SIE Investment Companies and Packaged Products

Question 1

What is the key difference between open-end and closed-end mutual funds?

Accepted Answer

Open-end funds continuously issue new shares; closed-end have a fixed number of shares

Answer

Open-end funds (traditional mutual funds) create and redeem shares continuously, while closed-end funds issue a fixed number of shares traded on exchanges.

Question 2

At what price are open-end mutual fund shares bought and sold?

Accepted Answer

At the next calculated Net Asset Value (NAV)

Answer

Open-end mutual funds transact at the NAV calculated after the trading day ends (forward pricing rule).

Question 3

What is a 12b-1 fee?

Accepted Answer

An annual fee charged by mutual funds to cover marketing and distribution costs

Answer

A 12b-1 fee is an annual fund expense used for marketing and distribution, included in the fund's expense ratio.

Question 4

Which type of mutual fund share class typically has a front-end sales load?

Accepted Answer

Class A shares

Answer

Class A shares typically charge a front-end sales load, deducted from the initial investment at the time of purchase.

Question 5

An Exchange-Traded Fund (ETF) differs from a mutual fund primarily because:

Accepted Answer

ETFs trade on exchanges throughout the day like stocks

Answer

ETFs trade on exchanges continuously throughout the trading day at market prices, unlike mutual funds priced once at end of day.

SIE - Securities Industry Essentials Practice Test

SIE - Securities Industry Essentials Practice Test

SIE Investment Companies and Packaged Products