Which of the following statements are true of open-end mutual funds (OEFs)?

I. OEFs are regulated under the Investment Company Act of 1940

II. OEFs are pass-through vehicles that distribute most income and realized capital gains to shareholders

III. OEFs provide diversification and professional management

IV. OEF shares trade on secondary markets

Select one:

a.

II, III, and IV

b.

I, III, and IV

c.

I, II, and III

d.

All of the above

Net redemptions can cause an open-end mutual fund to distribute capital gains far in excess of an investors cost basis.

Select one:

True

False

Open-end mutual funds always trade at net asset value (NAV)

Select one:

True

False

All of the following are considerations when selecting an open-end mutual funds EXCEPT:

Select one:

a.

Style focus / style consistency

b.

Expense ratios

c.

Not over-weighting recent performance

d.

Whether fund trades at a premium or discount to NAV

e.

The risk of embedded gains

One of the weaknesses of open-end mutual funds is that they must maintain cash reserves against the possibility of net redemptions from shareholders.

Select one:

True

False

Question text

Which of the following are true about closed-end mutual funds?

I. Trades continuously during the day

II. Not subject to tax impact of redemptions

III. Can be fully invested at all times

IV. Always trades at NAV

V. May borrow to create leveraged portfolios

Select one:

a.

I, II, III, and V

b.

I, III, IV, and V

c.

II, III, IV, and V

d.

All of the above

Question text

The first ETF was the S&P Depository Receipt or SPDR

Select one:

True

False

Question text

Which of the following are true of ETFs?

I. ETFs are a pooled investment under the Investment Company Act of 1940

II. After issuance, ETF shares trade on the secondary markets

III. ETF shares can be bought and sold continuously through the trading day

IV. Authorized Participants (APs) maintain parity between market price and NAV through arbitrage of creation and redemption units

V. ETFs are tax efficient, with no risk from redemptions

Select one:

a.

I, II, and IV

b.

I, II, and III

c.

III, IV, and V

d.

All of the above

Question text

If shares trade at a discount to NAV or Indicated Intraday Value (IIV), APs will exchange creation units for shares and sell the shares for an arbitrage profit

Select one:

True

False

Question text

If shares trade at a premium to NAV or IIV, APs will exchange CUs for shares and sell them for an arbitrage profit

Select one:

True

False