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Questions and Answers
A fund that distributes at least 90% of its Net Investment Income to shareholders is termed a(n):
A fund that distributes at least 90% of its Net Investment Income to shareholders is termed a(n):
- Registered fund
- Income fund
- Regulated fund (correct)
- Tax exempt fund
The investment adviser of a mutual fund determines all of the following EXCEPT:
The investment adviser of a mutual fund determines all of the following EXCEPT:
- Purchases of securities into the portfolio
- Percentage of cash or equivalents held in the portfolio
- Investment objective of the fund (correct)
- Sales of the securities from the portfolio
An investor wishes to buy mutual fund shares with the primary objective of aggressive growth. Based on this information, the appropriate recommendation is a:
An investor wishes to buy mutual fund shares with the primary objective of aggressive growth. Based on this information, the appropriate recommendation is a:
- Preferred stock fund
- Balanced fund
- Money market fund
- Sector fund (correct)
The death benefit of a variable annuity contract applies _____ to annuitization.
The death benefit of a variable annuity contract applies _____ to annuitization.
Amount of REIT income that must be real estate related to qualify as an investment company.
Amount of REIT income that must be real estate related to qualify as an investment company.
A variable annuity is a(n):
A variable annuity is a(n):
A 'specialty' fund is one which invests in:
A 'specialty' fund is one which invests in:
A customer redeems a mutual fund. The customer must be paid the money from the fund company within how many business days?
A customer redeems a mutual fund. The customer must be paid the money from the fund company within how many business days?
Mutual funds must send their financial statements to shareholders:
Mutual funds must send their financial statements to shareholders:
When comparing an Exchange Traded Fund to a Unit Investment Trust, the customer should be made aware that:
When comparing an Exchange Traded Fund to a Unit Investment Trust, the customer should be made aware that:
What is the main objective of investing in equity REITs?
What is the main objective of investing in equity REITs?
What does a BDC invest in?
What does a BDC invest in?
All of the following terms apply to publicly traded fund shares EXCEPT:
All of the following terms apply to publicly traded fund shares EXCEPT:
The essential difference between an open end fund and closed end fund is that a(n):
The essential difference between an open end fund and closed end fund is that a(n):
Which statement is TRUE regarding mutual fund offerings?
Which statement is TRUE regarding mutual fund offerings?
Which statement is TRUE regarding the ex date for a mutual fund?
Which statement is TRUE regarding the ex date for a mutual fund?
The manager of a mutual fund is known as the:
The manager of a mutual fund is known as the:
A customer contributed $50,000 to a variable annuity contract. The account value has grown over the years and the NAV is now $70,000. The customer is now age 60, and takes a lump-sum distribution of $25,000 to pay for expenses. Which statement is TRUE?
A customer contributed $50,000 to a variable annuity contract. The account value has grown over the years and the NAV is now $70,000. The customer is now age 60, and takes a lump-sum distribution of $25,000 to pay for expenses. Which statement is TRUE?
Distributions from variable annuity contracts at retirement age are:
Distributions from variable annuity contracts at retirement age are:
All of the following are characteristics of Defined Benefit Plans EXCEPT:
All of the following are characteristics of Defined Benefit Plans EXCEPT:
An income fund would likely invest in all of the following securities EXCEPT:
An income fund would likely invest in all of the following securities EXCEPT:
Spiders (SPDRs) are securities whose value is based upon the securities in the:
Spiders (SPDRs) are securities whose value is based upon the securities in the:
The purchaser of a variable annuity bears all of the following risks EXCEPT:
The purchaser of a variable annuity bears all of the following risks EXCEPT:
A woman in the highest tax bracket has $105,000 to invest for her teenage child's college education. She wants to make sure that, if he doesn't attend college, that he will not have access to these funds. She should be advised to make the investment in a:
A woman in the highest tax bracket has $105,000 to invest for her teenage child's college education. She wants to make sure that, if he doesn't attend college, that he will not have access to these funds. She should be advised to make the investment in a:
In the year 2017, a divorced woman under age 50 collects $50,000 of alimony and child support as her sole source of income. The woman wishes to make a contribution to an Individual Retirement Account this year. Which statement is TRUE?
In the year 2017, a divorced woman under age 50 collects $50,000 of alimony and child support as her sole source of income. The woman wishes to make a contribution to an Individual Retirement Account this year. Which statement is TRUE?
Which of the following can be purchased on margin?
Which of the following can be purchased on margin?
