QUESTION: 33

Which of the following share classes do not have front-end loads?

Class A
Class B
Class C
Neither Class B nor Class C shares have front-end loads.

Answer(s): D

Explanation:

Neither Class B nor Class C shares have front-end loads. Class B and Class C shares typically have higher 12b -1 fees, however, with Class C having the highest 12b-1 fees of the three classes.

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QUESTION: 34

A new issue of common stock can be classified in which of the following categories?

I). primary market
II). money market
III). secondary market
IV). capital market

I only
III only
I and IV only
II and III only

Answer(s): C

Explanation:

Only Selections I and IV are correct. A new issue of common stock will be sold in the primary market. It is also a capital market security since it has no maturity, and capital market securities are securities with greater than one year to maturity.

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QUESTION: 35

Steve Sharp sees a quote for a mutual fund that indicates the fund has a net asset value (NAV) of $26.60 and a public offering price (POP) of $28.00. Based on this, Mr. Sharp quickly ascertains that this fund must have:

a front-end load of 5.0%.
a front-end load of 5.3%.
either a front-end or rear-end load of 5.0%.
either a front-end or rear-end load of 5.3%.

Answer(s): A

Explanation:

A mutual fund that is reported to have a NAV of $26.60 and a POP of $28.00 must have a
front-end load of 5.0%. Front-end load = (POP - NAV)/POP = ($28.00 - $26.60)/$28.00 = 5.0%.

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QUESTION: 36

A type of preferred stock for which any dividends missed in prior years must be paid before common shareholders may receive any dividends is referred to as:

cumulative preferred.
participating preferred.
convertible preferred.
adjustable rate preferred.

Answer(s): A

Explanation:

The type of preferred stock that requires that any dividends missed in prior years be paid before common shareholders may receive any dividends is referred to as cumulative preferred stock. Participating preferred stock allows the preferred shareholders to earn extra dividends if the firm has higher than normal earnings. Convertible preferred stock allows the preferred shareholders to convert their shares to common stock. Adjustable rate preferred has a variable dividend rate that is tied to some benchmark.

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QUESTION: 33

Explanation:

QUESTION: 34

Explanation:

QUESTION: 35

Explanation:

QUESTION: 36

Explanation: