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 characteristic unique to preferred stock compared to common stock?
Answer: Preferred stockholders receive dividends before common stockholders
Preferred stockholders have priority over common stockholders in receiving dividends and in asset distribution during liquidation.
Which type of bond is backed by the full faith and credit of the U.S. government?
Answer: U.S. Treasury bonds
U.S. Treasury bonds are direct obligations of the federal government and are backed by the full faith and credit of the United States.
What is the primary tax advantage of municipal bonds for U.S. investors?
Answer: Interest income is generally exempt from federal income tax
Interest earned on most municipal bonds is exempt from federal income tax, and often exempt from state and local taxes in the issuing state.
Which of the following describes a zero-coupon bond?
Answer: A bond issued at a discount that pays no periodic interest but pays face value at maturity
Zero-coupon bonds are sold at a deep discount, pay no periodic interest, and return the full face value at maturity.
What is a real estate investment trust (REIT)?
Answer: A company that owns income-producing real estate and passes at least 90% of taxable income to shareholders
REITs must distribute at least 90% of their taxable income to shareholders as dividends, providing investors with real estate exposure and regular income.
What distinguishes an exchange-traded fund (ETF) from a traditional mutual fund?
Answer: ETFs trade on exchanges throughout the day like stocks; mutual funds price only at end of day
ETFs trade continuously on stock exchanges during market hours, while mutual fund shares are priced and transacted only at the end-of-day net asset value.