Question 1

The total of a mutual fund’s front-end load, rear-end load, and 12b-1 fees may not exceed:

Options :

A : 10.0% of the fund’s offer price.

B : 10.0% of the fund’s net asset value.

C : 8.5% of the fund’s offer price.

D : 8.5% of the average annual net assets of the fund.

Answer: C

Question 2

Giant Investments filed a registration statement with the SEC for a new fund it wanted to introduce and has received word that the registration statement is now effective. Based on this, Jack, a registered representative with Giant Investments, can tell a client that:

Options :

A :

because the SEC has recently announced the fund’s registration statement effective, the client can rest assured that it is a sound long-term investment.

B :

the SEC pronouncement on the effectiveness of the registration statement means only that the SEC has deemed that enough information has been provided in the registration statement for the client to judge the quality of the investment for himself.

C : the SEC warrants that there have been no misstatements of fact in the registration statement.

D :

because the SEC has recently approved the fund, it is likely to be a much safer investment than other, older funds in the same fund category.

Answer: B

Question 3

Glamourless Fund is a value fund. As such, it invests primarily in stocks with:

Options :

A : low cash dividend yields.

B : high betas.

C : high price-earnings ratios.

D : low earnings growth rates.

Answer: D

Question 4

Which of the following statements regarding the purchase and redemption of mutual fund shares is false?

Options :

A : Mutual fund shares may not be purchased on margin.

B : An investor can both purchase and sell fractional shares of mutual funds.

C : When an investor redeems his shares, the mutual fund must pay for the shares within 7 business days.

D :

If an investor places an order to buy or redeem shares of a mutual fund before 4 P.M.EST on a day when the markets are open, the price will be based on the fund’s net asset value (NAV), as calculated at the end of that trading day.

Answer: C

Question 5

Which of the following is not a potential advantage associated with investing through a mutual fund?

Options :

A : lower cost associated with portfolio management

B : simplified recordkeeping

C : price discovery

D : diversification

Answer: C

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