REPOs are repurchase agreements; ADRs are American Depositary Receipts; and ADSs are American Depositary Shares. A fund that distributes at least 90% of Net Investment Income to shareholders is regulated under Subchapter M of the Internal Revenue Code and pays no tax on the distributed amount. D A No collateral is required to borrow from this market. C II private sector retirement plans $1,039D. Brainscape helps you realize your greatest personal and professional ambitions through strong habits and hyper-efficient studying. What is a characteristic of a Unit Investment Trust? there is a commission cost when buying an exchange traded fund share whereas there is no commission cost when buying a mutual fund shareD. $100,001 - $250,000 3% One of the hedge fund customers tells the representative: I would like you to talk to the administrative people at the Jeffersonian Fund Group. True Management companies are subclassified as either: A. open-end or closed-endB. A. Exchange Traded Fund. Fund dividends are taxable, whether or not they are automatically reinvested in additional fund shares. D She should be told that these are lightly regulated, high risk investments that are only suitable for wealthy, sophisticated investors. However, it will only redeem shares at stated intervals - usually quarterly - and it will not redeem the investors entire holding at these redemption dates. interval fundD. I, II, III, IV. Redemption feeC. $14.25 x 100 shares = $1,425 received upon redemption. C A _______ contract calls for delivery of an asset (or in some cases, its cash value) at a specified delivery or maturity date for an agreed-upon price. I Income She should be informed that hedge funds: I offer higher returnsII are high-risk investmentsIII are lightly regulatedIV are like mutual funds. III and IVD. use aggressive investment strategies and have higher riskC. Because they are risk-free, they offer lower interest rates than other bonds. both futures contracts and call options What is the customers maximum potential loss? Borrowed shares are sold, and then must be bought back and replaced at a later date. are only available to qualified purchasersD. premium Shorting an ETF is the same thing as shorting any stock. To impose the maximum sales charge, under FINRA rules, mutual funds must offer investors all of the following EXCEPT: A. BreakpointsB. hedge Browse over 1 million classes created by top students, professors, publishers, and experts. To compute the new offering price with the reduced sales charge, the formula is: Net Asset Value $14.30 $14.30- = = = $15.294100% - Sls Chrg % 100%-6.5% .935 Nw Prc, $31,000 purchase amount / $15.294 price per share = 2,027 shares purchased. 5 % At the end of the first day, because the index rises by 10%, this position will rise by 20% to $12,000 value ($10,000 x 1.2). If the actual interest rate earned in the separate account underlying a variable annuity contract is lower than the "AIR," the annuity payment: A. will increase Explain your answer by discussing functions of money. Mutual fundB. I, II, III, IV. All of the following statements are true EXCEPT the: A. customers yield will decreaseB. Putting your money in a savings account is best if you'll need to withdraw the money in the near future. Convey the obligation to deliver the asset $1,918 plus a commission. that days closing Net Asset Value. For example, if an investor has 1,000 shares @ $1 ($1,000 total) in the fund, and the assets appreciate by 10%, then the customer will have 1,100 shares at $1 ($1,100 total). Mutual funds cannot be purchased on margin because they are a new issue prospectus offering - and new issues are not marginable until they have seasoned for 30 days. asset appreciation is untaxed for both, Section 529 plans are established by the: III and IV only 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%. IV Hedge fund managers can only be compensated based on a percentage of assets under management Closed-End FundC. Fixed periodC. The ratio of the current stock price to last year's earnings per share is known as the ______ Potential losses are unlimited They can be bought on margin or sold short. 12b-1 fees are permitted under SEC Rule 12b-1. The representative was required to tell the customer about the family of funds featureC. This contrasts to a closed end fund, where the fund is traded in the market like any other stock. To prevent market timing, most mutual funds have placed restrictions on excessive trading in their prospectuses and monitor accounts for excessive short-term trading. Fill in the blanks to complete the sentence. III The capital gain is taxable if it is automatically reinvested in the fund Estimate with 95% confidence the total amount that left New York. registered or unregisteredD. II Investment in U.S. issued securities is permitted $60 per shareC. The ex-date is set by FINRA A. ETFs are registered under the Investment Company Act of 1940B. C The lower the ratio, the lower the funds expenses, leaving more net investment income for shareholders. I Investment in U.S. minted gold coins is permitted registered fundC. I and IV onlyD. It pays a fixed stream of income without a contractual obligation to make the payments. The members of the board of directors are elected at the annual meeting. A) ETF indexes allow the investor to easily become fully diversified. C. II and III money market The registered representative advises the customer to invest $8,000 on ABCD fund; $8,000 in DEFF fund; and $8,000 in XYZZ fund; to