Question 1

All classes of mutual fund shares may legally charge an annual 12b-1 fee.

Accepted Answer

A) True 
 B)False

Question 2

Fees of load funds that are used to cover the costs of trading in securities are called 12b-1 fees.

Accepted Answer

A) True 
 B)False

Question 3

Open-end mutual funds guarantee

Accepted Answer

A) investors a minimum rate of return. 
B) investors a minimum Net Asset Value (NAV). 
C) to redeem investors' shares upon demand at the daily Net Asset Value (NAV). 
D) to earn the rate of return promised in the prospectus. 
E) that there will be no load charges. 
A) investors a minimum rate of return. 
B) investors a minimum Net Asset Value (NAV). 
C) to redeem investors' shares upon demand at the daily Net Asset Value (NAV). 
D) to earn the rate of return promised in the prospectus. 
E) that there will be no load charges.

Question 4

Mutual fund shares that are offered for sale at the NAV without a front-end load, but which charge a combination of 12b-1 fees and a back-end load, and whose back-end load typically remains in effect for 6 to 8 years, are

Accepted Answer

A) Class A shares. 
B) Class B shares. 
C) Class C shares. 
D) Class D shares. 
E) either Class A or Class C shares. 
A) Class A shares. 
B) Class B shares. 
C) Class C shares. 
D) Class D shares. 
E) either Class A or Class C shares.

Question 5

The SEC now requires mutual fund portfolio managers to report their personal trading in individual stocks, but not in the portfolios they manage.

Accepted Answer

A) True 
 B)False

Question 6

Hedge fund data such as assets held and trading activity

Accepted Answer

A) are primarily self-reported. 
B) can be independently tracked. 
C) can be obtained from SEC filings. 
D) can be obtained from research agencies. 
E) All of the above. 
A) are primarily self-reported. 
B) can be independently tracked. 
C) can be obtained from SEC filings. 
D) can be obtained from research agencies. 
E) All of the above.

Question 7

The returns obtained by investors of mutual funds include the following except

Accepted Answer

A) interest income earned on assets. 
B) dividend income earned on assets. 
C) capital gains on assets sold by the fund. 
D) capital appreciation in the underlying value of the assets held in the portfolio. 
E) refunds of load charges and management fees. 
A) interest income earned on assets. 
B) dividend income earned on assets. 
C) capital gains on assets sold by the fund. 
D) capital appreciation in the underlying value of the assets held in the portfolio. 
E) refunds of load charges and management fees.

Question 8

Which of the following is the practice that involves short-term trading of mutual funds seeking to take advantage of short-term discrepancies between the price of a mutual fund's shares and out-of-date values on the securities in the fund's portfolio?

Accepted Answer

A) Market timing. 
B) Insider trading. 
C) Late trading. 
D) Directed brokerage. 
E) Spinning. 
A) Market timing. 
B) Insider trading. 
C) Late trading. 
D) Directed brokerage. 
E) Spinning.

Question 9

The short-term mutual fund sector includes

Accepted Answer

A) money market mutual funds. 
B) hybrid funds. 
C) equity funds. 
D) bond funds. 
E) tax-exempt municipal bond funds. 
A) money market mutual funds. 
B) hybrid funds. 
C) equity funds. 
D) bond funds. 
E) tax-exempt municipal bond funds.

Question 10

The NAV of a closed-end investment company shares is determined at any point in time by

Accepted Answer

A) the number of shares available. 
B) the value of the underlying shares owned by the company. 
C) the demand for the investment company's shares. 
D) Answers A and B only. 
E) Answers B and C only. 
A) the number of shares available. 
B) the value of the underlying shares owned by the company. 
C) the demand for the investment company's shares. 
D) Answers A and B only. 
E) Answers B and C only.

Question 11

The front-end or back-end loads charged by some mutual funds often are combined with 12b-1 fees.

Accepted Answer

A) True 
 B)False

Question 12

Duties of a mutual fund chief compliance officer include

Accepted Answer

A) policing the trading by non-fund managers. 
B) ensuring the accuracy of information provided to fund managers. 
C) reviewing fund business practices such as marketing and administration. 
D) reporting any wrongdoing directly to fund directors. 
E) All of the above. 
A) policing the trading by non-fund managers. 
B) ensuring the accuracy of information provided to fund managers. 
C) reviewing fund business practices such as marketing and administration. 
D) reporting any wrongdoing directly to fund directors. 
E) All of the above.

Question 13

New SEC rules call for shareholder reports to include

Accepted Answer

A) clear information to investors on brokerage commissions and discounts. 
B) information on how the fund compares with industry averages on fees and loads. 
C) information on eligibility for breakpoint discounts. 
D) All of the above. 
E) Only two of the above. 
A) clear information to investors on brokerage commissions and discounts. 
B) information on how the fund compares with industry averages on fees and loads. 
C) information on eligibility for breakpoint discounts. 
D) All of the above. 
E) Only two of the above.

Question 14

The first mutual fund was founded in this city in 1924.

Accepted Answer

A) New York, New York 
B) San Francisco, California 
C) Boston, Massachusetts 
D) London, England 
E) Paris, France 
A) New York, New York 
B) San Francisco, California 
C) Boston, Massachusetts 
D) London, England 
E) Paris, France

Question 15

Match the following pieces of legislation with the function achieved by each regulation as stated in question
-Requires a mutual fund to set rules and procedures regarding the fund's prospectus sent to investors.

