Fund dividends are taxable, whether or not they are automatically reinvested in additional fund shares. Thus, they are only suitable for relatively risk tolerant, sophisticated investors. D Both Treasury bonds and Treasury notes are Issued with maturities ranging from 10 to 30 years. B I and III It appears that the hedge fund customer is engaging in the prohibited practice of late trading of mutual fund sharesC. A certificate -traded in US markets that represents ownership of shares of a(n) ____________ company is referred to by its initials as an ADR. 3 business daysC. Experts are tested by Chegg as specialists in their subject area. Which statements are true of the DJIA? MUTUAL FUNDSFund Net Asset Value Offering Price Change, Capital $9.01 $9.59 -.02Common $6.37 $6.64 -.04Corporate $7.72 $8.44 +.03. Hedge funds are partnerships that are completely illiquid. Estimate with 95% confidence the total amount that left New York. B C. is unaffected The wife works while the husband does not. Open-end funds continuously issue and redeem shares. D (a) Justify Interest is payable semiannually on June 30 and December 31. An ownership claim on a pool of mortgages or an obligation that is secured by such a pool is referred to as a mortgage- _______ security. Redemption feeC. Which of the following statement (s) is (are) TRUE regarding family limited partnerships? The Ask price on ALPO Fund is $10.39 per share or $1,039 for 100 shares. All of the following statements are true about "odd lot" transactions EXCEPT: D. odd lot commissions are set by the NYSE. So, only the 1% of the income retained will be taxed. II The REIT issues shares of beneficial interest representing an undivided interest in a pool of real estate investments Most are AMEX listed (now renamed the NYSE American), but there are ETFs on the NYSE and NASDAQ as well. C $10 plus a commissionC. These are taxed at ordinary income tax rates of up to 37%. B $10,450D. The guarantee of payments for life if the purchaser chooses to take a lump sum distribution at retirement A dividends at Net Asset Value and capital gains at the Public Offering PriceD. Furthermore, the longer maturity and lower coupon issues fall the fastest as market interest rates rise. Which statements are true about bid-ask spreads? $5,500 for the wife; $2,750 for the husband Money market funds are unusual in that the Net Asset Value per share is constant at $1.00. A 200% Leveraged Dow Jones Industrial Average Index ETF would be expected to move: I up 50% in price when the DJIA moves up 100%II up 100% in price when the DJIA moves up 50%III down 50% in price when the DJIA moves down 100%IV down 100% in price when the DJIA moves down 50%, A leveraged ETF uses borrowing (margin) and options to magnify price movement as compared to the reference index. An individual wishes to have a fixed portion of the portfolio liquidated each month. B I and III onlyD. To prevent market timing, most mutual funds have placed restrictions on excessive trading in their prospectuses and monitor accounts for excessive short-term trading. At the market opening, a customer purchases 200 shares of an S&P 500 Inverse ETF (-1x) at $50 per share. customer will pay a sales charge. B. I and IV The lower the ratio, the greater the residual income for investors making the fund more efficient. A. The Net Asset Value per share is constant at $10 C. Net Asset Value per share varies with the performance of the portfolio D. Net Asset Value per share cannot be determined in a money market fund C C. 2X (Leveraged) 20+ Year Treasury ETF They include treasuries with less than 1 year to maturity and negotiable CDs. An inverse ETF is most similar to taking what options position(s) on the reference index? It is based on 500 firms. As the fund has earnings, and Total Assets increase, the shareholder receives more shares worth $1.00 each. REITs do not allow for flow through of loss - only net income flows through to shareholders under conduit tax treatment. III A fund can achieve high performance for a few years by taking greater risk and then have a period of poor performance Regularly scheduled investments of the same dollar amount in fund shares will most likely result in a: A. lower average price per shareB. quarterlyC. C. Country II and IV, The purchaser of a variable annuity bears which of the following risks? the customer must pay the Public Offering Price as described in the prospectusC. I The Net Asset Value per share is . 8 1/2% of Net Asset ValueD. Potential losses are unlimited What are the terms used for the price specified in an options contract at which the underlying asset can be bought or sold? Instead, it will only redeem anywhere from 5% to 25% of the investors net assets at a single time. I, II, III, IV. $50,001 - $100,000 4% Shareholders in a management company have the right to: I set the management feeII vote for the Board of DirectorsIII vote to change the investment objective of the fundIV vote for the investment adviser, A. I, IIIB. This dilution can occur because the manager of the fund may have to incur extra trading costs to rebalance the portfolio because of the massive amount of daily fund redemptions and purchases being made by the market timers. If market prices remain constant, the plan will produce a lower average per share costB. On this date, the Funds shares are reduced by the value of the distribution. D Then sellers exceed buyers and the market price is pushed lower than Net Asset Value. The