A. REITs invest in real estate or loans secured by real estate. 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. "), 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). When the proportion of the index a stock represents is proportional to the stock's share price, the index is said to be Repayment is based on the credit of the issuing bank, and if the banks credit rating is lowered, the price should drop. Which of the following is true regarding ETFs? The customer starts with 200 shares at $50, or a $10,000 position. $750 Hedge funds started in the 1990s and the managers produced superior returns and were able to charge high fees. $5,500 legal fees. III and IVC. I If the securities in the portfolio make dividend distributions, the Net Asset Value per share will increaseII If the securities in the portfolio make dividend distributions, the Net Asset Value per share is unaffectedIII If the mutual fund makes dividend distributions to shareholders, the Net Asset Value per share will decreaseIV If the mutual fund makes dividend distributions to shareholders, the Net Asset Value per share is unaffected. II the price of the stock fluctuates On that date, the price of the shares is reduced for any distributions. D Which statements are true of the DJIA? II The representative must believe that the customer would benefit from the product's features Both open-end and closed-end funds compute Net Asset Value per share daily. $19 x 100 shares = $1,900 received upon redemption. Mortgage Bonds I, II, III, IV, All of the following statements are true for both mutual funds and variable annuities that are in the accumulation phase EXCEPT: Technically, most ETFs are structured as open-end investment companies, since they allow for the creation of additional shares in minimum creation units of $50,000 - $100,000. Similarly, undistributed income retained by the fund would not be taxed, since it consists solely of tax free municipal interest income. 6 % a. B Dividends and interest are taxable in the year received; capital gains are tax deferred $50,001 - $100,000 4% They include the entire fixed income market. A. 5% of the Public Offering PriceC. It is listed and trades like a stock, so it has little marketability risk. If market interest rates rise, this is exactly what should happen. II Periodic payments of varying dollar amounts are made Thus, this type of fund is a publicly traded fund. The customer is purchasing enough ($35,000) to qualify for a 6 % sales charge. Note that in the real world, competition among funds has forced sales charges well below this maximum permitted level. A call with a 15 strike, when the market is $10.75, is 4 . Fill in the blanks to complete the sentence. Letter of IntentD. Then the shares are listed on an exchange and trade like any other stock. sector fundC. The wife works while the husband does not. II Money market funds typically do not impose management fees A IV The representative must sign a statement that all required representations and determinations were completed Mutual FundC. IV If the mutual fund makes dividend distributions to shareholders, the Net Asset Value per share is unaffected Because the investor might be able to achieve hedge fund like returns (since the interval fund makes investments in a much broader range of assets such as commercial property, private equity funds, hedge funds, business loans, catastrophe bonds, etc.) Multiple choice question. Front end sales chargeB. Since the customer has deposited $15,000 of the $25,000 required by the LOI already, the remaining $10,000 must be deposited to retain the reduced sales charge. A closed-end management company is a publicly traded fund. Which of the following are true of short futures positions? Adap $7.45 7.50 -.01 ETNs have market riskD. I Property rentalsII Interest from mortgagesIII Capital gains on property salesIV Real estate tax refunds, A. I and II onlyB. III and IV only Because common stock is equity, it is not found in money market funds. However, all mutual funds charge an annual management fee, which is an annual expense against the funds investment income. B. The ex-date is 2 business days prior to the record dateD. 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. II Investment in U.S. issued securities is permitted registered or unregisteredD. C. I and IV asset appreciationC. requiring minimum initial fund capital of $100,000 A The best answer is A. An insurance policy sells for $600\$ 600$600. Funds in the bank's reserve account are called ______ ______ . interest income from mortgages I Money market funds are typically sold without a sales charge II Money market funds typically do not impose management fees III Fund dividends are not taxable if reinvested in additional shares IV Typical maturities of securities held in the portfolio are 30 days or less. IV. I, II, III, IV. The best answer is C. An ETN is an Exchange Traded Note. If a mutual fund distributes 99% of its Net Investment Income to its shareholders, how much of the Net Investment Income will be taxable? Correct B. II only B. 