Q&A Hero

Q: The party who serves as a dealer for a few securities on an exchange floor and is obligated to maintain an orderly market for those securities is called a: A. floor trader. B. designated market maker. C. floor broker. D. member. E. house broker.

Q: An NYSE Supplemental Liquidity Provider: I. can trade the same stocks as designated market makers II. can trade only from offices outside the exchange III. must quote bid or ask quotes a certain % of the day IV. are paid 30 cents per 100 shares traded A. I and II only B. I, II and III only C. I and III only D. I, II, and IV only E. I, II, III and IV

Q: An owner of a trading license on the NYSE is called a: A. broker. B. shareholder. C. member. D. trader. E. dealer.

Q: Which of the following is correct regarding the compensation paid to private equity fund managers? A. Managers typically receive 20% of fund profits but no separate management fee. B. Managers typically receive a high percentage management fee but no portion of fund profits. C. Management compensation is usually subject to a "clawback" provision to limit the performance fees. D. "Carried interest" refers to the interest fund managers earn on performance fees. E. Fees paid to fund managers do not reduce the net return of the fund.

Q: A private equity fund: I. is set up as a limited partnership II. usually use a 2/20 fee structure III. place no constraints on manager compensation IV. typically have a stated life of 7 to 10 years A. I and II only B. I and III only C. I, II and III only D. I, II and IV only E. I, II, III, and IV

Q: The profit a dealer makes on a purchase and resale of shares of stock is called the: A. margin. B. bid. C. float. D. offer. E. spread.

Q: Which one of the following prices will an investor pay to purchase shares of stock that are currently outstanding? A. issue B. option C. bid D. ask E. primary

Q: Which one of the following prices will an individual investor receive if he or she sells shares of Microsoft? A. bid B. ask C. issue D. offer E. Dutch

Q: Which one of the following best describes a broker? A. intermediary who arranges trades between a buyer and a seller B. trader who buys and sells from his or her inventory C. firm which charges a commission for arranging a transaction D. person who buys securities for his or her own account on an exchange floor E. trader who transacts business on behalf of a securities issuer

Q: A securities dealer is a(n): A. intermediary who arranges trades between a buyer and a seller. B. trader who buys and sells from his or her inventory. C. firm which charges a commission for arranging a transaction. D. person who buys securities for his or her own account on an exchange floor. E. trader who transacts business on behalf of a securities issuer.

Q: A preliminary document provided to investors who are interested in a stock offering is called a(n):A. prospectus.B. inquiry form.C. draft offer.D. green shoe.E. red herring.

Q: The document that must be prepared in order to receive approval for a stock offering is called a: A. tombstone. B. prospectus. C. offering agreement. D. regulatory report. E. offering paper.

Q: Which one of the following is the federal agency which regulates the financial markets in the U.S.? A. Treasury Department B. National Association of Securities Dealers C. Over the Counter Commission D. Federal Reserve E. Securities and Exchange Commission

Q: When the price of newly issued shares is determined by competitive bidding the underwriting is known as a _____ underwriting. A. Dutch auction B. market-priced C. seasoned D. best efforts E. rights

Q: When the issuer assumes the risk for any shares the underwriters cannot sell, the underwriting is known as a _____ underwriting. A. Dutch auction B. partial C. firm commitment D. best efforts E. pro-rata

Q: When an underwriting syndicate purchases an entire issue of new securities and accepts the risk of unsold shares, the underwriting is known as a _____ underwriting. A. Dutch auction B. full-fledge C. firm commitment D. best efforts E. guaranteed sale

Q: When a group of underwriters jointly work together to sell a new issue of securities, the underwriters form a(n): A. underwriting cartel. B. market union. C. venture capital association. D. Dutch market. E. syndicate.

Q: The difference between the price an underwriter pays an issuer and the underwriter's offering price is called the: A. spread. B. margin. C. offer differential. D. firm commitment. E. underwriting capital.

