Which of the following must be true for a fund to be called a "no load" fund?I). The fund can have no front-end load.II). The fund can have no contingent deferred sales charge.III). The fund can charge no 12b-1 fees.IV). The fund cannot charge investors an exchange fee.
Answer(s): A
Only Statements I and II must be true for a fund to be called a "no load" fund. The fund can have no front-end load, and it can have no contingent deferred sales charge. It can, however, charge 12b-1 fees, as long as the 12b-1 fees do not exceed 0.25% of the fund's average net assets, and it can charge investors an exchange fee when they elect to switch their monies from one fund to another.
The subaccounts into which Mr. Sumrisk directed his variable life premiums have earned a 6% return. If the assumed interest rate was 7%:I). the cash value of his policy increased.II). the death benefit associated with his policy decreased.III). the cash value of his policy decreased.IV). the death benefit associated with his policy increased.
If Mr. Sumrisk's subaccounts earned a 6% return and the assumed interest rate was 7%, then the cash value of his policy increased, but the death benefit associated with his policy decreased. The cash value of the policy increases when the separate account earns a positive return, regardless of the size of that return. The death benefit, however, depends on both the return earned on the separate account and the assumed interest rate. Since the separate account returned less, in this case, than the assumed interest rate, the death benefit decreased.
When a broker-dealer hires a new agent, it must submit:
Answer(s): D
When a broker-dealer hires a new agent, it must submit a U-4 form that includes information about the agent's name, address, and employment history. The form must also include information on any felony charges or securities-related misdemeanors, but it does not include anything about the agent's education or marital status. The U-5 form, which is filed when an agent is terminated, would include this additional information.
A face-amount certificate company:
Answer(s): C
A face-amount certificate company sells its debt, which is backed by the assets owned by the company, to its investors. It does not invest primarily in bonds that sell at or above par value, and it does have management fees that are paid to the portfolio managers of the company.
Pete Prophet, the manager of a bond mutual fund, is expecting interest rates to increase. All else equal, which of the following bonds would be the best investment under this assumption?
Answer(s): B
If Pete is expecting interest rates to increase, the bond with a 10% coupon and 5 years to maturity is the best investment. If interest rates increase, bond prices fall, so he will want to invest in the bond that will have the lowest percentage decrease in price. This will be the bond with the shortest duration, which is the bond described in Choice B. It has the highest coupon and the fewest years to maturity.
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