SIE: Chapter 3 Practice Questions

Chapter 3 Practice Questions

1. 1. Which of the following is not a difference between open-end and closed-end funds?
2. A. Shares of open-end funds are purchased through the issuer, while shares of closed-end funds are not.
3. B. Supply and demand dictates the price of open-end funds but not the price of closed-end funds.
4. C. Shares of open-end funds are redeemable, while shares of closed-end funds are not.
5. D. Shares of open-end funds are priced once a day, while shares of closed-end funds are priced continually throughout the day.
6. 2. What price will you receive when you purchase shares of a no-load mutual fund?
7. A. Market price
8. B. Next calculated NAV
9. C. Most recently calculated NAV
10. D. Weighted average volume price
11. 3. When interest rates rise, which of the following is typically true about an open-end bond fund?
12. I. The NAV of the fund will go down.
13. II. The NAV of the fund will remain unchanged.
14. III. The fund’s yield will increase in the longer term.
15. IV. The fund’s yield will decrease in the longer term.
16. A. I and III
17. B. II and III
18. C. I and IV
19. D. II and IV
20. 4. David is considering an investment with the following characteristics: it is actively managed and invests exclusively in Asia, currently trades at a premium to the value of its underlying investments, can be bought and sold on the New York Stock Exchange, is not redeemable, and uses leverage to increase returns. What type of security is David considering?
21. A. Mutual fund
22. B. Closed-end fund
23. C. Unit investment trust
24. D. ETF
25. 5. All of the following are characteristics of ETFs except:
26. A. Redeemable at NAV
27. B. Low expense ratios
28. C. Tax efficient
29. D. Flexible trading
30. 6. Which of the following two terms are associated with open-end management companies?
31. I. Premium
32. II. POP
33. III. Accumulation units
34. IV. NAV
35. A. I and IV
36. B. II and IV
37. C. III and IV
38. D. II and III
39. 7. All of the foll