Types of Debt Instruments
Treasury bonds normally mature in:
What is 10–30 years
Total return on an investment includes:
What is income + capital gains/losses?
Which of the following is true regarding mutual fund NAV?
A. It fluctuates only weekly
B. It equals assets minus liabilities divided by shares outstanding
C. It is always equal to the public offering price
D. It is set by supply and demand
What is it equals assets minus liabilities divided by shares outstanding?
This account is where trading for variable annuities occur?
What is the separate account?
Which of the following is considered an alternative investment?
A. Mutual fund
B. Hedge fund
C. Money market fund
D. Corporate bond
What is a Hedge fund?
Which debt instrument is issued at a discount and matures at par?
A. T-bill
B. Corporate bond
C. Equipment trust certificate
D. Municipal GO bond
What is a T-Bill?
A capital gain occurs when:
What is a security is sold for more than its purchase price?
A mutual fund that invests in both stocks and bonds is a:
A. Sector fund
B. Balanced fund
C. Growth fund
D. Hedge fund
What is balanced fund?
The investor receives a fixed rate of interest and the investment risk is assumed by the insurance company
What is a fixed rate annuity?
Private equity funds generally invest in:
A. Publicly traded stocks
B. Government securities
C. Privately held companies
D. Municipal bonds
What are privately held companies?
Foreign companies are issued these when them come to the U.S to borrow money.
What is a Yankee bond?
Interest income from corporate bonds is:
A. Tax-free
B. Taxed as ordinary income
C. Taxed as capital gains
D. Tax-deferred
What is Taxed as ordinary income?
A unit investment trust (UIT) typically:
A. Is actively managed
B. Issues redeemable shares
C. Trades in the secondary market
D. Allows portfolio managers to replace holdings
What issues redeemable shares?
The performance of a variable annuity is based on:
A. The insurance company’s profitability
B. The performance of the separate account
C. Guaranteed interest rates
D. The fixed account only
What is the performance of the separate account?
Which of the following describes a business development company (BDC)?
A. A closed-end investment company
B. A hedge fund
C. A municipal fund security
D. An insurance product
What is a closed-end investment company?
General obligation (GO) bonds are backed by:
What is a municipality’s taxing power?
Interest from this bond is typically federally tax-free
What is a municipal bond?
Which type of investment company is most likely to use leverage?
A. Open-end funds
B. Closed-end funds
C. UITs
D. Money market funds
What is Closed-end fund?
Which of the following must be registered as a security?
A. Fixed annuity
B. Variable annuity
C. Whole life insurance
D. Term insurance
What is Variable annuity?
Interval funds allow investors to:
A. Redeem shares daily
B. Redeem shares only at specific times
C. Buy shares only once per year
D. Trade on exchanges
What is Redeem shares only at specific times?
Which risk is greatest for long-term bonds?
What is Market/price risk?
Market-wide risk that cannot be diversified away is called?
What is Systematic risk?
A mutual fund’s public offering price (POP) equals:
What is NAV plus sales charge?
What is the primary purpose of an ABLE (529A) account?
What is tax-advantaged savings for disabled individuals?
Which investment is structured as unsecured debt issued by a bank?
A. Hedge fund
B. ETN
C. Private equity fund
D. BDC
What is ETN?
A bond with no specific maturity date but pays interest indefinitely is a:
What is a Perpetual bond?
Inflation risk affects:
A. Fixed-income investors the most
B. Common stock investors only
C. Options investors only
D. Money market securities only
What are "fixed-income investors the most"?
Which of the following is true about UITs?
A. They are managed by investment advisers
B. They have fixed portfolios that do not change
C. They trade intraday
D. They issue non-redeemable shares
What are they have fixed portfolios that do not change?
Who typically sponsors a 529 plan?
What is States or state agencies?
A REIT must invest at least what percentage of assets in real estate–related activities?
What is 75%?
Which type of bond generally has the LOWEST yield due to safety?
A. Corporate bond
B. Municipal GO bond
C. High-yield bond
D. U.S. Treasury bond
What is U.S. Treasury bond?
What is the formula for current yield on a bond?
What is Coupon ÷ Market Price?
. NAV per share will increase if a mutual fund’s:
A. Liabilities increase
B. Portfolio value rises
C. Shares outstanding increase
D. Fund pays a dividend
What is if portfolio value rises?
If a customer surrenders a variable annuity early, they may face:
A. A surrender charge
B. A back-end load
C. A rights-of-accumulation fee
D. Breakpoint penalties
What is A surrender charge?
ETFs differ from mutual funds because ETFs:
A. Are redeemed by the issuer
B. Trade throughout the day
C. Are sold only at NAV
D. Cannot be purchased on margin
What is Trade throughout the day?
U.S. dollar–denominated bonds issued outside the U.S are called:
What is a Euro Dollar Bond?
Return of capital means:
A. A tax-free return of the investor’s own money
B. A gain on investment
C. A taxable dividend
D. A form of interest income
What is a tax-free return of the investor’s own money?
A fund designed to track the performance of a specific market benchmark is called a:
What is Index fund?
A customer who wants guaranteed minimum income should choose:
A. Variable annuity
B. Fixed annuity
C. ETN
D. 529 plan
What Fixed annuity?
ETFs usually have lower expenses than mutual funds because:
A. They are actively managed
B. They are not legally registered
C. They are passively managed
D. They can only hold government securities
What is they are passively managed?
Treasury Inflation-Protected Securities (TIPS) protect investors from:
What is Inflation Risk?
Dividends received from common stock are generally taxed as:
What is Ordinary income?
An investor buying Class A shares of a mutual fund should be most aware of:
A. Back-end loads
B. High annual 12b-1 fees
C. Front-end sales charges
D. Contingent deferred charges
What is Front-end sales charges?
Which risk is the investor exposed to in a variable annuity?
A. No risk, guarantees protect the investor
B. Only inflation risk
C. Market risk
D. Liquidity risk only
What is Market risk?
Which type of investor is most suitable for hedge funds?
A. Investors seeking low risk
B. Retail investors with limited assets
C. Accredited or institutional investors
D. Investors needing daily access to funds
What is Accredited or institutional investors?
Which of the following is true of TIPS?
A. Coupon stays the same; principal adjusts
B. Principal stays the same; coupon adjusts
C. Both coupon and principal adjust
D. Neither adjusts
What is Coupon stays the same; principal adjusts?
If a $1,000 par bond pays a $50 annual coupon and trades at $1,250, the current yield is:
What is 4%?
(Current Yield= Coupon/Market Price)
Which mutual fund feature reduces the sales charge based on the amount invested?
What are breakpoints?
A customer buying a variable annuity is most concerned about:
What is Investment performance of the separate account?
This alternative investment exposes investors to credit risk because returns depend on the financial health of the issuer?
What is ETN?
(Because ETNs are unsecured, their performance depends on the issuer’s ability to repay)