Exercise
Choose the correct answer.
- 1. Bob wants to redeem his 100 shares in a mutual fund, which is held in street name by his brokerage. Bob sends his request by postal mail on a Tuesday and the investment company receives it on Thursday. How long does the mutual fund company have to redeem Bob’s shares?
- A. Seven business days from the request receipt date
- B. Seven calendar days from the request receipt date
- C. Seven calendar days from the receipt of Bob’s signature guarantee
- D. Seven days from Tuesday
- 2. Why is a declining back-end load called a contingent deferred sales charge?
- A. The sales charge is deferred until the investor sells, and the percentage charged is contingent on when the sale occurs.
- B. The sales charge is deferred until the investor sells, and the percentage charged is contingent on interest rates at that time.
- C. The sales charge declines until the investor sells and is contingent on the relationship of the shares’ POP to NAV at the time of sale.
- D. The sales charge declines until the investor sells and is contingent on the fees that have already been charged.
- 3. Why is late trading of mutual fund shares prohibited?
- A. To ensure that all purchasers of mutual fund shares are on equal footing as to price and information on any given day.
- B. Forward pricing puts investors who purchase shares before the NAV is calculated at a disadvantage.
- C. Because the NAV is calculated at market close, late-breaking news is reflected in the calculation.
- D. Late trading makes a fund’s long-term investors pay higher fees due to the transaction costs of short-term trading.
- 4. John, a registered representative of a broker-dealer, has come up with a strategy that reduces the time he spends doing paperwork. Instead of submitting mutual fund orders every day, he submits his mutual fund orders every three days. Which of the fol