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. The shares are not redeemable; they are negotiable. Since this ETF is -1x, it is an inverse ETF that moves at the same rate (1x), but in the opposite direction (-), to the market. A It appears that the hedge fund is engaging in the prohibited practice of market timing of mutual fund shares negotiated sales charge fund. C Passive asset managementB. Instead, it will only redeem anywhere from 5% to 25% of the investors net assets at a single time. C. It appears that the representative has violated the insider trading rules because he divulged the mutual fund's "red flag" threshold to the hedge fund customer (Money market funds usually do not impose sales charges but all funds impose management fees. An individual or corporation making a purchase is considered to be one purchaser and qualifies for the breakpoint. Buy the fund shares now just before the dividend is paid so you can get immediate income. the use of the Poisson model. I, II, III, IV, If a fund distributes a capital gain to shareholders, which statements are TRUE? I Minimum initial fund capital of $100,000II Interested persons on the Board of Directors cannot hold over 60% of the seatsIII Changing the funds investment objective requires a majority vote of the shareholdersIV Setting maximum sales charges on mutual fund purchases, A. I and II onlyB. open end management company A customer redeems 1,000 shares of ABC Fund on Wednesday, June 14th. Capital gains taxes must be paid if they are sold for more than the investor's purchase price. The PW is negative and Thus, when securities in the portfolio pay a dividend, there is no effect on NAV. Both Treasury notes and Treasury bonds may be issued in increments of $ ________. A $35,000 investment will buy $35,000 / $10.075 = 3,474 shares (rounded). mutual funds C 8 1/2% of the amount investedD. II and III only Which of the following statements is true with regard to financial markets? At the end of 13 months, the NAV is $20,000. It appears that the representative has violated the insider trading rules because he divulged the mutual fund's "red flag" threshold to the hedge fund customer considered to be a fairly safe asset due to the ability to be monitored and predicted over a short term. $11.85 Which of the following statements about real estate investment trusts is true? Label each article definite or indefinite. Which of the following statements are TRUE regarding the Federal tax treatment of regulated mutual funds? D. Market capitalization, B. $990 plus a commissionD. Complete each sentence by writing the form of the verb indicated in parentheses. to change the separate account's investment objective For example, if the fund held overseas stocks, that might slow up the computation of NAV for the fund company - however the sophisticated hedge fund investor might build its own software to compute NAV faster than the fund company - and would place buy orders for shares that it found to be undervalued and sell orders for fund shares that it found to be overvalued. The other major exchange traded funds include - SPDRs (Standard and Poors 500 Index - symbol = SPY) - also traded on the AMEX (now renamed the NYSE American), and QUBES (NASDAQ 100 Index - symbol = QQQ) which are traded on the NASDAQ. ____________ -weighted. 2X (Leveraged) S&P 500 Index ETFB. It is listed and trades like a stock, so it has little marketability risk. II and IV. What will be the market value of the 200 share position? liquidityD. Furthermore, the longer maturity and lower coupon issues fall the fastest as market interest rates rise. A True If market prices remain constant, the plan will produce a lower average per share costB. III. It appears that the hedge fund is engaging in the prohibited practice of late trading of mutual fund shares A. Mutual funds cannot be sold short. Which statement is TRUE regarding money market funds? I The portfolio of investments is managedII The initial offering of shares is made under a prospectusIII Shares trade in the secondary market at prevailing market prices, A. I onlyB. B. III and IV 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. interval fundD. Multiple select question. on a typical Wednesday. The receipt of these monies into the Fund increases NAV per share, exactly offsetting the reduction of the share price on ex date by the exchange where the company that paid the dividend trades. A. I and III D Borrowed shares are sold, and then must be bought back and replaced at a later date. Hedge funds are completely illiquid investments. III The representative must believe that the variable product as a whole, the underlying separate accounts to which funds are allocated, and riders to the policy, are suitable C For the customer exchanging Government Bond Fund shares for Growth Fund shares, a tax event has occurred. The maximum tax deductible Individual Retirement Account contribution for this year is: Both Treasury bonds and Treasury notes make semiannual interest payments. It is a type of structured product offered by banks that gives a return tied to a benchmark index. If a fund adopts a 12b-1 plan it may charge its existing shareholders for the cost of soliciting new investment to the fund. dividends at Net Asset Value and capital gains at the Public Offering PriceD. B. $5,500 for the wife; $5,500 for the husband C They are directly accessible to individual investors. c. They have management fees higher than other mutual funds. A registered representative primarily services institutional hedge fund customers that direct a large volume of trades to that brokerage firm. Note that the maximum is a percentage of all dollars invested; it is not a percentage of Net Asset Value. $7,500, If the actual interest rate earned in the separate account underlying a variable annuity contract is higher than the "AIR" the annuity payment: Total Expenses / Total Net Assets. III The capital gain is taxable if it is automatically reinvested in the fund limited partnershipsD. that days closing Net Asset Value. Which statements are TRUE regarding mutual funds that have adopted 12b-1 plans? The ex-date for a mutual fund is set by the Board of Directors. C II and IV. Let X be the number of cancellations on a particular Wednesday. I, II, III, IV. III Annuity payments may be reduced because of increased expenses experienced by the insurance company $11.00 / 100% - 8.5 Over the past 5 years, the fund has appreciated to $46,000. Their yields are interpreted as real interest rates. A. ETFs are registered under the Investment Company Act of 1940B. Because of this, the customer must deposit new money in the dollar amount required by the LOI to get the lowered sales charge. The provisions of the Investment Company Act of 1940 include which of the following? It is a type of structured product offered by banks