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Question 1 of 10
1. Question
Which of the following statements is true regarding the public offering price?
Correct
The offering price, or public offering price, of a mutual fund is the price at which the fund can be purchased by an investor. The offering price may be identical to the net asset value (the total value of fund assets less expenses divided by the number of outstanding shares) or may differ depending upon whether any sales loads are charged. The offering price is simply equal to the net asset value plus any applicable sales loads that the fund charges.
Incorrect
The offering price, or public offering price, of a mutual fund is the price at which the fund can be purchased by an investor. The offering price may be identical to the net asset value (the total value of fund assets less expenses divided by the number of outstanding shares) or may differ depending upon whether any sales loads are charged. The offering price is simply equal to the net asset value plus any applicable sales loads that the fund charges.
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Question 2 of 10
2. Question
Which of the following statements is true regarding Class B of share classes available within mutual funds?
Correct
Class B shares do not charge a front-end sales charge and instead impose a contingent deferred sales charge (CDSC) according to a defined schedule over the first several years of holding the fund (often six years). However, the annual 12b-1 fees imposed are higher than Class A shares. Once the CDSC no longer applies, the shares are converted into Class A shares, thereby lowering 12b-1 fees.
Incorrect
Class B shares do not charge a front-end sales charge and instead impose a contingent deferred sales charge (CDSC) according to a defined schedule over the first several years of holding the fund (often six years). However, the annual 12b-1 fees imposed are higher than Class A shares. Once the CDSC no longer applies, the shares are converted into Class A shares, thereby lowering 12b-1 fees.
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Question 3 of 10
3. Question
How front-end sales charge will impact investors’ investment performance?
Correct
Front-End Sales Charge: This fee is imposed when Class A shares are purchased. If a fund’s front-end sales charge is 5% and an investor purchases $1,000, then the investor will have $950 invested in the fund and will have paid a front-end sales charge of $50.
Incorrect
Front-End Sales Charge: This fee is imposed when Class A shares are purchased. If a fund’s front-end sales charge is 5% and an investor purchases $1,000, then the investor will have $950 invested in the fund and will have paid a front-end sales charge of $50.
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Question 4 of 10
4. Question
To what does the term “Rights of accumulation” within the context of a mutual fund purchase refer?
Correct
Rights of accumulation within the context of a mutual fund purchase refers to the practice whereby a mutual fund family will consider other purchases and other current holdings in determining whether or not an investor qualifies for breakpoint pricing on the front-end sales charge.
Incorrect
Rights of accumulation within the context of a mutual fund purchase refers to the practice whereby a mutual fund family will consider other purchases and other current holdings in determining whether or not an investor qualifies for breakpoint pricing on the front-end sales charge.
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Question 5 of 10
5. Question
For whom are letters of intent beneficial?
Correct
Letters of intent are much more beneficial for newer investors to a fund family who plan to make regular and/or significant contributions over the near- term (13 months).
Incorrect
Letters of intent are much more beneficial for newer investors to a fund family who plan to make regular and/or significant contributions over the near- term (13 months).
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Question 6 of 10
6. Question
Which of the following statements is NOT one of the benefits of fractional shares in mutual funds?
Correct
With fractional shares in mutual funds, investors can manage their holdings down to the penny. This allows investors with smaller investable asset bases to better manage their asset allocations and properly allocate future purchases and dividend reinvestments.
Incorrect
With fractional shares in mutual funds, investors can manage their holdings down to the penny. This allows investors with smaller investable asset bases to better manage their asset allocations and properly allocate future purchases and dividend reinvestments.
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Question 7 of 10
7. Question
Which of the following things is NOT one of the information investors need to know about funds?
Correct
It is critically important for each fund to have a clearly stated investment objective outlined in the prospectus and statement of additional information so that investors have a clear expectation of the objectives and constraints of the fund. A fund’s investment objectives should also specify the types of securities in which the fund will invest.
Incorrect
It is critically important for each fund to have a clearly stated investment objective outlined in the prospectus and statement of additional information so that investors have a clear expectation of the objectives and constraints of the fund. A fund’s investment objectives should also specify the types of securities in which the fund will invest.
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Question 8 of 10
8. Question
What is the importance of equity income mutual funds?
Correct
Equity income mutual funds seek to provide return to investors through a combination of equity dividends and capital appreciation. Proportionately, more of the fund’s returns will come from equity dividends and the fund will not rely as significantly upon capital appreciation as most other equity funds. Additionally, these funds are typically less aggressive than a fund that provides return solely through capital appreciation.
Incorrect
Equity income mutual funds seek to provide return to investors through a combination of equity dividends and capital appreciation. Proportionately, more of the fund’s returns will come from equity dividends and the fund will not rely as significantly upon capital appreciation as most other equity funds. Additionally, these funds are typically less aggressive than a fund that provides return solely through capital appreciation.
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Question 9 of 10
9. Question
Which of the following statements is true regarding equity growth funds?
Correct
Equity growth funds seek to provide returns through capital appreciation. While the fund may hold some securities that pay modest dividends, the dividends are not a significant source of returns for the fund. Instead, the portfolio manager and research team attempt to identify securities that will grow (and whose stock price will appreciate) at a rate greater than that which is implied through the current stock price. Investors in equity growth funds are typically more aggressive and may be investing over a longer time horizon or with a greater target return than investors in fixed income or equity income funds.
Incorrect
Equity growth funds seek to provide returns through capital appreciation. While the fund may hold some securities that pay modest dividends, the dividends are not a significant source of returns for the fund. Instead, the portfolio manager and research team attempt to identify securities that will grow (and whose stock price will appreciate) at a rate greater than that which is implied through the current stock price. Investors in equity growth funds are typically more aggressive and may be investing over a longer time horizon or with a greater target return than investors in fixed income or equity income funds.
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Question 10 of 10
10. Question
Which of the following statements is true regarding equity blend or core funds?
Correct
Equity blend or core funds provide a mix of returns through investing in companies that could be considered either growth or value funds, or balanced between the two approaches. Instead of limiting the choice of underlying investments to specifically identifying growth or value companies, blend or core funds seek to provide the highest risk-adjusted return through investing in companies with the best potential risk-adjusted returns, regardless of whether they are undervalued or underestimated in terms of future growth.
Incorrect
Equity blend or core funds provide a mix of returns through investing in companies that could be considered either growth or value funds, or balanced between the two approaches. Instead of limiting the choice of underlying investments to specifically identifying growth or value companies, blend or core funds seek to provide the highest risk-adjusted return through investing in companies with the best potential risk-adjusted returns, regardless of whether they are undervalued or underestimated in terms of future growth.