Series 7: Exercise

Exercise

Answer the following questions.

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 snail 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 it’s contingent on (may or may not be charged) 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. John, a representative of a broker-dealer, has come up with a good strategy for reducing his paperwork. He submits his mutual fund orders every three days. This way he doesn’t have to send them out every day. Which of the following is true?
12. A. This is not a violation because the mutual fund has seven days to redeem the shares.
13. B. This is not a violation because John has three business days to transmit an order to the investment company.
14. C. This is a violation.
15. D. This is not a violation if all the orders are defined as small orders (under 100 shares).
16. 4. Sarah, a representative of a broker-dealer, has an exciting idea to increase business. She decides to hold a one-day sale on black Friday (the Friday foll