customer will pay $10.075 per share (rounded). An individual or corporation making a purchase is considered to be one purchaser and qualifies for the breakpoint. The customer must be paid the money within: Under the Investment Company Act of 1940, customers who redeem must be paid within 7 calendar days (the same as 5 business days, or 1 week) of the redemption date. I The capital gain is taxable if it is taken as a check D. II and IV, C. II and III I and IVC. She should be told that these are lightly regulated, high risk investments that are only suitable for wealthy, sophisticated investors. B Question: Multiple Select Question Select all that apply Which statements are true of money market instruments? The bid price of a mutual fund is $14.30 and the ask price is $15.50. Which of the following statements are TRUE regarding the mutual fund letter of intent? This will occur if the fund gives an inferior return. Any purchaser would pay the prevailing market price (which can be below, at, or above Net Asset Value) and would have to pay a commission to have the trade executed. Which statements are true of money market instruments? Mutual funds cannot be sold short. IV Whether the customer can handle declining benefit payments in retirement D A little professional guidance would be helpful until this guy gets some experience. A. Under FINRA rules, the maximum sales charge that may be imposed by a mutual fund is 8 1/2% of the Public Offering Price. C A If market interest rates rise, this is exactly what should happen. Usually, the limited partner investor can only cash out at year end. Buying a fund just before a distribution results in taxes to the customer and nothing else because the shares are reduced on ex date for the full distribution. III and IV only stability. An individual or corporation making a purchase is considered to be one purchaser and qualifies for the breakpoint. Exchange Traded Fund. $0 - $10,000 8 % II the price of the stock fluctuates I Acceptance of the plan requires a majority vote of the outstanding shares; the Board of Directors; and the disinterested members of the BoardII Discontinuance of the plan requires majority vote of the outstanding shares or the disinterested members of the BoardIII Mailings to prospective purchasers of the fund are an acceptable 12b-1 chargeIV Expense ratios for funds that have adopted 12b-1 plans can be expected to be higher than for similar funds without 12b-1 fees. Which of the following recommendations is most appropriate for this customer? C fund has made dividend distributions to shareholdersD. The ex-date is set by the Board of Directors of the Fund there is a commission cost when buying an exchange traded fund share whereas there is no commission cost when buying a mutual fund shareD. In this example, Choice C meets the customers requirements. The stock then trades like any other common stock, except the company is in the business of making investments; instead of say, making cars, beer, or computers. $1,039D. dividends at NAV and capital gains at POPC. Dollar cost averaging does not work if the price of the stock remains fixed, nor does it protect against loss in a falling market. Fund dividends are taxable, whether or not they are automatically reinvested in additional fund shares. requiring at least 40% of the funds Board of Directors to be non-interested partiesD. The fund has the following breakpoint schedule: Purchase Amount Sales Charge$0 -$10,000 7.75 % $10,001 - $25,000 7.25 %$25,001 - Over 6.50 %. Under the conduit theory, any payment distributed by the fund to shareholders retains the same character and is free from Federal income tax. Industry sector Since this ETF is 2x, it is an ETF that moves in the same direction as the market, but it moves twice as fast The customer starts with 200 shares at $50, or a $10,000 position. are only available to qualified purchasersD. Under the Investment Company Act of 1940, customers who redeem must be paid within 7 calendar days (1 business week) of the redemption date. sector fundC. I, II, IIID. net asset value history. may correspond to ownership of a fraction of a foreign share $750 A closed-end fund is managed; while an open-end fund is not managedC. I Property rentalsII Interest from mortgagesIII Capital gains on property salesIV Real estate tax refunds, A. I and II onlyB. I ETNs have both credit risk and market riskII ETFs have both credit and market riskIII ETNs have only market riskIV ETFs have only market risk, A. I and II onlyB. Borrowed shares are sold, and then must be bought back and replaced at a later date. I and II only An engineer prepares a report to evaluate a project using PW and IRR. futures contracts but not call options C This action is: A. permittedB. The typical hedge fund fee is 2 and 20 - a 2% annual management fee as a percent of assets under management, plus 20% of profits. that days opening Net Asset ValueD. Tax deductibility of contributions made to the contract if distributions are not taken until age 59 1/2 or later Limited partners who form a partnership to make the purchaseD. Which statements are TRUE when the Federal Reserve enters into a repurchase agreement with a U.S. Government securities dealer? asset appreciation is untaxed for both, Section 529 plans are established by the: income (adjustment) bond, Which of the following statements concerning comparison of mutual funds are TRUE? Any surrender fee imposed: (One specific type of violation is "market timing" - the practice of frequently buying and selling a fund's shares to exploit inefficiencies in how the mutual fund company computes NAV per share. ready marketability of sharesC. I, II, III, IV, A husband and wife wish to open a spousal IRA. I Shares are issued in a one-time offeringII Shares are continually issuedIII Shares trade on an exchange or over-the-counterIV Shares are redeemed with the issuer. A customer redeems a mutual fund. It is based on the composition of the Standard and Poors 500 Index. The representative has acted properly - no additional disclosures are required to be made to the customerB. Redemption of shares has no effect on Net Asset Value per share, because the redemption of each share occurs at the current Net Asset Value that day. $990B. C Custodian Hedge fund managers are not subject to the Investment Company Act of 1940 that limits managers compensation to a percentage of assets under management - no performance fees are allowed. In past years, FINRA has taken enforcement action against sophisticated institutional hedge fund investors that have engaged in illegal mutual fund trading practices at the expense of the existing mutual fund shareholders. The letter can extend for a maximum time period of 13 months, inclusive of the 90-day backdating. A Bonds issued by state and local governments are _______ bonds, often referred to by the __________ nickname bonds. Which are not? A 8 1/2% of the amount investedD. Both Treasury bonds and Treasury notes make semiannual interest payments. It offers its shares continuously like an open-end fund. The cost of soliciting new investment also includes compensation to registered representatives selling the fund shares. is not deductible, The underwriter of a mutual fund is known as the: (REITs issue shares of beneficial interest with each certificate representing an undivided interest in the pool of real estate investments. II Mutual funds cannot be purchased on margin; exchange traded funds can be purchased on margin managed or unmanagedC. Which statements are true of money market instruments? I The distribution of dividends to mutual fund shareholders affects the Net Asset Value per shareII The distribution of dividends to mutual fund shareholders does not affect the Net Asset Value per shareIII The redemption of mutual fund shares affects the Net Asset Value per shareIV The redemption of mutual fund shares does not affect the Net Asset Value per share. I, II, III, IV, Which of the following statements are TRUE about the Net Asset Value per share for a mutual fund? Which statement is TRUE regarding money market funds? Acme $9.90 10.25 +.10 requiring minimum initial fund capital of $100,000, A fund that distributes at least 90% of its Net Investment Income to shareholders is termed a(n): Identify the statements that describe the similarities between Treasury bonds and Treasury notes. (The maximum sales charge on a mutual fund is 8.5% under FINRA rules. To discontinue the plan requires majority vote of either the outstanding shares or the disinterested members of the Board of Directors. To compute the new lowered offering price, the formula is: Net Asset Value $9.42 $9.42- = = = $10.075100% - Sls Chrg % 100%-6.5% .935 Nw Prc. I Hedge funds are subject to little regulatory oversight II Hedge funds must register as management companies under the Investment Company Act of 1940 . I Interest rate risk The representative tells the hedge fund customer of the conversation, after which the customer places daily orders to buy and sell that funds shares in amounts of $750,000. Distribute the amount in excess of the $50,000 LOI requirementC. b. The plan requires that a constant dollar amount be maintained in equity securities, with any excess invested in debt. I Investors have a Federal tax liability on the interest income received from the fundII Investors have no Federal tax liability on the interest income received from the fundIII The investment company has Federal tax liability on the undistributed income that it retainsIV The investment company has no Federal tax liability on the undistributed income that it retains. It appears that the hedge fund is engaging in the prohibited practice of late trading of mutual fund sharesB. IV Funds with the same investment objectives will have the same risks, A mutual fund has a Net Asset Value per share of $46.00 and the following breakpoint schedule. ), Which statements are TRUE regarding the annuitization of a variable annuity contract? The investor would like to diversify the portfolio and enhance returns without adding much additional risk. A balanced fund is one that: A. invests in securities found in one industry or geographic area B. allocates investment among common stocks, preferred stocks, and bonds of companies in various industries C. sells futures on market indices and uses short sales to limit risks of long positions D. invests solely in the common stocks of companies that A customer asks the following; One of my neighbors was talking about his investment in an ETF (Exchange Traded Fund) and said that it is low cost. Is this true? The registered representative should respond that: A. the expense ratios of most ETFs are lower than those for comparable index mutual fundsB. A customer has signed a Letter of Intent (LOI) to buy $25,000 of XYZ mutual fund to qualify for a breakpoint that reduces the sales charge from 7% to 6%.
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