Series 6 – Investment Company and Variable Contract Products Representation Qualification Exam Mutual Funds & Investment Companies Flashcards

Which of the following is NOT a characteristic of a closed-end investment company?

Answer: Investors redeem shares directly with the fund at NAV

Closed-end funds do not redeem shares directly; investors must sell their shares on a stock exchange.

A letter of intent (LOI) in mutual fund investing allows a customer to:

Answer: Receive a breakpoint discount based on a commitment to invest a specified amount over 13 months

An LOI allows investors to qualify for reduced sales charges by committing to reach a breakpoint within a 13-month period.

Which fund share class typically has no front-end load but charges a contingent deferred sales charge (CDSC) if redeemed early?

Answer: Class B shares

Class B shares have no upfront load but impose a CDSC that declines over time and eventually disappears.

Rights of accumulation in mutual funds allow investors to:

Answer: Combine the current purchase value with existing fund holdings to qualify for a breakpoint

Rights of accumulation let investors use the total value of their existing fund holdings plus the new purchase to qualify for breakpoint discounts.

A mutual fund that invests primarily in long-term U.S. Treasury securities and high-grade corporate bonds would be classified as a:

Answer: Bond fund

A fund focusing on long-term Treasury and high-grade corporate bonds is a bond (fixed income) fund.

Under the Investment Company Act of 1940, a fund must have a minimum of how many shareholders to register as an investment company?

Answer: 100

The Investment Company Act requires a minimum of 100 shareholders (record holders) for a company to register as an investment company.