Exercise
Answer the following questions.
- 1. What is the purpose of a letter of intent?
- A. A letter of intent accompanies the prospectus and explains the terms of sale to potential investors.
- B. A letter of intent allows an investor to place a price-per-share bid on an intended purchase.
- C. A letter of intent allows an investor to pay a sales charge based on a lower breakpoint on sales during a specified period of time.
- D. A letter of intent allows an investor to reserve shares for a future purchase at a specified time when he has the money.
- 2. What is the purpose of rights of accumulation?
- A. Rights of accumulation allow an investor to choose whether to apply accumulation (appreciation) in her account to cash dividends or purchase of new shares.
- B. Rights of accumulation allow an investor to pay a sales charge based on a lower breakpoint calculated by including account accumulation (appreciation), as well as new investment funds.
- C. “Rights of accumulation” is an IRS term that helps define capital tax rates paid on account accumulation (appreciation).
- D. Rights of accumulation are the basis for an automatic investment program that purchases shares regularly and thus uses dollar cost averaging.
- 3. Why is late trading prohibited by the SEC and F