SIE: Exercise

Exercise

Choose the correct answer.

1. 1. Bob wants to redeem his 100 shares in a mutual fund, which is held in street name by his brokerage. Bob sends his request by postal mail on a Tuesday and the investment company receives it on Thursday. How long does the mutual fund company have to redeem Bob’s shares?
2. A. Seven business days from the request receipt date
3. B. Seven calendar days from the request receipt date
4. C. Seven calendar days from the receipt of Bob’s signature guarantee
5. D. Seven days from Tuesday
6. 2. Why is a declining back-end load called a contingent deferred sales charge?
7. A. The sales charge is deferred until the investor sells, and the percentage charged is contingent on when the sale occurs.
8. B. The sales charge is deferred until the investor sells, and the percentage charged is contingent on interest rates at that time.
9. C. The sales charge declines until the investor sells and is contingent on the relationship of the shares’ POP to NAV at the time of sale.
10. D. The sales charge declines until the investor sells and is contingent on the fees that have already been charged.
11. 3. Why is late trading of mutual fund shares prohibited?
12. A. To ensure that all purchasers of mutual fund shares are on equal footing as to price and information on any given day.
13. B. Forward pricing puts investors who purchase shares before the NAV is calculated at a disadvantage.
14. C. Because the NAV is calculated at market close, late-breaking news is reflected in the calculation.
15. D. Late trading makes a fund’s long-term investors pay higher fees due to the transaction costs of short-term trading.
16. 4. John, a registered representative of a broker-dealer, has come up with a strategy that reduces the time he spends doing paperwork. Instead of submitting mutual fund orders every day, he submits his mutual fund orders every three days. Which of the fol