Trust

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2
Q

FAC

A

Face-Amount Certificate Company

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3
Q

Open-Ended Funds

A

mutual fund

when liquidating, investor returns shares to fund

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4
Q

Closed-End Funds

A

limited number of shares

when liquidating, investor sells on secondary market

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5
Q

75-5-10 Diversificaton

A

Within 75% of invested funds:
-No more than 5% of funds should be invested in the securities of any one issuer
- Fund may not own more than 10% of the outstanding voting securities of any one issuer
UNDER INVESTMENT ACT OF 1940

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6
Q

OF 3 TYPES OF INVESTMENT COMPANIES, WHAT TYPE IS AN ETF?

A

UITs or open-end funds

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7
Q

ETF CREATION UNITS

A

LARGE BLOCK ISSUES OF ETF
- IF LIQUIDATING, INVESTOR returns creation units to fund and redeems the actual securities that comprise the portfolio instead of CASH.

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8
Q

How many times are ETFs priced throughout the day?

A

Continuously

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9
Q

Which of three types of investments does not have management fee, has redeemable shares, and a fixed portfolio?

A

UIT

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10
Q

Who must an investment company register with?

A

SEC

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11
Q

3 requirements to be an investment company and issue securities to the public:

A
  • private capitalization of $100,000
  • 100 investors
  • clearly defined investment objectives
  • If does not meet first two requirements, it can still register a public offering as long as it does meet the requirements within 90 days.
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12
Q

Can mutual funds be purchased on margin?

A

No

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13
Q

How often must shareholders receive reports according to 1940 ACT?

A

At least, semi-annually

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14
Q

Expense Ratio

A

Expenses / Avg. Net Assets

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15
Q

Sales Charge Equation

A

Public Offering Price - Net Asset Value = Sales Charge

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16
Q

Sales Charge % Equation

A

Sales Charge / POP = Sales Charge %

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17
Q

POP Equation

A

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

18
Q

What is the maximum sales charge?

A 
8.5%
If does not offer:
-breakpoints
-rights of accumulation
-automatic reinvestment
MAX = 6.25%
19
Q

Class A Shares of Mutual Fund

A

front-end load that can be reduced with breakpoints

20
Q

Class B Shares of Mutual Fund

A

back-end load declines over time

21
Q

Class C Shares of Mutual Fund

A

12b-1 fees charged quarterly with small back end load in first year

22
Q

Class D Shares of Mutual Fund

A

level load plus a redemption fee

23
Q

How many days does a mutual fund have until it must redeem shares

A

7 calendar days

24
Q

How often are 12b-1 fees charged?

A

Quarterly, must be approved annually

25
Q

SubChapter M

A

requires a fund to distribute at least 90% of its net investment income to shareholders

26
Q

Mutual Fund Yield

A

Annual Dividend/POP

27
Q

ex date

A

determined by BoD

-typically one business day after the record date

28
Q

When is Dollar Cost Average an effective method of purchasing fund shares?

A

When the average cost is less than the average price

29
Q

Dollar Cost Averaging will result in average cost less than average price when:

A

1) Price of Stock Fluctuates

2) A fixed dollar amoutn is invested regularly

30
Q

Redemption Price is equal to _____

A

NAV

31
Q

NAV / share of mutual fund is affected by:

A

Changes in market value of positions
Receiving Cash Dividends from positions
The fund paying dividends to shareholders

32
Q

Are dividends of mutual fund taxable?

A

NO

33
Q

Are capital gains distributions of mutual fund taxable

A

YES

34
Q

How often can capital gains be distributed to mutual fund investors?

A

Annually

35
Q

How many days can an LOI be backdated by?

A

90 days

36
Q

OPEN OR CLOSED-END FUNDS ISSUE DEBT SECURITIES?

A

CLOSED END

37
Q

Is the LOI binding to the customer?

A

NO

38
Q

If customer never follows through with LOI, what does the fund do?

A

Reduce the redemption by shares held in escrow

39
Q

A redeemable security DOES/DOESN’T have a secondary market?

A

DOES NOT

40
Q

Breakpoint Sale

A

Just below the number share needed to reach the breakpoint discount

41
Q

What Class of Share can always be redeemed at its NAV

A

C

SERIES 7 (13 decks)

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