SIE Investment Companies and Packaged Products 2

Question 1

A variable annuity differs from a fixed annuity in that:

Accepted Answer

Variable annuity returns depend on the performance of underlying investment subaccounts

Answer

Variable annuity payouts fluctuate based on the performance of selected subaccounts, while fixed annuities pay a guaranteed amount.

Question 2

What is a unit investment trust (UIT)?

Accepted Answer

An investment company with a fixed, unmanaged portfolio that terminates on a set date

Answer

A UIT holds a fixed portfolio of securities and has a set termination date, unlike mutual funds that are actively managed.

Question 3

Which of the following is a characteristic of a Real Estate Investment Trust (REIT)?

Accepted Answer

REITs must distribute at least 90% of taxable income to shareholders

Answer

To qualify as a REIT, the trust must distribute at least 90% of its taxable income to shareholders each year.

Question 4

Breakpoints in mutual fund investing refer to:

Accepted Answer

Investment thresholds that qualify investors for reduced sales loads on Class A shares

Answer

Breakpoints are investment levels at which Class A mutual fund sales loads are reduced as a reward for larger investments.

Question 5

What distinguishes a hedge fund from a registered mutual fund?

Accepted Answer

Hedge funds are not registered with the SEC and are limited to accredited investors

Answer

Hedge funds operate as private funds exempt from SEC registration and restrict participation to accredited investors.

SIE - Securities Industry Essentials Practice Test