Which of the following is NOT defined as an 'investment company' under the Investment Company Act of 1940?
Which of the following is NOT defined as an 'investment company' under the Investment Company Act of 1940?
An ETF that attempts to emulate the Standard and Poor's 500 Index employs what investment strategy?
An ETF that attempts to emulate the Standard and Poor's 500 Index employs what investment strategy?
All of the following investment company terms are synonymous EXCEPT:
All of the following investment company terms are synonymous EXCEPT:
The expense ratio of a mutual fund is a measure of:
The expense ratio of a mutual fund is a measure of:
Which statement is TRUE regarding a variable annuity offering a GMIB?
Which statement is TRUE regarding a variable annuity offering a GMIB?
Which of the following annuity payment options will continue payments to another person for their life after the annuitant dies?
Which of the following annuity payment options will continue payments to another person for their life after the annuitant dies?
Distributions from qualified retirement plans that are not rolled over into an IRA or other qualified plan are subject to:
Distributions from qualified retirement plans that are not rolled over into an IRA or other qualified plan are subject to:
Which of the following statements are TRUE regarding contributions to 403(b) tax-deferred annuities and the distributions from these plans after age 59 1/2? (Select all that apply)
Which of the following statements are TRUE regarding contributions to 403(b) tax-deferred annuities and the distributions from these plans after age 59 1/2? (Select all that apply)
Which of the following investment company securities is NOT redeemable?
Which of the following investment company securities is NOT redeemable?
Quotes for mutual funds in the news media show:
Quotes for mutual funds in the news media show:
No load funds do not impose any of the following fees EXCEPT:
No load funds do not impose any of the following fees EXCEPT:
An individual wishes to have a fixed number of shares liquidated each month. He or she should elect which type of withdrawal plan?
An individual wishes to have a fixed number of shares liquidated each month. He or she should elect which type of withdrawal plan?
A Special Situations Fund invests in:
A Special Situations Fund invests in:
When a variable annuity contract is "annuitized," which statements are TRUE?
When a variable annuity contract is "annuitized," which statements are TRUE?
When referring to guarantees in a variable annuity contract, a registered representative would be permitted to say all of the following EXCEPT:
When referring to guarantees in a variable annuity contract, a registered representative would be permitted to say all of the following EXCEPT:
Which of the following securities can be sold by an individual holding an investment companies/variable annuities (Series 6) registered representative's license? (Select all that apply)
Which of the following securities can be sold by an individual holding an investment companies/variable annuities (Series 6) registered representative's license? (Select all that apply)
For an investor who has a Keogh Plan, which of the following statements are TRUE?
For an investor who has a Keogh Plan, which of the following statements are TRUE?
Which of the following statements are TRUE about non-contributory defined benefit retirement plans?
Which of the following statements are TRUE about non-contributory defined benefit retirement plans?
Which statements are TRUE about SEP IRAs?
Which statements are TRUE about SEP IRAs?
State-sponsored education savings programs that permit contributions to build tax-deferred are known as:
State-sponsored education savings programs that permit contributions to build tax-deferred are known as:
The manager of an unregistered hedge fund charges a fee of "2 and 20." This means that investors are charged a(n):
The manager of an unregistered hedge fund charges a fee of "2 and 20." This means that investors are charged a(n):
An investor in a "Ginnie Mae" mutual fund assumes all of the risks EXCEPT:
An investor in a "Ginnie Mae" mutual fund assumes all of the risks EXCEPT:
An annuitized account in a variable annuity is most similar to:
An annuitized account in a variable annuity is most similar to:
Which statements are TRUE about variable annuities?
Which statements are TRUE about variable annuities?
The maximum contribution to a Keogh is effectively...
The maximum contribution to a Keogh is effectively...
Regularly scheduled investments of the same dollar amount in fund shares will most likely result in a:
Regularly scheduled investments of the same dollar amount in fund shares will most likely result in a:
If the actual interest rate earned in the separate account underlying a variable annuity contract is higher than the "AIR" the annuity payment:
If the actual interest rate earned in the separate account underlying a variable annuity contract is higher than the "AIR" the annuity payment:
A client surrenders a variable annuity contract 5 years after purchase because of poor performance. Any surrender fee imposed:
A client surrenders a variable annuity contract 5 years after purchase because of poor performance. Any surrender fee imposed:
An "annuity unit" of a variable annuity contract is a(n):
An "annuity unit" of a variable annuity contract is a(n):
When comparing Real Estate Investment Trusts (REITs) to Real Estate Limited Partnerships (RELPs), which of the following statements are TRUE?