Q: A public offering of securities which are offered first to current shareholders is called a(n): A. existing shareholder offer. B. limited offer. C. rights offer. D. venture offer. E. preference offer.

Q: Under the provisions of a general cash offer, shares of stock are offered to: A. underwriters on a guaranteed sale basis only. B. current shareholders prior to being offered to the general public. C. institutional investors only. D. the issuer's employees on a cash purchase basis only. E. the general public on a "first-come" basis.

Q: Marco Painting Supplies is a publicly-traded firm with 250,000 shares of stock outstanding. If the firm issues an additional 10,000 shares, those shares will be referred to as a(n): A. supplemental offering. B. seasoned equity offering. C. initial public offer. D. market expansion offer. E. after-market underwriting.

Q: The financing provided for new ventures that are frequently high-risk investments is referred to as "venture _______". A. capital B. leverage C. risk funds D. funding E. investing

Q: The process of purchasing newly issued shares from the issuer and reselling those shares to the general public is called: A. underwriting B. capitalizing C. securing D. brokering E. deploying

Q: A firm that specializes in arranging financing for companies is called a(n): A. floor broker B. investment banking firm C. investment dealer D. private broker E. marketing firm

Q: Hi-Tek Shoes is a private firm that has decided to issue shares of stock to the general public. This stock issue will be referred to as a(n): A. open-end sale B. break-out issue C. public service offering D. initial public offering E. initial trial issue

Q: Wilson just placed an order with his broker to purchase 500 of the outstanding shares of GE. This purchase will occur in which one of the following markets? A. primary B. secondary C. third D. fourth E. fifth

Q: High Color Detergent is issuing new shares of stock which will trade on NASDAQ. If Sue purchases 300 of these shares, the trade will occur in which one of the following markets? A. primary B. secondary C. third D. fourth E. over-the-counter

Q: What are the primary differences between an ETF and an ETN?

Q: You want to purchase a security that tracks the S&P 500. What types of securities can you purchase to accomplish this goal? Which type of security would you purchase and why would you choose that security over your other options?

Q: Which type of investor is most apt to purchase municipal bond funds and why?

Q: A closed-end fund has total assets of $379 million and liabilities of $640,000. There are 36 million shares outstanding. What is the premium or discount if the shares are currently selling for $9.85 each?A. 7.46 percent discountB. 6.28 percent discountC. 6.94 percent discountD. 6.80 percent premiumE. 7.46 percent premium

Q: The Exploratory Fund is a new closed-end fund which just offered its shares to the public. The fund raised $65 million and each share sold for $10. The fee for the fund promoter was 6.5 percent of the initial proceeds. What was the value of your initial $20,000 purchase before the shares began trading in the marketplace? A. $18,400 B. $18,700 C. $19,100 D. $20,000 E. $21,300

Q: A tax exempt money market fund has an annual return of 3.76 percent. What is your equivalent taxable rate if you are in a 28 percent marginal tax bracket? A. 3.15 percent B. 3.38 percent C. 5.22 percent D. 6.11 percent E. 6.81 percent

Q: A taxable money market fund has an annual return of 4.62 percent. What is the equivalent aftertax yield if the tax rate is 27 percent? A. 1.25 percent B. 3.37 percent C. 4.62 percent D. 5.87 percent E. 6.13 percent

Q: The High Yield Money Market Fund returned 5.20 percent for the last year. Currently, you own 9,134 shares of this fund. If you invested in this fund one year ago, what was the amount of your original investment? A. $8,350.00 B. $8,402.38 C. $8,682.51 D. $8,750.00 E. $9,650.03

Q: One year ago, you invested $7,000 in the no-load Triple A Money Market Fund. You have neither added to this account nor received any funds from this account since that time. The fund earned a 5.2 percent rate of return for the past year. How many shares of this fund do you currently own? A. 750.00 B. 796.50 C. 7,000.00 D. 7,364.00 E. 7,965.00

