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Question 1 of 10
1. Question
Which of the following is NOT one of the differences between Section 529 College Savings Plans and Coverdell Education Savings Plans?
Correct
While the Section 529 plans provide only for the funds to be applied to higher education expenses with qualified colleges, Coverdell accounts can be used to fund elementary and secondary educations. Additionally, Section 529 plans allow for significantly higher contributions, when compared to the $2,000 annual limit on contributions into a Coverdell account, and Section 529 Plans also do not impose income limits on the amount of contributions. If a parent was looking to save money for a private high school education, the Coverdell account would allow them to so do
Incorrect
While the Section 529 plans provide only for the funds to be applied to higher education expenses with qualified colleges, Coverdell accounts can be used to fund elementary and secondary educations. Additionally, Section 529 plans allow for significantly higher contributions, when compared to the $2,000 annual limit on contributions into a Coverdell account, and Section 529 Plans also do not impose income limits on the amount of contributions. If a parent was looking to save money for a private high school education, the Coverdell account would allow them to so do
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Question 2 of 10
2. Question
Which class of shares that has a front-end sales load that is paid at the time of purchase?
Correct
Class A shares typically have a front-end sales load that is paid at the time of purchase, while Class B and C shares would typically have a contingent deferred sales load and 12b-1 fees.
Incorrect
Class A shares typically have a front-end sales load that is paid at the time of purchase, while Class B and C shares would typically have a contingent deferred sales load and 12b-1 fees.
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Question 3 of 10
3. Question
What should a board of directors do to ensure the protection of shareholder interests?
Correct
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.
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.
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Question 4 of 10
4. Question
Which of the following statements is true regarding an investment adviser?
Correct
The investment adviser within an open-end investment company, or mutual fund, is responsible for the research and execution of the strategy that is set forth in the fund’s prospectus. While the fund’s prospectus contains the objective of the fund and any restricted asset classes or securities in which the fund is not permitted to invest, it is up to the investment adviser to actually execute this strategy and to select the individual securities that will most optimally achieve the fund’s stated objective. Typically, this investment adviser is paid a fee for this service.
Incorrect
The investment adviser within an open-end investment company, or mutual fund, is responsible for the research and execution of the strategy that is set forth in the fund’s prospectus. While the fund’s prospectus contains the objective of the fund and any restricted asset classes or securities in which the fund is not permitted to invest, it is up to the investment adviser to actually execute this strategy and to select the individual securities that will most optimally achieve the fund’s stated objective. Typically, this investment adviser is paid a fee for this service.
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Question 5 of 10
5. Question
What is the responsibility of a custodian of an open-end investment company?
Correct
The custodian of an open-end investment company, often a bank or trust company, is responsible for the safekeeping of the securities and assets of the fund. Additional protection is afforded to the fund’s investors by segregating this activity to a third party who can verify the type of quantity of securities held.
Incorrect
The custodian of an open-end investment company, often a bank or trust company, is responsible for the safekeeping of the securities and assets of the fund. Additional protection is afforded to the fund’s investors by segregating this activity to a third party who can verify the type of quantity of securities held.
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Question 6 of 10
6. Question
Which of the following statements is true regarding the underwriter of an open-end investment company?
Correct
The underwriter (or distributor) within an open-end investment company, or mutual fund, is responsible for selling shares of the fund to investors. Due to the fact that the fund is an open-end investment company, this sale of shares is an ongoing process as sales and redemption of shares must be permitted every day.
Incorrect
The underwriter (or distributor) within an open-end investment company, or mutual fund, is responsible for selling shares of the fund to investors. Due to the fact that the fund is an open-end investment company, this sale of shares is an ongoing process as sales and redemption of shares must be permitted every day.
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Question 7 of 10
7. Question
Which of the following statements is NOT true regarding the election of directors?
Correct
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. A mutual fund’s board of directors is nominated for board service either by the existing board members or by the fund company or shareholders. However, the Investment Company Act of 1940 imposes a requirement that at least two-thirds of a fund’s board of directors must have been nominated by the fund’s shareholders.
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. A mutual fund’s board of directors is nominated for board service either by the existing board members or by the fund company or shareholders. However, the Investment Company Act of 1940 imposes a requirement that at least two-thirds of a fund’s board of directors must have been nominated by the fund’s shareholders.
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Question 8 of 10
8. Question
What is the result of establishing a formal Audit Committee?
Correct
financial statements prior to being filed with the Securities Exchange Commission. The selection of the independent auditors depends upon whether or not the mutual fund has established an Audit Committee comprised entirely of independent directors. If a formal Audit Committee has been established by the mutual fund, then the Audit Committee can select and ratify, and annually reengage, the independent audit firm without requiring any approval from shareholders. If no formal Audit Committee has been established by the mutual fund, then shareholder ratification of the audit firm selected by the board is required.
Incorrect
financial statements prior to being filed with the Securities Exchange Commission. The selection of the independent auditors depends upon whether or not the mutual fund has established an Audit Committee comprised entirely of independent directors. If a formal Audit Committee has been established by the mutual fund, then the Audit Committee can select and ratify, and annually reengage, the independent audit firm without requiring any approval from shareholders. If no formal Audit Committee has been established by the mutual fund, then shareholder ratification of the audit firm selected by the board is required.
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Question 9 of 10
9. Question
What is the impact of the lack of investors’ access to investment products and financial tools?
Correct
An open-end investment company, or mutual fund, allows a wide range of investors access to a wide array of investment products and financial tools. Without such access, an investor who wanted to diversify his account across a range of diverse asset classes and styles would need to purchase each individual security. Additionally, each security could only be purchased in whole shares. Thus, the minimum amount of investable assets required to properly diversify a portfolio would be substantial.
Incorrect
An open-end investment company, or mutual fund, allows a wide range of investors access to a wide array of investment products and financial tools. Without such access, an investor who wanted to diversify his account across a range of diverse asset classes and styles would need to purchase each individual security. Additionally, each security could only be purchased in whole shares. Thus, the minimum amount of investable assets required to properly diversify a portfolio would be substantial.
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Question 10 of 10
10. Question
What is the impact of the absence of a custodian within an open-end investment company?
Correct
The role of a custodian within an open-end investment company, or mutual fund, is to provide for the safekeeping of the securities and assets of the fund and account for cash inflows and outflows of the mutual fund. Without the existence of this valuable service, an investor would have to monitor each of his individual security holdings along with the record keeping of holdings, trade activity, and cash positions.
Incorrect
The role of a custodian within an open-end investment company, or mutual fund, is to provide for the safekeeping of the securities and assets of the fund and account for cash inflows and outflows of the mutual fund. Without the existence of this valuable service, an investor would have to monitor each of his individual security holdings along with the record keeping of holdings, trade activity, and cash positions.