Unit 8 Investment Companies

Question 1

All ETFs, even those invested in bonds, are considerd:

Answer 1

equity securities

Question 2

Commission are paid on what type of funds?

Answer 2

closed-end funds and ETFs
NOT: mutual funds or UITs

Question 3

UITs

Answer 3

redeemable units
fixed pools of equity or debt
do not trade in secondary market
not actively managed (low cost)

Question 4

Business Development Company (BDC)

Answer 4

exchange traded
small mid sized companies
must pay out $90 of taxable income

Question 5

Interval Fund

Answer 5

closed-end that offers access to exotic or alternative investments
limited to hedge funds and institutions
Intervals are quarterly
High fees
Lack of liquidity
Suitable for investors with longer time horizon

Question 6

When investor redeems mutual fund shares, payment must be made within

Answer 6

7 business days, investor receives NAV at time of redemption

Question 7

Mutual Fund Class A shares

Answer 7

front-end load
offer break points
lower annual expenses
good for investors with long time horizon

Question 8

Mutual Fund Class B shares

Answer 8

deferred sales charges
no break points
higher annual expenses

Question 9

Mutual Fund Class C shares

Answer 9

higher annual expenses (12b-1)
no break points
deferred sales charge
good for short term investors

Question 10

Cap gain holding period in mutual funds are based off…

Answer 10

the mutual holding period, not the investors holding period

Question 11

Mutual funds dividends and capital gains are paid…

Answer 11

div: quarterly
cap gain: annually

Question 12

Equity income fund is for investors looking for…

Answer 12

combination of income and capital appreciation