that gives a return tied to a benchmark index. ETF stands for Exchange Traded Funds. stability. I and IV The investor redeems the 100 shares at an NAV of $20 per share after holding them for 3 months. D Which of the following are mortgage-related government agencies, created because Congress believed that adequate credit was not being received through normal private sources. What will be the market value of the 200 share position? Acco $8.32 8.13 -.08 C. must look for a buyer for the shares on the NYSE floor Fixed shares This is credit risk. fixed unit investment trust The investor redeems the 100 shares at an NAV of $15 per share after holding them for 5 months. And the fees charged are more similar to hedge funds than a traditional closed-end fund as well - with annual ongoing fees averaging 3%, and another average 2% fee when shares are redeemed (and this ignores the up-front sales charge that is imposed when the shares are purchased!). C 1) Which of the following statements about the money markets are true? At the end of that day, the S&P 500 Index declines by 10%. Bad debt expense is estimated at1/21/21/2 of 1% of sales. income (adjustment) bond, Which of the following statements concerning comparison of mutual funds are TRUE? money market instruments For the rest of the year, the investor is locked into the investment. Compare the unit sales to the units produced and keep a running total. Net Asset Value per share for a mutual fund can be expected to decrease if which of the following occur(s)? C Which are not? An interval fund is a newer type of fund structure that is classified as a closed-end fund, but it has many open-end fund features. C A. He or she could elect to have a fixed number of shares liquidated each month (Choice A); could elect to have the account liquidated over a specified period of time (for college education) (Choice B); could elect to have a fixed percentage of the portfolio liquidated each month (Choice C); or could elect to have enough shares liquidated so that a specific dollar amount is received each month (Choice D). Note that most funds process redemptions much more quickly than this. D $1,025 D One cannot say that the income yield of a fund consists of both dividends and capital gains because income is defined as dividends only. C. $12.42 Convey the right to sell the asset When discussing mutual funds with a customer, which statements are prohibited? Thus, these are illiquid securities because an investor cannot trade out the position, nor can the investor redeem the position at any time. II The expected payments from the retirement plan are lower than the expected future assets in the plan Fannie Mae Pass-Through Certificates, All of the following investment company terms are synonymous EXCEPT: the annuitant's life, not to exceed 20 years April 15th tax filing date of the calendar year after which the contribution may be claimed on that person's tax return What are the terms used for the price specified in an options contract at which the underlying asset can be bought or sold? I and IV only I Investment ClubII Omnibus AccountIII Corporate PurchaserIV Individual Purchaser, A. I and II onlyB. Mutual funds can be redeemed every business day, so they are liquid. Which statements are TRUE regarding closed end investment companies? Correct B. will decrease 20 years to the annuitant or beneficiary, All of the following sources of REIT income are counted towards the 75% test required by Subchapter M EXCEPT: The fed funds rate is simply the rate of interest on: very short-term loans among financial institutions. These 3 funds all have different sponsors. Mutual fundB. II The REIT issues shares of beneficial interest representing an undivided interest in a pool of real estate investments 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. When a sales charge is not imposed on a fund purchase, nor on redemption, this is known as a: A. front-end load fundB. C. Country The ex-date is set by the Board of Directors of the Fund C It pays a fixed stream of income without a contractual obligation to make the payments. both futures contracts and call options $46.92 In the study, the economist learned that 112,236 tax filers left the state of New York. Matching a funds composition to a benchmark index is passive asset management. When a manager actually selects which investments to buy and which investments to sell, this is active asset management. Management fees are much higher for active management than for passive management. I and IV III federal government employee retirement plans, A. I only To meet the customer's investment objective of tax advantaged income, the BEST recommendation is for the customer to: The "death benefit" associated with a variable annuity contract: n income fund would likely invest in all of the following securities EXCEPT: Assets - Liabilities for a mutual fund equals: Many years ago, a customer opened a Coverdell ESA for his son, who is now age 16, and a savings account for his daughter, who is now age 18. Quotes found in the ADF are primarily bids and offers from: Which of the following describes a position trade? Mutual fundsB annual expense against the funds investment income will produce a lower average per share for a for! Is locked into the investment company Act of 1940 include which of the following statements concerning comparison of fund. $ 7.45 7.50 -.01 ETNs have market riskD deposit new money in the ADF primarily... At a later date is 4 management fee, which is an traded. 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Value of the following statements are TRUE share after holding them for 5 months Thus, is! Are much higher for active management than for passive management make semiannual interest payments 100,000 a the best answer a... An individual or corporation making a purchase is considered to be one purchaser and qualifies for cost. Qualifies for the shares are not redeemable ; they are sold, and must!