Investment Vehicle Flashcards

A closed-end fund differs from an open-end mutual fund in that:

Answer: It issues a fixed number of shares traded on exchanges

Closed-end funds issue a fixed number of shares that trade on stock exchanges, unlike open-end funds that continuously issue/redeem shares at NAV.

Which type of annuity contract guarantees a fixed payout regardless of market performance?

Answer: Fixed annuity

Fixed annuities guarantee a specified interest rate and payout, providing predictable income regardless of market conditions.

A Real Estate Investment Trust (REIT) must distribute at least what percentage of taxable income as dividends?

Answer: 90%

REITs must distribute at least 90% of taxable income to shareholders to maintain their tax-advantaged status.

Which investment vehicle allows investors to gain exposure to commodities without directly holding physical assets?

Answer: Commodity ETFs

Commodity ETFs provide exposure to commodities (like gold, oil, or agricultural products) without requiring physical ownership.

Preferred stock typically has which characteristic compared to common stock?

Answer: Priority dividend claims but limited upside

Preferred stock has priority over common stock for dividends and in liquidation, but typically lacks voting rights and significant price appreciation.

A zero-coupon bond:

Answer: Is sold at a discount and pays face value at maturity

Zero-coupon bonds are sold at a deep discount and pay no periodic interest—the investor receives the full face value at maturity.