Q: You invest $4,300 in a money market fund at the beginning of the year. The fund's assets appreciate by 3.2 percent over the year. How many shares of the fund do you own at the end of the year? A. 4,300.00 shares B. 4,437.60 shares C. 4,529.60 shares D. 4,682.40 shares E. 4,700.00 shares

Q: Seven years ago, you purchased 216.34 shares of a mutual fund. Since then, you have reinvested your fund dividends and acquired an additional 31.02 shares. The fund currently has an NAV of $38.06. The fund charges a contingent deferred sales charge of 5 percent for the first 2 years after which time the charge declines by 1 percent a year. How much money will you receive if you redeem all of your shares today? A. $9,320.38 B. $9,414.52 C. $9,508.67 D. $9,603.75 E. $9,699.79

Q: Matt owns 724.08 shares of a fund which has a current NAV of $41.04. He has owned all of these shares for 3.3 years. The fund charges a contingent deferred sales charge which starts at 5 percent for the first year and declines by 1 percent each year. How much cash will he receive if he redeems all of his shares today? A. $29,121.92 B. $29,709.36 C. $30,334.82 D. $30,647.55 E. $31,023.14

Q: The Aggressive Eastern Fund sold $167 million of assets during the year and purchased $162 million of new assets. The average daily assets of the fund were $248 million. What is the turnover rate? A. .62 B. .65 C. .67 D. .97 E. 1.03

Q: Eastern States Mutual Fund sold $82.5 million of assets during the year and purchased $93 million of new assets. The average daily assets of the fund were $330 million. What is the fund's turnover rate for the year? A. .25 B. .27 C. .52 D. .94 E. 1.07

Q: Five months ago, you purchased 200 shares of a mutual fund at an offering price of $54 a share. The fund imposes a front-end load of 4.5 percent and has total annual expenses of 1.08 percent. The NAV of the fund today is $52.40. There were no fund distributions during these five months. What is your holding period return on this investment? A. -2.96 percent B. -1.92 percent C. 1.44 percent D. 1.89 percent E. 2.26 percent

Q: One year ago, Allison purchased 350 shares of a mutual fund which has a front-end load of 5.25 percent. The NAV at the time of purchase was $30. Today, the NAV is $33. The fund had total annual expenses of 1.65 percent. There were no fund distributions this past year. What is Allison's rate of return for the year? A. -1.10 percent B. -1.04 percent C. 4.23 percent D. 4.76 percent E. 5.00 percent

Q: You invested $5,000 in a mutual fund 27 months ago when the NAV of the fund was $30.00. You have not acquired or sold any shares since that time. Today, the NAV is $28.40. The fund charges a contingent deferred sales charge of 6, 5, 4, 3, 2, 2, and 1 percent if the shares are redeemed within the first 7 years, respectively. How much money will you receive if you redeem your shares today? A. $4,383 B. $4,450 C. $4,544 D. $4,748 E. $4,801

Q: Alex invested $10,000 in a mutual fund two and one-half years ago when the NAV of the fund was $25. Today, the NAV has risen to $28.30. Since the time of his original investment, Alex has obtained an additional 54.36 shares by reinvesting the fund distributions. The fund charges a contingent deferred sales charge of 6 percent the first year with the charge decreasing by 1 percent each year. How much money will he receive if he redeems his shares today? A. $11,633.78 B. $11,930.52 C. $12,344.05 D. $12,858.39 E. $13,501.31

Q: You are investing $8,000 in a mutual fund that charges a 4.50 percent front-end load. The offering price is $24.70 a share. What will your investment be worth immediately after your shares are purchased? A. $7,520 B. $7,640 C. $8,000 D. $8,360 E. $8,420

Q: You want to buy 1,400 shares of a mutual fund that has an NAV of $26.50. The fund charges a 3.5 percent front-end load. How much will you have to spend to make this purchase? A. $34,878.87 B. $35,913.00 C. $36,953.37 D. $37,333.33 E. $38,445.60

