Investment Vehicle Characteristics Flashcards
6 cards from real Series 65 – Uniform Investment Adviser Law Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Investment Vehicle Characteristics flashcards as text
What is a convertible bond?
Answer: A bond that can be exchanged for a fixed number of shares of the issuer's common stock
Convertible bonds give the bondholder the right to convert the bond into a predetermined number of common shares, offering upside participation if the stock rises.
What is duration in the context of fixed income securities?
Answer: A measure of a bond's price sensitivity to interest rate changes
Duration measures the weighted average time to receive a bond's cash flows and is used to estimate how much a bond's price will change when interest rates move.
Which type of mutual fund charges a fee when shares are purchased?
Answer: Front-end load fund
A front-end load fund charges a sales commission at the time of purchase, reducing the amount of money actually invested.
What is a closed-end fund?
Answer: An investment company that issues a fixed number of shares that trade on an exchange at market prices
Closed-end funds issue a fixed number of shares through an IPO and trade on exchanges like stocks, with prices determined by market supply and demand rather than NAV.
What distinguishes an accredited investor under U.S. securities laws?
Answer: An individual with income exceeding $200,000 annually or net worth over $1 million excluding primary residence
Under SEC rules, an accredited investor must meet income ($200,000 individual or $300,000 joint) or net worth thresholds ($1 million excluding primary residence), allowing access to certain private offerings.
What is a put option?
Answer: The right to sell a security at a specified price before expiration
A put option gives the holder the right, but not the obligation, to sell an underlying security at the strike price before or at expiration.