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Question 1 of 10
1. Question
Which is (are) the correct statement(s) regarding Exchange traded funds?
I. Exchange traded fund’s objective is to have earnings in line with the market.
II. Exchange traded funds are speculating on out of the ordinary growth in a particular investment segment.
III. Exchange traded fundswhere stocks are not bought from the issuer, but traded at various exchanges and NASDAQ.
IV. Exchange traded funds are often used to diversify investment portfolios.Correct
Exchange traded funds: funds where stocks are not bought from the issuer, but traded at various exchanges and NASDAQ.
Incorrect
Exchange traded funds: funds where stocks are not bought from the issuer, but traded at various exchanges and NASDAQ.
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Question 2 of 10
2. Question
Investment Company Act of 1940 act regulates investment companies’-
I. Pricing policies
II. Promotion
III. Allocation of investments
IV. Growth in a particular investment segmentCorrect
Investment Company Act of 1940: this act regulates investment companies’ pricing policies, promotion, and allocation of investments.
Incorrect
Investment Company Act of 1940: this act regulates investment companies’ pricing policies, promotion, and allocation of investments.
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Question 3 of 10
3. Question
Which is (are) the correct statement(s) regarding the Investment Company Act of 1940?
I. The Investment Company Act of 1940 was created as the result of misleading practices.
II. This act was passed by Congress, requiring investment companies to register with the SEC and follow their policies, demanding full disclosure to investors.
III. This act regulates investment companies’ pricing policies, promotion, and allocation of investments.
IV. The Investment Company Act of 1940 helps to make portfolio decisions, aiming to diversify the investment choices.Correct
The Investment Company Act of 1940 was created as the result of misleading practices (like overcharging for stocks bought, and charging high fees) that led to great investor loss. This act was passed by Congress, requiring investment companies to register with the SEC and follow their policies, demanding full disclosure to investors.
Incorrect
The Investment Company Act of 1940 was created as the result of misleading practices (like overcharging for stocks bought, and charging high fees) that led to great investor loss. This act was passed by Congress, requiring investment companies to register with the SEC and follow their policies, demanding full disclosure to investors.
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Question 4 of 10
4. Question
Which is (are) the correct statement(s) regarding Unit investment trusts?
I. Unit investment trusts have a fixed portfolio investment allocation.
II. Unit investment trusts have no management fees.
III. Unit investment trusts terminates when the investments (usually bonds) mature.
IV. Unit investment trusts invests in set mutual funds shares, with no set maturation.Correct
Unit investment trusts, unlike mutual funds, have a fixed portfolio investment allocation, and they do not employ investment managers. UITs have no management fees.
Incorrect
Unit investment trusts, unlike mutual funds, have a fixed portfolio investment allocation, and they do not employ investment managers. UITs have no management fees.
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Question 5 of 10
5. Question
Which is (are) the correct statement(s) regarding Fixed Annuities?
I. Fixed Annuities have a fixed rate of return.
II. Fixed Annuities are a safe investment due to guaranteed payout.
III. Fixed Annuities they hold purchasing power risk.
IV. Fixed Annuities carry great inflation risk.Correct
Fixed Annuities The only thing you should know about fixed annuities is they have a fixed rate of re- turn. The investor is guaranteed a dollar amount for his or her lifetime — he or she will not sell this investment. Fixed annuities are a safe investment due to guaranteed payout, but they hold pur- chasing power risk. Because these contracts are made years, often decades, ahead of their payout, they carry great inflation risk (for example, $500 in 1980 will buy more than $500 in 2010).
Incorrect
Fixed Annuities The only thing you should know about fixed annuities is they have a fixed rate of re- turn. The investor is guaranteed a dollar amount for his or her lifetime — he or she will not sell this investment. Fixed annuities are a safe investment due to guaranteed payout, but they hold pur- chasing power risk. Because these contracts are made years, often decades, ahead of their payout, they carry great inflation risk (for example, $500 in 1980 will buy more than $500 in 2010).