Q: The Stable Utility Fund has an offering price of $54.11 and an NAV of $52.48. What is the front-end load percentage? A. 3.0 percent B. 3.1 percent C. 3.5 percent D. 3.8 percent E. 4.0 percent

Q: The High Growth Technology Fund has an NAV of $51.06 and a 4.4 percent front-end load. What is the offering price? A. $50.84 B. $51.36 C. $53.41 D. $54.53 E. $55.81

Q: A mutual fund has a current offering price of $52.31. What is the net asset value if the fund charges a 3 percent front-end load? A. $50.74 B. $51.66 C. $54.57 D. $54.86 E. $54.91

Q: The European Growth Fund has $820 million in assets and $76,000 in liabilities. There are 30.5 million shares outstanding. The fund charges a 4.4 percent front-end load. What is the offering price? A. $26.08 B. $26.47 C. $27.54 D. $28.12 E. $29.74

Q: The Stone Wall Fund has an offer price of $32.90 and a front-end load of 3.25 percent. What is the net asset value? A. $31.68 B. $31.75 C. $31.83 D. $32.90 E. $34.05

Q: One year ago, you purchased $6,000 worth of a mutual fund at an offering price of $38.10 a share. Today, the fund distributed $0.20 in short-term gains and $1.04 in long-term gains. The current offering price is $41.80. The fund has a front-end load of 5 percent and total annual operating expenses of 1.25 percent. What is your rate of return on this investment? A. 2.87 percent B. 3.54 percent C. 6.06 percent D. 7.48 percent E. 9.91 percent

Q: One year ago, you purchased 421 shares of a mutual fund when both the offering price and the NAV were $10.80 a share. Today, the NAV is $10.64 after today's distribution of $1.48 per share in short-term gains. There is no long-term gain distribution. What is your rate of return? A. 10.99 percent B. 12.04 percent C. 12.22 percent D. 14.29 percent E. 14.41 percent

Q: You invested $9,000 in a mutual fund when the offering price was $31.50 and the NAV was $30.20. This purchase was made one year ago today. Today, the fund distributed a total of $1.55 in long-term gains and $0.85 in short-term gains. The current offering price is $33.42 and the NAV is $32.08. What is your return for the year? A. 4.35 percent B. 6.37 percent C. 7.58 percent D. 9.46 percent E. 10.80 percent

Q: At the beginning of the year, you invested $4,000 in a no-load mutual fund with a NAV of $20.00. At the end of the year, the fund distributed $1.06 in short-term earnings and $3.10 in long-term earnings. The end of year NAV was $19.42. What was your annual rate of return on this investment? A. -5.90 percent B. -1.86 percent C. 11.80 percent D. 15.36 percent E. 17.90 percent

Q: The Market Stability Fund owns the following stocks:The fund has no liabilities and has 57,600 shares outstanding. What is the NAV?A. $14.72B. $14.88C. $15.47D. $15.95E. $16.02

Q: The Atlas Mutual Fund owns the following stocks:The fund has no liabilities and has 65,000 shares outstanding. What is the NAV?A. $6.32B. $6.57C. $6.71D. $7.08E. $7.19

Q: A mutual fund has an NAV of $9.55 with 272,400 shares outstanding. What is the value of the fund's assets if it has $350,400 in liabilities? A. $2,844,537 B. $2,951,820 C. $3,055,380 D. $3,187,019 E. $3,267,337

Q: The Latest Trend Fund has $2,648,900 in assets, and $1,878,400 in liabilities. How many shares are outstanding if the NAV is $10.07? A. 75,481 B. 76,514 C. 77,089 D. 79,142 E. 79,638

Q: The Blue Star Fund has assets with a market value of $10.6 million and liabilities of $607,000. What is the net asset value if there are 185,000 shares outstanding? A. $54.02 B. $55.00 C. $56.67 D. $57.18 E. $58.25

Q: A hedge fund: A. may charge relatively high fees. B. must be registered if there are ten or more investors. C. is generally structured as a corporation. D. is limited to $1 million in assets. E. is fairly complicated to legally establish.

