Question 1

In order for the Invest4U Mutual Fund to qualify as a regulated investment company under Internal Revenue Code Subchapter M, it must:

Options :

A : distribute at least 90% of its net investment income to its shareholders.

B : distribute at least 98% of its net income from capital gains to its shareholders.

C : invest at least 75% of its monies in diversified securities.

D : Both A and B are required for Invest4U to qualify as a regulated investment company.

Answer: D

Question 2

The Securities Exchange Commission consists of:

Options :

A : 6 members, elected by member firms.

B : 5 members, appointed by the President of the U.S., with Senate approval

C : 7 members, appointed by FINRA.

D : 5 members, appointed by the Secretary of Treasury of the U.S.

Answer: B

Question 3

Rank the following funds in order of their relative risk, from highest to lowest: I. growth fund II. high-yield bond fund III. high-grade bond fund IV. international fund

Options :

A : IV, I, II, III

B : I, IV, III, II

C : II, IV, I, III

D : IV, II, I, III

Answer: A

Question 4

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.

Options :

A : Only I and II must be true.

B : I, II, and III must all be true.

C : Only I must be true.

D : I, II, III, and IV must all be true.

Answer: A

Question 5

By investing in a diversified portfolio, an investor will:

Options :

A : lower both his risk and his expected return.

B : lower his risk without affecting his expected return.

C : lower his risk and increase his expected return.

D : eliminate all the market risk associated with his investment portfolio.

Answer: B

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