When comparing Real Estate Investment Trusts (REITs) to Real Estate Limited Partnerships (RELPs), which of the following statements are TRUE?
Employees of non-profit organizations are permitted to establish tax-deferred retirement plans, similar to a Keogh, by making investments in a:
Employees of non-profit organizations are permitted to establish tax-deferred retirement plans, similar to a Keogh, by making investments in a:
A customer redeems 1,000 shares of XYZ Fund. The computed Net Asset Value per share is $13 and the Public Offering Price is $13.68. The fund has a 1/2% redemption fee. The customer will receive:
A customer redeems 1,000 shares of XYZ Fund. The computed Net Asset Value per share is $13 and the Public Offering Price is $13.68. The fund has a 1/2% redemption fee. The customer will receive:
When comparing an ETN to an ETF, which statements are TRUE?
When comparing an ETN to an ETF, which statements are TRUE?
Which of the following statements are TRUE regarding the taxation of payments from variable annuities?
Which of the following statements are TRUE regarding the taxation of payments from variable annuities?
Exchange traded index funds:
Exchange traded index funds:
Quotes published in the news media for mutual funds show:
Quotes published in the news media for mutual funds show:
What does a BDC invest in?
What does a BDC invest in?
A customer dies, leaving his $300,000 IRA account to his 3 daughters, who are age 46, 50, and 52. Which daughter's life expectancy would be used to determine the minimum annual payout to be made from the IRA?
A customer dies, leaving his $300,000 IRA account to his 3 daughters, who are age 46, 50, and 52. Which daughter's life expectancy would be used to determine the minimum annual payout to be made from the IRA?
In 2017, an individual earning $60,000 makes an annual contribution of $1,500 to a Traditional IRA. Which statement is TRUE?
In 2017, an individual earning $60,000 makes an annual contribution of $1,500 to a Traditional IRA. Which statement is TRUE?
A 60-year-old customer asks about the tax consequence of taking distributions from his Traditional 401(k) plan. You should tell him that:
A 60-year-old customer asks about the tax consequence of taking distributions from his Traditional 401(k) plan. You should tell him that:
Which of the following terms apply to fixed unit investment trusts?
Which of the following terms apply to fixed unit investment trusts?
Mutual fund sales charge %
Mutual fund sales charge %
Which is the BEST definition of an "annuity unit"?
Which is the BEST definition of an "annuity unit"?
A client surrenders a variable annuity contract 5 years after purchase because of poor performance. Any surrender fee imposed:
A client surrenders a variable annuity contract 5 years after purchase because of poor performance. Any surrender fee imposed:
Which of the following funds MUST be a closed-end fund?
Which of the following funds MUST be a closed-end fund?
Exchange Traded Funds (ETFs) are:
Exchange Traded Funds (ETFs) are:
Redemption always takes place at the...
Redemption always takes place at the...
Which annuity payout option usually results in the largest periodic payment?
Which annuity payout option usually results in the largest periodic payment?
An "accumulation unit" of a variable annuity contract is a(n):
An "accumulation unit" of a variable annuity contract is a(n):
Real Estate Investment Trusts are:
Real Estate Investment Trusts are:
Payments received by the owner of a tax qualified variable annuity are:
Payments received by the owner of a tax qualified variable annuity are:
Which of the following are characteristics of Defined Contribution Plans?
Which of the following are characteristics of Defined Contribution Plans?
Which statements are TRUE when comparing UTMA Custodian Accounts to Coverdell Education Savings Accounts?
Which statements are TRUE when comparing UTMA Custodian Accounts to Coverdell Education Savings Accounts?
The minimum price at which an open end fund share can be purchased is:
The minimum price at which an open end fund share can be purchased is:
Which of the following statements are TRUE regarding management fees imposed by mutual funds?
Which of the following statements are TRUE regarding management fees imposed by mutual funds?
Study Notes
Mutual Fund Shares
- Class B shares impose a contingent deferred sales charge and a 12b-1 fee.
- Investment clubs and omnibus accounts do not qualify for breakpoints on mutual fund purchases.
Investment Funds and Types
- A regulated fund distributes at least 90% of its net investment income to shareholders.
- Sector funds are suitable for investors aiming for aggressive growth.
Variable Annuities
- During the accumulation phase, both dividends and interest, along with capital gains, are tax-deferred.