Q: Currently, the term "hedge fund" refers to: A. any registered fund with a stated investment objective. B. any unregistered fund pursuing any type of investment style. C. any fund that equally invests in long and short positions. D. any fund that adheres to a "market-neutral" investment strategy. E. any private fund that has a minimum investment requirement of $1 million or more.

Q: A hedge fund may charge a special performance fee which commonly ranges from:A. 10 to 15 percent of NAV.B. 15 to 20 percent of the fund's profits.C. 20 to 30 percent of NAV.D. 20 to 40 percent of the market price.E. 20 to 40 percent of the fund's profits.

Q: Which of the following will exempt a hedge fund from registering with the SEC? A. offering shares to the general public B. being in existence for more than two years C. limiting sales to individual investors D. locking up investor's money for at least two years E. exceeding $25 million in assets

Q: Which one of the following correctly applies to hedge funds? A. highly liquid B. must be highly diversified C. available to the general public D. vast array of investment objectives E. limited investment options

Q: ETFs are: A. limited to diversified index funds. B. generally held until they mature. C. sponsored primarily by large investment banks. D. based on market-cap-weighted indexes only. E. claims on shares held in a trust.

Q: Which one of the following statements is true? A. An ETN shareholder owns a fractional ownership of the trust shares. B. You can establish long, but not short, positions in ETNs. C. ETNs invest only in commodities. D. An ETN is an unsecured debt. E. ETN is just another name for an ETF.

Q: Exchange traded notes were first created to mimic _____ index. A. the S&P 500 B. a commodity C. the dollar D. the Indian stock market E. the DJIA

Q: Which of the following can you do with an ETF that you cannot do with an open-end fund? I. sell at mid-day prices II. short sell III. buy options on them IV. resell A. I and III only B. II and III only C. III and IV only D. I, II, and III only E. I, II, III, and IV

Q: An ETF is best described as: A. an index fund that trades like a closed-end fund. B. a closed-end fund that trades like a stock. C. a sector fund that trades like a bond. D. an index fund that trades only at the end of each day. E. an international fund that trades like a domestic stock.

Q: Which one of the following trading symbols is associated with the ETF on the S&P 500 index? A. DIA B. QQQQ C. SPY D. SPX E. DIAX

Q: If you purchase shares in a closed-end fund at the initial offer price, you should expect to:A. earn an abnormally high rate of return the first year.B. immediately see a decrease in the value of your investment.C. receive offers to purchase your shares at a premium prior to the official first day of trading.D. earn tax-advantaged income.E. realize a capital gain if you sell your shares as soon as trading in the shares commences.

Q: Which one of the following is a common characteristic of a closed-end fund but not of an open-end fund? A. professional management B. annual fees C. stated objective D. discounted price E. taxable distributions

Q: You recently purchased a fund at a price of $39.97 per share. The NAV at the time of purchase was $40.67. You must have purchased a(n) _____ fund. A. closed-end B. global C. bond D. index E. asset allocation

Q: While reviewing mutual fund reports, Alex noticed that a fund was reported as "closed". What is the primary reason for closing a fund? A. all issued shares have been sold B. the fund is suffering a loss C. the NAV has declined noticeably D. the fund has grown too large in size E. the fund is underperforming its peers

Q: Trading symbols for mutual funds end in which letter? A. M B. F C. X D. Z E. Q

Q: Letter grades are most frequently assigned to mutual funds based on the fund's:A. projected future returns.B. historical rates of return.C. management style.D. portfolio size.E. investment objective.

Q: Besides size, how else does a mutual fund style box classify equity funds? A. cost and fees as a percent of NAV B. taxability at federal, state, and local levels C. value versus growth characteristics D. age of the fund E. short and long-term rates of return

Q: Which one of the following types of funds is most apt to invest in preferred stocks? A. income B. balanced C. world D. insured E. index