Question 1

5-74 Which of the following observations is true of a no-load fund?

Accepted Answer

A)  Purchase is subject to a sales charge.
B)  Sales charges may be as high as 8.5 percent.
C)  They directly market shares to investors.
D)  They use sales agents.
E)  They have up-front commission charges.F) B) and E)
G) D) and E)

Question 2

5-30 The Securities Exchange Act of 1934 requires a mutual fund to file a registration statement with the SEC.

Accepted Answer

A) True 
 B)False

Question 3

5-5 Long-term mutual funds invest primarily in long-term,fixed-income securities such as corporate and/or government bonds.

Accepted Answer

A) True 
 B)False

Question 4

5-82 Which act appointed the National Association of Securities Dealers (NASD) to supervise mutual fund share distributions?

Accepted Answer

A)  Securities Act of 1933.
B)  Securities Exchange Act of 1934.
C)  Investment Advisers Act.
D)  Investment Company Act.
E)  Market Reform Act of 1990.F) All of the above
G) B) and E)

Question 5

5-52 Closed-end investment companies

Accepted Answer

A)  have a fixed number of shares.
B)  can trade at a price that is greater than,equal to,or less than the NAV.
C)  will trade at a different price as the number of shares of the fund changes.
D)  A and C only.
E)  A and B only.F) A) and C)
G) A) and B)

Question 6

5-69 Duties of the newly required chief compliance officers 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.F) B) and E)
G) C) and D)

Question 7

5-16 The net asset value of a mutual fund is a value determined by an end-of-day marking-to-market process.

Accepted Answer

A) True 
 B)False

Question 8

5-66 The type of abusive activity that involves cases where investors were able to buy or sell mutual fund shares long after the price had been set each day is

Accepted Answer

A)  market timing.
B)  late trading.
C)  directed brokerage.
D)  improper fee assessment.
E)  None of the above.F) C) and D)
G) B) and C)

Question 9

5-42 The rate of investing in mutual funds tends to be positively correlated with economic activity in the U.S.,but is negatively correlated with economic activity in other countries.

Accepted Answer

A) True 
 B)False

Question 10

5-94 These "more risky" hedge funds aim to profit from changes in global economies,typically brought about by shifts in government policy that impact interest rates.

Accepted Answer

A)  Distressed securities funds.
B)  Macro funds.
C)  Value funds.
D)  Opportunistic funds.
E)  Market timing funds.F) C) and D)
G) D) and E)

Question 11

5-97 Which of the following is common to both hedge funds and mutual funds?

Accepted Answer

A)  SEC Registration.
B)  Disclosure norms.
C)  Management fees.
D)  Performance fees.
E)  Investor profiles.F) A) and B)
G) C) and E)

Question 12

5-98 What does a hurdle rate specified by a hedge fund indicate?

Accepted Answer

A)  The maximum number of investors possible in the fund that would allow it to avoid regulations.
B)  The minimum amount required to be invested in the fund.
C)  The net worth criterion for an individual to be deemed an "accredited investor."
D)  The highest net asset value that the fund has previously achieved,above which the manager receives a performance fee.
E)  The minimum annualized performance benchmark that must be realized before a performance fee can be assessed.F) B) and E)
G) A) and E)

Question 13

5-78 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.F) D) and E)
G) A) and E)

Question 14

5-49 Regarding the relative asset size and asset growth rate of mutual fund sectors,

Accepted Answer

A)  long-term funds had more assets at the end of 2009,but short-term funds had grown at a faster rate since 1980.
B)  long-term funds had more assets at the end of 2009,and long-term funds had grown at a faster rate since 1980.
C)  short-term funds had more assets at the end of 2009,but long-term funds had grown at a faster rate since 1980.
D)  short-term funds had more assets at the end of 2009,and short-term funds had grown at a faster rate since 1980.
E)  More than one of the above is correct.F) C) and D)
G) A) and E)

Question 15

5-96 75 percent of all hedge funds are located in

Accepted Answer

A)  Bermuda.
B)  Hong Kong.
C)  Cayman Islands.
D)  Luxembourg.
E)  San Marino.F) A) and E)
G) A) and D)

Question 16

5-50 Which of the following is one of the characteristics of household mutual fund owners as of 2009?

Accepted Answer

A)  The typical fund-owning household has $100,000 invested.
B)  53 percent of the families are headed by someone without a college degree.
C)  The median age of mutual fund holders is 50.
D)  23 percent of investors that conducted equity fund transactions used the internet.
E)  All of the above.F) B) and E)
G) C) and E)

Question 17

5-87 Which of the following observations concerning hedge funds is NOT true?

Accepted Answer

A)  They are pooled investment vehicles.
B)  They are not required to register with the SEC.
C)  They are subject to virtually no regulatory oversight.
D)  They usually take significant risk.
E)  They have to disclose their activities to third parties.F) A) and E)
G) A) and D)

Question 18

5-76 Identify the primary regulator (s) of mutual funds.

Accepted Answer

A)  Fed.
B)  SEC.
C)  NASD.
D)  State regulators.
E)  Stock exchanges.F) A) and B)
G) A) and C)

Question 19

5-60 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.F) D) and E)
G) B) and E)

Question 20

5-57 12b-1 fees

Accepted Answer

A)  are determined as a small percentage of the fund's investable assets.
B)  are annual fees to cover distribution and marketing costs of the fund.
C)  have been approved by the SEC.
D)  are capped at a maximum 0.25 percent for no-load funds.
E)  All of the above.F) D) and E)
G) C) and D)

Exam 5: Financial Services: Mutual Funds and Hedge Funds

5-94 These "more risky" hedge funds aim to profit from changes in global economies,typically brought about by shifts in government policy that impact interest rates.

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5-96 75 percent of all hedge funds are located in

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5-69 Duties of the newly required chief compliance officers include

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5-60 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

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5-30 The Securities Exchange Act of 1934 requires a mutual fund to file a registration statement with the SEC.

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5-87 Which of the following observations concerning hedge funds is NOT true?

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5-82 Which act appointed the National Association of Securities Dealers (NASD) to supervise mutual fund share distributions?

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5-74 Which of the following observations is true of a no-load fund?

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5-78 Which of the following is the regulation that allowed the SEC to restrict program trading when it deems necessary?

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5-98 What does a hurdle rate specified by a hedge fund indicate?

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5-5 Long-term mutual funds invest primarily in long-term,fixed-income securities such as corporate and/or government bonds.

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5-42 The rate of investing in mutual funds tends to be positively correlated with economic activity in the U.S.,but is negatively correlated with economic activity in other countries.

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5-16 The net asset value of a mutual fund is a value determined by an end-of-day marking-to-market process.

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5-49 Regarding the relative asset size and asset growth rate of mutual fund sectors,

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5-97 Which of the following is common to both hedge funds and mutual funds?

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5-52 Closed-end investment companies

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5-76 Identify the primary regulator (s) of mutual funds.

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5-57 12b-1 fees

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5-66 The type of abusive activity that involves cases where investors were able to buy or sell mutual fund shares long after the price had been set each day is

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5-50 Which of the following is one of the characteristics of household mutual fund owners as of 2009?

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