Questions and Answers
Which class of shares have a 12b-1 fee as the primary sales charge?
Class C shares
Which of the following investment companies do not redeem their shares?
A mutual fund's public offering price is $15.23. An investor who wishes to invest $1,000 in the fund will purchase how many shares?
All of the following actions would cause the NAV per share of the mutual fund to increase except:
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All of the following are true regarding breakpoints for mutual funds except:
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Which of the following would be unlawful regarding the use of a mutual fund prospectus?
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Which of the following investment companies terminates business on a predetermined date?
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Class B mutual fund shares are also known as?
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Regarding sales loads, management fees, and operating expenses for mutual funds, which of the following is true?
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Which is the most common way investors pay a mutual fund's sales charge?
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An investor has entered into a contract to pay an investment company a specific sum of money in exchange for the company's agreement to pay the investor a specific (larger) sum of money on a specific date in the future. The investment company must be?
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All of the following would be included in the expense ratio of a fund except:
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Study Notes
Class of Shares and Fees
- Class C shares typically have a 12b-1 fee as the primary sales charge.
Investment Companies and Share Redemptions
- Closed-end funds do not redeem their shares, unlike unit investment trusts, face amount certificates, or open-end funds.
Breakpoint Sales
- Transactions that could be considered breakpoint sales include a purchase of $48,000 worth of shares and $96,000 worth of shares.
Public Offering Price Calculations
- An investor wishing to invest $1,000 in a mutual fund priced at $15.23 can purchase approximately 65.66 shares.
NAV Per Share Influencing Factors
- NAV per share of a mutual fund will not increase with a large influx of investor deposits, but it will rise with received dividends, decreased liabilities, or received interest.
Breakpoints for Mutual Funds
- The first breakpoint is not mandated to be set at an investment threshold of $10,000; breakpoints vary.
Annuity Payments
- Fixed annuities and variable annuities are most likely to provide monthly or quarterly payments for the lifetime of the investor.
Mutual Fund Prospectus Usage
- It is lawful to highlight areas of interest in a prospectus, but failing to send a prospectus to interested parties or leaving typos unaddressed may be unlawful.
Fixed Unit Investment Trusts
- Fixed unit investment trust (UIT) terminates on a predetermined date, unlike other investment companies that do not have a set end.
Class B Shares
- Class B mutual fund shares are commonly referred to as back-end load shares.
Impact of Fees on Investor Returns
- All sales loads, management fees, and operating expenses reduce investor returns by lowering the capital available for investment.
Sales Charge Structures
- The most common method for investors to pay a mutual fund's sales charge is the front-end load.
Investment Company Contracts
- An investment company must be a face-amount certificate company if it agrees to pay a specific sum upon a future date in exchange for a specific sum now.
Mutual Fund Sales Charges
- Mutual fund sales charges are expenses to the investor and serve to compensate underwriters and fund representatives, rather than being expenses to the fund itself.
Expense Ratios
- Front-end or back-end loads are not included in the expense ratio of a mutual fund, but administrative fees, management fees, and 12b-1 fees are.
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Description
Test your knowledge on investment companies and mutual funds with this quiz. It covers topics such as share classes, redemption policies, and breakpoint transactions. Perfect for finance students and professionals looking to refresh their understanding.
