Free 5-question sample test with instant feedback. See how ready you are.
Question 1
Under the Investment Company Act of 1940, what are the three main types of investment companies?
Answer: The three main types are management companies (open-end and closed-end funds), unit investment trusts (UITs), and face-amount certificate companies.
Question 2
What distinguishes an open-end management company from a closed-end management company?
Answer: An open-end company (mutual fund) continuously issues and redeems shares at NAV, while a closed-end company issues a fixed number of shares that trade on the secondary market at market prices.
Question 3
How does a Unit Investment Trust (UIT) differ from a management company?
Answer: A UIT holds a fixed, unmanaged portfolio of securities and issues redeemable units; it does not have a board of directors or an investment adviser actively managing the portfolio.
Question 4
How are exchange-traded fund (ETF) shares bought and sold, and how does this differ from a mutual fund?
Answer: ETF shares trade on a stock exchange throughout the day at market prices, while mutual fund shares are purchased and redeemed directly with the fund only once per day at NAV.
Question 5
What is a face-amount certificate company?
Answer: It is a type of investment company that issues contracts obligating it to pay a fixed (face) amount to the investor at a future date in exchange for periodic installment payments.