QUESTION: 169

Which of the following statements regarding the required distribution of income by a regulated investment company are true?

Both short-term and long-term capital gains earned by the company can be distributed only once a year.
Under current tax laws, qualifying dividends distributed to the company's investors are taxable to those investors at a preferential rate-i.e., either 0% or 15%, depending on the investor's marginal tax rate.
If an investor in the investment company has elected to reinvest his dividend and capital income in the company rather than receiving a check, then the investor is not required to pay taxes on the reinvested funds.
Both A and B are true statements.

Answer(s): B

Explanation:

The statement regarding the required distribution of income by a regulated investment company that is true is that under current tax laws, qualifying dividends distributed to the company's investors are taxable to those investors at a preferential rate-i.e., either 0% or 15%, depending on the investor's marginal tax rate. This preferential treatment is due to expire on Dec. 31, 2010 unless it is extended. Only long-term capital gains earned by the company can only be distributed once a year. Short-term capital gains are generally distributed along with dividends-usually once a quarter. Even if an investor elects to reinvest dividend and capital gain income rather than receiving a check, the investor must still pay taxes on the income he would have received had he not made the election.

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QUESTION: 170

Your 53-year-old client, Ms. Antsy, just inherited $80,000 from her aunt and has decided to retire immediately. She wants to invest in something that will allow her to begin making withdrawals immediately, and she wants to be certain that she will continue to receive payments at least until she turns 62 ½ and begins drawing social security. You should recommend Ms. Antsy invest in:

a single-payment deferred annuity.
a periodic-payment deferred annuity.
a single-payment immediate annuity.
none of the above.

Answer(s): D

Explanation:

If Ms. Antsy is 53 years old and wants to invest in something that will allow her to begin making immediate withdraws and continue to make withdrawals until she turns 62 ½, you should recommend none of the choices provided. They are all annuities, and Ms. Antsy will be subject to a 10% penalty for withdrawing any amount prior to turning 59 ½.

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QUESTION: 171

On which of the following items do mutual fund shareholders get to vote?

I). any change in the investment objective of the fund
II). the election of a new investment adviser
III). the renewal of the fund's 12b-1 fee
IV). the purchase or sale of real estate by the fund

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

Answer(s): D

Explanation:

Mutual fund shareholders get to vote on any change in the investment objective of the fund, the renewal of the fund's 12b-1 fee, and the purchase or sale of real estate by the fund. They do not elect the fund's investment adviser; they only vote to approve the investment adviser's contract.

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QUESTION: 172

Which of the following is not an advantage that an exchange traded fund (ETF) has over a traditional mutual fund?

There are no fees (i.e., loads, commissions) associated with buying and selling ETFs.
ETFs trade continuously throughout the day.
Investors can use limit and stop orders when trading ETFs.
All of the above are advantages that an ETF has over a traditional mutual fund.

Answer(s): A

Explanation:

The choice that does not represent an advantage that an ETF has over a traditional mutual fund is Choice A. While ETFs have no load charges, investors do pay commissions when buying or selling these funds. ETFs do offer the advantage of continuous trading, and investors can use limit and stop orders when trading ETFs, options that are not available when trading mutual funds.

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Free Series 6 Exam Braindumps (page: 43)

QUESTION: 169

Explanation:

QUESTION: 170

Explanation:

QUESTION: 171

Explanation:

QUESTION: 172

Explanation: