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Question 1 of 10
1. Question
Which of the following statements is true regarding A Coverdell Education Savings Plan?
I. It is a type of tax-disadvantaged investment account
II. It allows parents the opportunity to save for educational expenses
III. Contributions into the plan are not tax-deductible and are limited to $2,000 per year for a given beneficiary
IV. Additional limits may apply to the contributionsCorrect
A Coverdell Education Savings Plan is a type of tax-advantaged investment account to allow parents the opportunity to save for educational expenses. Contributions into the plan are not tax-deductible and are limited to $2,000 per year for a given beneficiary. Additional limits may apply to the contributions that can be made to an account depending upon the Modified Adjusted Gross Income of the individual making the contribution.
Incorrect
A Coverdell Education Savings Plan is a type of tax-advantaged investment account to allow parents the opportunity to save for educational expenses. Contributions into the plan are not tax-deductible and are limited to $2,000 per year for a given beneficiary. Additional limits may apply to the contributions that can be made to an account depending upon the Modified Adjusted Gross Income of the individual making the contribution.
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Question 2 of 10
2. Question
Which of the following statements is true regarding College Savings Plan?
I. It is a valuable tool for parents to invest funds on a tax-preferred basis to be used for the costs of college education
II. Contributions into the plan are made with after-tax dollars, so the benefit of the plan is not experienced at the time of contribution
III. Your contributions grow tax-based and can’t be invested as you choose to allocate the funds within the options available in your specific plan
IV. The funds can be withdrawn to cover any “qualified higher education expenses,” including tuition, room and board, and books and computersCorrect
A Section 529 College Savings Plan is a valuable tool for parents to invest funds on a tax-preferred basis to be used for the costs of college education. Contributions into the plan are made with after-tax dollars, so the benefit of the plan is not experienced at the time of contribution. However, your contributions grow tax-free and can be invested as you choose to allocate the funds within the options available in your specific plan. The funds can be withdrawn to cover any “qualified higher education expenses,” including tuition, room and board, and books and computers.
Incorrect
A Section 529 College Savings Plan is a valuable tool for parents to invest funds on a tax-preferred basis to be used for the costs of college education. Contributions into the plan are made with after-tax dollars, so the benefit of the plan is not experienced at the time of contribution. However, your contributions grow tax-free and can be invested as you choose to allocate the funds within the options available in your specific plan. The funds can be withdrawn to cover any “qualified higher education expenses,” including tuition, room and board, and books and computers.
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Question 3 of 10
3. Question
Which of the following statements is true regarding Board of directors?
I. It is tasked under the Investment Company Act of 1948
II. It ensures that interests are aligned between the fund, its shareholders, and the fund’s investment adviser
III. at least 40 percent of the mutual fund’s board of directors must be comprised of independent directors to ensure this protection of shareholder interests
IV. There are also typically a number of specific subcommittees that govern certain key areas of importanceCorrect
The board of directors of an open-end investment company, or mutual fund, is tasked under the Investment Company Act of 1940 with overseeing the operations of the fund and ensuring that interests are aligned between the fund, its shareholders, and the fund’s investment adviser. In order to ensure this protection of shareholder interests, at least 40 percent of the mutual fund’s board of directors must be comprised of independent directors. Within the board of directors, there are also typically a number of specific subcommittees that govern certain key areas of importance, such as audit, corporate governance, or compensation.
Incorrect
The board of directors of an open-end investment company, or mutual fund, is tasked under the Investment Company Act of 1940 with overseeing the operations of the fund and ensuring that interests are aligned between the fund, its shareholders, and the fund’s investment adviser. In order to ensure this protection of shareholder interests, at least 40 percent of the mutual fund’s board of directors must be comprised of independent directors. Within the board of directors, there are also typically a number of specific subcommittees that govern certain key areas of importance, such as audit, corporate governance, or compensation.
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Question 4 of 10
4. Question
Which of the following statements is true regarding Quantitative risk management?
I. Many open-end investment companies, or mutual funds, use it
II. They use it to mitigate a portion of the downside risk that is inherent in the fund’s investment strategy
III. To achieve this risk mitigation, funds will purchase certain derivatives and option contracts
IV. There is a cost to such risk mitigation that may also lower expected returns in positive marketsCorrect
Quantitative risk management
Many open-end investment companies, or mutual funds, use a quantitative risk management strategy to mitigate a portion of the downside risk that is inherent in the fund’s investment strategy. To achieve this risk mitigation, funds will purchase certain derivatives and option contracts that are meant to protect the firm from unexpected negative results. There is, however, a cost to such risk mitigation that may also lower expected returns in positive markets.Incorrect
Quantitative risk management
Many open-end investment companies, or mutual funds, use a quantitative risk management strategy to mitigate a portion of the downside risk that is inherent in the fund’s investment strategy. To achieve this risk mitigation, funds will purchase certain derivatives and option contracts that are meant to protect the firm from unexpected negative results. There is, however, a cost to such risk mitigation that may also lower expected returns in positive markets. -
Question 5 of 10
5. Question
Which of the following statements is true regarding Accumulation period and annuitization period?
I. Variable annuities are a form of insurance contract that provide for payment of income to the owner of the contract
II. The accumulation period and the annuitization period are the two distinct phases of Variable annuities
III. The funds invested will grow tax-deferred at a rate determined by the performance of the separate account investments
IV. The contract is annuitized meaning the funds are converted into profits for the remaining life of the contractCorrect
Accumulation period and annuitization period
Variable annuities are a form of insurance contract that provide for payment of income to the owner of the contract that depends upon the growth of a portfolio of separate account investments. Variable annuities have two distinct phases the accumulation period and the annuitization period. During the accumulation period, the contract owner may make contributions to the contract. The funds invested will grow tax-deferred at a rate determined by the performance of the separate account investments, less the charges imposed by the company that issued the contract. At the end of the accumulation period, the contract is annuitized, meaning that the funds are converted into payments for the remaining life of the contract, which may be either a specified number of years or, in the case of a life annuity, for the remaining life of the contract owner.Incorrect
Accumulation period and annuitization period
Variable annuities are a form of insurance contract that provide for payment of income to the owner of the contract that depends upon the growth of a portfolio of separate account investments. Variable annuities have two distinct phases the accumulation period and the annuitization period. During the accumulation period, the contract owner may make contributions to the contract. The funds invested will grow tax-deferred at a rate determined by the performance of the separate account investments, less the charges imposed by the company that issued the contract. At the end of the accumulation period, the contract is annuitized, meaning that the funds are converted into payments for the remaining life of the contract, which may be either a specified number of years or, in the case of a life annuity, for the remaining life of the contract owner. -
Question 6 of 10
6. Question
Which of the following statements is true regarding Taxation of payments?
I. The tax-deferral of growth within the contract during the accumulation phase is one of the primary benefits to a variable annuity
II. Understanding the tax consequences is important once the policy begins to make distributions
III. There are three methods under which the taxability of variable annuity payments can be calculated
IV. The General Rule is one of the three methodsCorrect
Taxation of payments
One of the primary benefits to a variable annuity is the tax-deferral of growth within the contract during the accumulation phase. However, it is important to also understand the tax consequences once the policy begins to make distributions. There are two methods under which the taxability of variable annuity payments can be calculated: the Simplified Method and the General Rule.Incorrect
Taxation of payments
One of the primary benefits to a variable annuity is the tax-deferral of growth within the contract during the accumulation phase. However, it is important to also understand the tax consequences once the policy begins to make distributions. There are two methods under which the taxability of variable annuity payments can be calculated: the Simplified Method and the General Rule. -
Question 7 of 10
7. Question
Which of the following statements is true regarding unit investment trust (UIT)
I. It is one of two types of investment companies
II. Units are issued at the inception of the UIT and are capitalized with the proceeds from that initial issuance
III. The most distinguishing characteristic of unit investment trusts is the extremely high turnover in the investment portfolio
IV. The initial securities purchased in the UIT are typically held through the maturity of the UITCorrect
A unit investment trust (UIT) is one of three types of investment companies, in addition to closed-end funds and open-end funds, or mutual funds. Units are issued at the inception of the UIT and are capitalized with the proceeds from that initial issuance. Perhaps the most distinguishing characteristic of unit investment trusts is the extremely low turnover in the investment portfolio. Contrary to mutual funds and closed-end funds, the initial securities purchased in the UIT are typically held through the maturity of the UIT.
Incorrect
A unit investment trust (UIT) is one of three types of investment companies, in addition to closed-end funds and open-end funds, or mutual funds. Units are issued at the inception of the UIT and are capitalized with the proceeds from that initial issuance. Perhaps the most distinguishing characteristic of unit investment trusts is the extremely low turnover in the investment portfolio. Contrary to mutual funds and closed-end funds, the initial securities purchased in the UIT are typically held through the maturity of the UIT.
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Question 8 of 10
8. Question
Which of the following statements is true regarding Value and price?
I. Unit investment trusts (UITs) aren’t valued and priced in much the same way as their mutual fund counterparts
II. Because of limited number of securities in UITs and the lower turnover, pricing of UITs requires significantly higher administrative effort
III. The net asset value of the UIT is simply the total of all underlying securities divided by the number of units that are presently outstanding
IV. The net asset value of the UIT is simply the sum of all underlying securities divided by the number of units that are currently outstandingCorrect
Value and price
Unit investment trusts (UITs) are valued and priced in much the same way as their mutual fund counterparts. Due to the limited number of securities in UITs and the lower turnover, pricing of UITs requires significantly less administrative effort on the part of the UIT than with mutual funds. The net asset value of the UIT is simply the total of all underlying securities divided by the number of units that are currently outstanding.Incorrect
Value and price
Unit investment trusts (UITs) are valued and priced in much the same way as their mutual fund counterparts. Due to the limited number of securities in UITs and the lower turnover, pricing of UITs requires significantly less administrative effort on the part of the UIT than with mutual funds. The net asset value of the UIT is simply the total of all underlying securities divided by the number of units that are currently outstanding. -
Question 9 of 10
9. Question
Which of the following statements is true regarding Trading on secondary markets and restrictions on redeeming shares?
I. Unit investment trusts (UIT) are issued only at the end of the fund
II. Units are redeemable at any time upon request by an investor
III. They must be redeemed by the trust upon receiving that request at the net asset value at that time
IV. Many sponsors of UITs will avoid a secondary market for units of UITs for investors to be able to both buy and sell their units to the sponsorCorrect
Trading on secondary markets and restrictions on redeeming shares
Unit investment trusts (UIT) are issued only at the inception of the fund. However, units are redeemable at any time upon request by an investor and must be redeemed by the trust upon receiving that request at the net asset value at that time. In order to promote keeping the funds invested as investors redeem shares, many sponsors of UITs will maintain a secondary market for units of UITs for investors to be able to both buy and sell their units to the sponsor.Incorrect
Trading on secondary markets and restrictions on redeeming shares
Unit investment trusts (UIT) are issued only at the inception of the fund. However, units are redeemable at any time upon request by an investor and must be redeemed by the trust upon receiving that request at the net asset value at that time. In order to promote keeping the funds invested as investors redeem shares, many sponsors of UITs will maintain a secondary market for units of UITs for investors to be able to both buy and sell their units to the sponsor. -
Question 10 of 10
10. Question
Which of the following statements is true regarding Value and price?
I. Closed-end funds have a net asset value calculated as the value of all underlying assets divided by the number of shares that were issued
II. The price paid for these securities may differ from the net asset value of the fund
III. The price may not track closely to the net asset value, and will ultimately be determined by supply of and demand for shares in the secondary market
IV. The sponsor of a closed-end fund may specify certain intervals at which to reject redemptions from investorsCorrect
Value and price
Just as with open-end funds, or mutual funds, and unit investment trusts (UITs), closed-end funds have a net asset value that is calculated as the value of all underlying assets divided by the number of shares that were issued. Due to the fact that these securities are traded in the secondary market and bought and sold between investors, the price paid for these securities may differ from the net asset value of the fund. The price may track closely to the net asset value, but will ultimately be determined by supply of and demand for shares in the secondary market. Additionally, the sponsor of a closed-end fund may specify certain intervals at which to accept redemptions from investors.Incorrect
Value and price
Just as with open-end funds, or mutual funds, and unit investment trusts (UITs), closed-end funds have a net asset value that is calculated as the value of all underlying assets divided by the number of shares that were issued. Due to the fact that these securities are traded in the secondary market and bought and sold between investors, the price paid for these securities may differ from the net asset value of the fund. The price may track closely to the net asset value, but will ultimately be determined by supply of and demand for shares in the secondary market. Additionally, the sponsor of a closed-end fund may specify certain intervals at which to accept redemptions from investors.