- The death benefit applies prior to annuitization.
- Contributions to variable annuities are not tax-deductible, while distributions are taxable.
REITs
- REITs issue shares of beneficial interest representing an undivided interest in real estate investments.
- To qualify under Subchapter M, at least 75% of REIT income must be real estate-related; qualifying sources include net rental income and interest from mortgages.
Tax Implications
- Distributions from variable annuities at retirement are taxable as ordinary income on amounts above the cost basis.
- 529 Plans are suitable investment options for college education savings, ensuring restricted access to funds if not used for education.
- Distributions from qualified retirement plans that are not rolled over are subject to a 20% withholding tax.
Investment Company Securities
- An open-end fund computes Net Asset Value (NAV) daily, while a closed-end fund does not.
- Closed-end fund shares are not redeemable, unlike open-end fund shares and series EE bonds.
- Investment companies regulated by the Investment Company Act of 1940 include various formats, but REITs are excluded.
Financial Statements and Experiences
- Mutual funds are required to send financial statements to shareholders semi-annually.
- Expense ratios reflect mutual fund operating efficiency and are generally higher for funds with 12b-1 plans.
Retirement and Savings Accounts
- Health Savings Accounts (HSAs) can be employer-established and funded with tax-deductible contributions.
- Contributions to 403(b) plans are made with before-tax dollars, and distributions are fully taxable.
Market and Trading
- Closed-end funds trading on the NYSE can be purchased on margin, unlike mutual funds.
- ETFs emulating the S&P 500 Index employ passive asset management strategies.
Annuity Payment Options
- A joint and last survivor annuity continues payments to another person after the annuitant's death.
- Variable annuity contracts may guarantee a minimum growth rate for the separate account at the time of annuitization.
Unique Fund Types and Strategies
- Specialty funds invest in a single geographic area or industry, while a Special Situations Fund targets corporate bonds rated below investment grade or corporate opportunities.### Takeover and Bankruptcy
- Companies undergoing a takeover or bankruptcy are often involved in significant financial restructuring.
- A takeover can be a hostile or friendly acquisition, changing ownership and possibly management.
- Bankruptcy is a legal status where a company cannot repay its debts and may lead to liquidation or reorganization.
- Chapter 11 bankruptcy allows companies to reorganize while continuing operations, whereas Chapter 7 leads to liquidation of assets.
Variable Annuities
- When annuitized, the number of annuity units is fixed while the unit value is variable.
- Guarantees in variable annuity contracts include a minimum income benefit and death benefits, but not a guaranteed return on investment.
- Securities that can be sold include municipal investment trusts and bond funds.
Keogh Plans and Retirement Accounts
- A Keogh Plan is tax-qualified, meaning contributions can lower taxable income.
- Distributions from a Keogh are taxable on both original contributions and earnings when taken after age 59½.
Defined Benefit Retirement Plans
- Contribution amounts vary, while annual benefit payments are fixed under non-contributory plans.
SEP IRAs
- Established by employers, SEP IRAs have considerably higher contribution limits than Traditional or Roth IRAs.
Education Savings Programs
- Section 529 plans allow tax-deferred growth for educational expenses.
Hedge Fund Fees
- A "2 and 20" fee structure includes a 2% annual management fee and a 20% performance fee on profits.
Ginnie Mae Funds
- Investors assume risks such as fluctuations in net asset value, reinvestment, and prepayment risks, but not credit risk.
Variable Annuity Characteristics
- Contributions are not tax-deductible, while earnings grow tax-deferred.
- Liquidation of a variable annuity incurs a surrender fee that reduces sales proceeds and is not deductible.
ETNs vs. ETFs
- ETNs carry both credit risk and market risk; ETFs solely have market risk.
- Strategic investing in ETFs often results in lower average expense ratios compared to mutual funds.
Tax Implications
- Payments from tax-qualified variable annuities are fully taxable as investment income.
- Withdrawals from a Traditional 401(k) are taxable at ordinary income rates.
Management Fees in Mutual Funds
- Management fees compensate fund advisers and are deducted from gross investment income before dividends are paid to shareholders.
Miscellaneous
- Real Estate Investment Trusts (REITs) trade on stock exchanges, allowing for passive investment income.
- Understanding the differences in redemption methods and pricing strategies is crucial for maximizing investment returns.
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Description
This quiz focuses on important concepts related to mutual fund shares, particularly Class B shares. Test your knowledge with multiple statements and definitions to better understand investment companies and their operations.