give the customer complete diversification and reduce risk. Because common stock is equity, it is not found in money market funds. C. is unaffected C. I and IV II Hedge funds must register as management companies under the Investment Company Act of 1940 $10,450D. The owners of the corporation manage the company themselves. The shares are not redeemable; they are negotiable. A The FHLB ______ money by ______ securities and ______ this money to savings and loans institutions to in turn be lent out to individuals borrowing for mortgage loans. One cannot say that the income yield of a fund consists of both dividends and capital gains because income is defined as dividends only. Multiple choice question. Which of the following statements are TRUE regarding the mutual fund letter of intent? I, II, III, IV. Based on past data, an average of 111 in 505050 policyholders will file a $5000\$ 5000$5000 claim, an average of 111 in 100100100 policyholders will file a $10,000\$ 10,000$10,000 claim, and an average of 111 in 200200200 policyholders will file a $30,000\$ 30,000$30,000 claim. Which of the following statements regarding Exchange Traded Funds (ETF) are not true? Thus, they are similar to closed-end investment companies under the Investment Company Act of 1940, except that investments are made in real estate and mortgages, instead of in securities. REITs are registered securities under the Securities Act of 1933 and trade on an exchange or OTC. It appears that the hedge fund is engaging in the prohibited practice of late trading of mutual fund shares I and IIC. D. II and IV, D. II and IV In addition, as a negotiable security, any general decline in stock prices will result in a price decline of the ETN (market risk). Passive asset managementB. Contingent deferred sales charge. A. "), Trading Markets: NASDAQ Market / OTC Market, Customer Accounts (Ch5): Account Basics (Sec, Fundamentals of Financial Management, Concise Edition, Don Herrmann, J. David Spiceland, Wayne Thomas, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Childhood Disorders Exam 1 (Chapters 1-3). Both Treasury bonds and Treasury notes make semiannual interest payments. II not registered under the Investment Company Act of 1940 B) Pension funds invest a portion of their assets in the money market to have sufficient liquidity to meet their obligations. (b) They work as an intermediary between the savers and the investors by mobilising funds between them. I REITs allow for flow through of gainII RELPs allows for flow through of gainIII REITs allow for flow through of lossIV RELPs allow for flow through of loss, A. I and II onlyB. I and III fund dividends are not taxable if reinvested in additional shares Bond. 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. I The initial offering of shares is made under a prospectusII Shares are redeemable with the issuer at Net Asset ValueIII Shares trade in the secondary market at prevailing market pricesIV The portfolio of investments is not managed, A. I and II onlyB. The bid price of a mutual fund is $14.30 and the ask price is $15.50. reduces cost basis Note that the maximum is a percentage of all dollars invested; it is not a percentage of Net Asset Value. II and III only A. It is a type of structured product offered by banks that gives a return tied to a benchmark index. Of course, any person who elects to reinvest the distributions in more shares will have now hold more shares, each one worth less than before. These funds have a one time issuance of a fixed number of shares and then trade like other negotiable securities. Fundamental analysisD. CLOSED END BOND FUNDSFund Net Asset Value Stock Close NAV Change, Acco $8.32 8.13 -.08 Acme $9.90 10.25 +.10Adap $7.45 7.50 -.01. It is based on 500 firms. An ETF that attempts to emulate the Standard and Poors 500 Index employs what investment strategy? Which of the following are true of short futures positions? Usually, the limited partner investor can only cash out at year end. II If the securities in the portfolio make dividend distributions, the Net Asset Value per share is unaffected II and IVC. $5,500 whereas ______ mortgages are riskier loans made to financially weaker borrowers One section of this release would have to be devoted to a study of the Commission's 2010 money market amendments ("2010 Amendments") to gather data and ascertain their effectiveness. Because of this, the customer must deposit new money in the dollar amount required by the LOI to get the lowered sales charge. I and IV Which statements are true about municipal bonds? coffee on it, making the first digit of the 2-digit IRR unreadable. If the securities in the fund portfolio pay dividends, these are received by the Fund. A They are exempt from securities regulation since the general public cannot invest, except for the anti-fraud rules. Which of the following securities CANNOT be sold by an individual holding an investment companies/variable annuities registered representative's (Series 6) license? A fund that distributes at least 90% of Net Investment Income to shareholders is regulated under Subchapter M of the Internal Revenue Code and pays no tax on the distributed amount. (b) What is the probability that no cancellations will occur on a particular Wednesday? A mutual fund portfolio is managed by an investment adviser and the fund continuously issues and redeems its common shares - so it is an open end management company. ETF stands for Exchange Traded Funds. D In the prospectus is the following breakpoint schedule: Purchase Amount Sales Charge$0 -$10,000 8 % $10,001 - $25,000 7 %$25,001 - Over 6 %. I Roth IRAs allow a greater contribution than Traditional IRAs II Roth IRA contributions are not tax deductible III Distributions from a Roth IRA are not taxable if the investment is held for at least 5 years I The income yield of the fund consists of both the dividend distributions and the capital gains distributionsII If you buy the fund with a few friends, the purchase will be large enough for a breakpointIII Buy the fund shares now just before the dividend is paid so you can get immediate incomeIV Buy shares of different funds of the same sponsor and the total purchase qualifies for a breakpoint, A. I and IIIB. 2X (Leveraged) S&P 500 Index ETFB. I, II, III, IV. II Expense risk SPDRs are Spiders - the Standard and Poors 500 Index exchange traded fund. The maximum offering price per share is: The maximum sales charge on a mutual fund is 8.5% under FINRA rules. True This mechanism ensures that the fund shares will not trade at a discount to NAV. The PW is negative and . II Life Annuity-Period Certain is the preferred payout option The manager of the fund, not having to worry about redemptions, can make less liquid, more risky investments similar to hedge funds. Which of the following customers is allowed a breakpoint on mutual fund purchases? Mutual funds that have an automatic reinvestment provision must reinvest: A. dividends at NAV and capital gains at NAVB. Which statements are TRUE under FINRA rules? D 5 business daysD. C The sales charge is reduced by 1% for every full year that the fund is held. However, since these are negotiable securities, they do have market risk. If a fund offers an automatic reinvestment provision, both dividend distributions and capital gains distributions are reinvested at Net Asset Value. A fund that distributes at least 90% of its Net Investment Income to shareholders is termed a(n): A. income fundB. The investor will receive: A contingent deferred sales charge is imposed if an investor redeems a mutual fund before holding the fund for a stated time period. ____________ -weighted. REITs do not allow for flow through of loss - only net income flows through to shareholders under conduit tax treatment. D. II and IV. quarterlyC. Any such late orders are not supposed to be processed at that days closing NAV; rather, they should be processed at the following days NAV. I, III, IV. (past tense of try). Conforming; subprime. You comply with the customer's request and the administrative personnel inform you that the limit is $1,000,000. They are highly regulated. C This makes sense because REITs cannot pass losses to their shareholders. customer will have greater capital appreciation potentialC. A Which of the following statements is true with regard to financial markets? ready marketability of sharesC. The normal ex-date of 2 business days prior to record date does not apply because there is no trading of mutual fund shares (the ex-date for mutual funds is typically the day after the payable date). I and III onlyC. registered fund D are certificates traded in US markets representing ownership in shares of domestic companies. $10,500D. Which of the following are mortgage-related government agencies, created because Congress believed that adequate credit was not being received through normal private sources. An ETF is an Exchange Traded Fund. Which statements are TRUE regarding closed end investment companies? The current economic environment is characterized by low interest rates and flat stock prices - and this is expected to remain unchanged for a number of years. $1,918D. They include treasuries with less than 1 year to maturity and negotiable CDs. If a mutual fund distributes 99% of its Net Investment Income to its shareholders, how much of the Net Investment Income will be taxable? Depreciating securities in the Fund portfolio will also decrease NAV per share. B growth fundD. The best answer is C. Interest payments on loans, intangible drilling costs (the cost of drilling for oil and gas), and depletion allowances (the recovery of monies paid to buy the oil or gas reserve) are all tax deductible items under the Internal Revenue Code since they are "ordinary and necessary business expenses." D Their common stock can be bought or sold freely on stock exchanges. It is listed and trades like a stock, so it has little marketability risk. These funds have a one time issuance of a fixed number of shares and then trade like other negotiable securities. Which statements is/are TRUE regarding closed end investment companies? A. Fund dividends are taxable, whether or not they are automatically reinvested in additional fund shares. is not deductible, The underwriter of a mutual fund is known as the: regulated fund Instead, it will only redeem anywhere from 5% to 25% of the investors net assets at a single time. I, II, III, IV, A husband and wife wish to open a spousal IRA. $10,500. The maximum annual 12b-1 fee is .75% of net assets per year under FINRA rules. ), I-Shares allow investors to invest in stock indexes based on all of the following EXCEPT: 2X (Leveraged) S&P 500 Index ETF It is commonly used by dealers in government securities who sell Treasury bills to a lender and agree to repurchase them at an agreed price at a later date. II Periodic payments of varying dollar amounts are made III. $10B. II and III only. 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which statements are true regarding money market funds?