Chapter 5 Practice Questions
- 1. Which of the following is not a difference between open-end and closed-end funds?
- A. Shares of open-end funds are purchased through the issuer, while shares of closed-end funds are not.
- B. Supply and demand dictates the price of open-end funds but not the price of closed-end funds.
- C. Shares of open-end funds are redeemable, while closed-end funds are not.
- D. Shares of open-end funds are priced once a day, while closed-end funds are priced continually throughout the day
- 2. An investor who purchases shares in a mutual fund is charged:
- A. The market price of the shares
- B. The most recently calculated NAV plus any front-end sales charge
- C. The next calculated NAV plus any front-end sales charge
- D. The weighted average volume price
- 3. Investment companies that make an initial public offering only once are called:
- A. Open-end funds
- B. Closed-end funds
- C. Open-end funds investing in IPOs
- D. Open-end funds reopening to new investors
- 4. Rights of accumulation refers to an investor’s right to:
- A. Reinvest her capital gains and dividends without paying a new sales charge
- B. Accumulate new shares of a mutual fund before other investors who did not previously own the fund
- C. Receive a lower sales charge if her existing investment appreciates past the next breakpoint
- D. Combine different mutual funds from the same family when she has accumulated a minimum amount
- 5. When proposing mutual funds to a customer, POP enters the conversation when discussing:
- A. A shares
- B. B shares
- C. C shares
- D. All of the choices listed
- 6. Which of the following would be considered an advantage of investing in a mutual fund?
- A. The ability to select investments within the fund
- B. Tax-deferral
- C. Protection of principal
- D. Dive