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Question 6 of 10
6. Question
Which is (are) the incorrect statement(s) regarding Variable Annuities?
I. To leverage against inflation, insurance companies issue variable annuities.
II. Variable annuities work like mutual funds and must be sold with a prospectus.
III. Most companies use variable funds to turn around and invest in stocks and bonds to ensure they make a profit and keep up with inflation.
IV. Variable annuities carry investment risk and are considered securities.Correct
Variable Annuities To leverage against inflation, insurance companies issue variable annuities.
Variable annuities work like mutual funds and must be sold with a prospectus. The insurance company will keep funds separate from their other business. Most companies use annuity funds to turn around and invest in stocks and bonds to en- sure they make a profit and keep up with inflation.
Variable annuities carry investment risk and are considered securities.Incorrect
Variable Annuities To leverage against inflation, insurance companies issue variable annuities.
Variable annuities work like mutual funds and must be sold with a prospectus. The insurance company will keep funds separate from their other business. Most companies use annuity funds to turn around and invest in stocks and bonds to en- sure they make a profit and keep up with inflation.
Variable annuities carry investment risk and are considered securities. -
Question 7 of 10
7. Question
In Life annuity, investment pays-
Correct
Life annuity: this investment pays out only for the life of the investor and stops paying when the investor dies.
Incorrect
Life annuity: this investment pays out only for the life of the investor and stops paying when the investor dies.
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Question 8 of 10
8. Question
Which is (are) the incorrect statement(s) regarding Real Estate Investment Trusts (REITs) ?
I. Real estate investment trusts (REITs) are investments in real estate projects.
II. An REIT can invest in mortgages, properties, and construction loans.
III. REITs must have at least 90 percent of all assets and income derived from investments in real estate, government securities, or cash, and must distribute 75 percent or more of income to investors to avoid corporate taxation.
IV. REITs only pass income to their investors, not write-offs, or deductions.Correct
Real estate investment trusts (REITs) are investments in real estate projects. An REIT can invest in mortgages, properties, and construction loans. REITs must have at least 75 percent of all assets and income derived from investments in real estate, government securities, or cash, and must distribute 90 percent or more of income to investors to avoid corporate taxation. Tip #45 Unlike real estate limited partnerships (see Chapter 6), REITs only pass income to their investors, not write-offs, or deductions.
Incorrect
Real estate investment trusts (REITs) are investments in real estate projects. An REIT can invest in mortgages, properties, and construction loans. REITs must have at least 75 percent of all assets and income derived from investments in real estate, government securities, or cash, and must distribute 90 percent or more of income to investors to avoid corporate taxation. Tip #45 Unlike real estate limited partnerships (see Chapter 6), REITs only pass income to their investors, not write-offs, or deductions.
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Question 9 of 10
9. Question
Which is (are) the correct statement(s) regarding Packaged securities?
I. Packaged securities offer the client the ability to avoid the risk of investing in one particular company, which is a type of diversification.
II. There is no significant risks involved in packaged securities investment.
III. Client can lose principal investment if investing in stock.
IV. If the client invests in REITs and the real estate market goes down, client will see a loss.Correct
Packaged securities offer your client the ability to avoid the risk of investing in one particular company, which is a type of diversification. There are still significant risks involved in packaged securities investment. Your client can lose principal in- vestment if investing in stock. There is also an added risk for particular industries: if your client invests in REITs and the real estate market goes down, your client will see a loss.
Incorrect
Packaged securities offer your client the ability to avoid the risk of investing in one particular company, which is a type of diversification. There are still significant risks involved in packaged securities investment. Your client can lose principal in- vestment if investing in stock. There is also an added risk for particular industries: if your client invests in REITs and the real estate market goes down, your client will see a loss.
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Question 10 of 10
10. Question
What is the qualification of a diversified management company?
Correct
A diversified management company must have no more than 5 percent invested in one company and cannot buy more than 10 percent of voting stock in one company.
Incorrect
A diversified management company must have no more than 5 percent invested in one company and cannot buy more than 10 percent of voting stock in one company.