Accepted Answer

A) Securities Act of 1933 
B) Securities Exchange Act of 1934 
C) Investment Advisers Act 
D) Investment Company Act 
E) Insider Trading and Securities Fraud Enforcement Act of 1988
F)Market Reform Act of 1990
G)National Securities Markets Improvement Act of 1996 
A) Securities Act of 1933 
B) Securities Exchange Act of 1934 
C) Investment Advisers Act 
D) Investment Company Act 
E) Insider Trading and Securities Fraud Enforcement Act of 1988
F)Market Reform Act of 1990
G)National Securities Markets Improvement Act of 1996

Question 16

Match the following pieces of legislation with the function achieved by each regulation as stated in question
-Requires a mutual fund to file a registration statement with the SEC.

Accepted Answer

A) Securities Act of 1933 
B) Securities Exchange Act of 1934 
C) Investment Advisers Act 
D) Investment Company Act 
E) Insider Trading and Securities Fraud Enforcement Act of 1988
F)Market Reform Act of 1990
G)National Securities Markets Improvement Act of 1996 
A) Securities Act of 1933 
B) Securities Exchange Act of 1934 
C) Investment Advisers Act 
D) Investment Company Act 
E) Insider Trading and Securities Fraud Enforcement Act of 1988
F)Market Reform Act of 1990
G)National Securities Markets Improvement Act of 1996

Question 17

Which of the following is true about the values of most money market mutual fund shares?

Accepted Answer

A) They fluctuate heavily. 
B) Values are fixed at $1. 
C) Values are fixed at $100. 
D) They depend on market demand. 
E) They are considered closed-end funds. 
A) They fluctuate heavily. 
B) Values are fixed at $1. 
C) Values are fixed at $100. 
D) They depend on market demand. 
E) They are considered closed-end funds.

Question 18

Mutual funds that purchase Treasury bills, bank negotiable certificates of deposit, commercial paper, and other short-term securities would be classified as

Accepted Answer

A) contractual institutions. 
B) investment institutions. 
C) money market funds. 
D) securities dealers. 
E) PC insurance companies. 
A) contractual institutions. 
B) investment institutions. 
C) money market funds. 
D) securities dealers. 
E) PC insurance companies.

Question 19

Open-end mutual funds are the major type of mutual funds.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is the regulation that allowed the SEC to restrict program trading when it deems necessary?

Accepted Answer

A) Securities Exchange Act. 
B) Investment Advisers Act. 
C) Investment Company Act. 
D) Insider Trading and Securities Fraud Enforcement Act. 
E) Market Reform Act. 
A) Securities Exchange Act. 
B) Investment Advisers Act. 
C) Investment Company Act. 
D) Insider Trading and Securities Fraud Enforcement Act. 
E) Market Reform Act.

Exam 5: Financial Services: Mutual Funds and Hedge Funds

All classes of mutual fund shares may legally charge an annual 12b-1 fee.

Fees of load funds that are used to cover the costs of trading in securities are called 12b-1 fees.

Open-end mutual funds guarantee

Mutual fund shares that are offered for sale at the NAV without a front-end load, but which charge a combination of 12b-1 fees and a back-end load, and whose back-end load typically remains in effect for 6 to 8 years, are

The SEC now requires mutual fund portfolio managers to report their personal trading in individual stocks, but not in the portfolios they manage.

Hedge fund data such as assets held and trading activity

The returns obtained by investors of mutual funds include the following except

Which of the following is the practice that involves short-term trading of mutual funds seeking to take advantage of short-term discrepancies between the price of a mutual fund's shares and out-of-date values on the securities in the fund's portfolio?

The short-term mutual fund sector includes

The NAV of a closed-end investment company shares is determined at any point in time by

The front-end or back-end loads charged by some mutual funds often are combined with 12b-1 fees.

Duties of a mutual fund chief compliance officer include

New SEC rules call for shareholder reports to include

The first mutual fund was founded in this city in 1924.

Match the following pieces of legislation with the function achieved by each regulation as stated in question -Requires a mutual fund to set rules and procedures regarding the fund's prospectus sent to investors.

Match the following pieces of legislation with the function achieved by each regulation as stated in question -Requires a mutual fund to file a registration statement with the SEC.

Which of the following is true about the values of most money market mutual fund shares?

Mutual funds that purchase Treasury bills, bank negotiable certificates of deposit, commercial paper, and other short-term securities would be classified as

Open-end mutual funds are the major type of mutual funds.

Which of the following is the regulation that allowed the SEC to restrict program trading when it deems necessary?

Why Are Financial Institutions Special

Financial Services: Depository Institutions

Financial Services: Finance Companies

Financial Services: Securities Brokerage and Investment Banking

Financial Services: Insurance

Risks of Financial Institutions

Interest Rate Risk I

Interest Rate Risk II

Credit Risk: Individual Loan Risk

Credit Risk: Loan Portfolio and Concentration Risk

Liquidity Risk

Foreign Exchange Risk

Sovereign Risk

Market Risk

Off-Balance-Sheet Risk

Technology and Other Operational Risks

Liability and Liquidity Management

Deposit Insurance and Other Liability Guarantees

Capital Adequacy

Product and Geographic Expansion

Futures and Forwards

Options, Caps, Floors, and Collars

Swaps

Loan Sales

Securitization

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