Summary: Series 7 Top-Off Exam Quiz Lesson 46 Unit Investment Trusts<br> This is Series 7 Top-Off Exam Quiz Lesson 46 Unit Investment Trusts<br> <br> 1. It is a specific portfolio of bonds that is self-liquidating.<br> A. unit investment trust<br> B. open-end mutual fund<br> C. closed-end mutual fund<br> D. hedge fund<br> <br> 2. The unit investment trust is regulated by the Investment Company Act of 1940.<br> A. True<br> B. False<br> <br> 3. What is the implication of a unit investment trust being self-liquidating?<br> A. The investor will get back over time the principal plus interest.<br> B. The net asset value of the trust is independent from the market value.<br> C. The trust is free from ownership risk.<br> D. There is a constant interest rate until the trust’s maturity.<br> <br> 4. Which of the following is true about a unit investment trust which invests in fixed income investments?<br> (Select all that apply.)<br> A. Buying the trust is buying shares of beneficial interest.<br> <br> <br> <br> B. Holding the unit investment trust to its maturity returns the investment (assuming no defaults).<br> C. If the trust is sold prior to maturity, it has more interest rate risk than other fixed income portfolio.<br> D. Unlike a bond, this trust is a fixed portfolio.<br> <br> 5. A fixed income unit investment trust differs from an open-end mutual fund in such a way that ___.<br> (Select all that apply.)<br> A. A fixed income unit investment trust is self-liquidating; an open-end mutual fund is not.<br> B. An open-end mutual fund has breakpoints; a fixed income unit investment trust has none.<br> C. An open-end mutual fund is perpetual; a fixed income unit investment trust is not.<br> D. An open-end mutual fund pays a little, if any, management fee; a fixed income unit investment trust pays very high management fees.<br> <br> 6. A unit investment trust does not expand nor contract in size once issued.<br> A. True<br> B. False<br> <br> 7. Unit investment trusts can invest in ___.<br> (Select all that apply.)<br> A. closed-end funds<br> B. corporate bonds<br> C. government securities<br> D. equities<br> <br> 8. The shares of beneficial interest in a unit investment trust can be redeemed prior to maturity.<br> A. True<br> B. False<br> <br> 9. A unit investment trust that invests in a master limited partnership will receive a ___ at the end of the year.<br> A. 1099-DIV<br> B. 1601F<br> C. CF-213<br> D. K-1<br> <br> 10. A trust invests in a closed-end fund. The fund’s net asset value is $28.74. It currently trades at $29.03. What is the percentage of the premium?<br> A. 0.01%<br> B. 0.09%<br> C. 0.99%<br> D. 1%<br> <br> 11. It is a unit investment trust used to fund variable annuities.<br> A. fixed income unit investment trust<br> B. municipal bond unit investment trust<br> C. participating unit investment trust<br> D. stock unit investment trust<br> <br> 12. In a fixed income unit investment trust, if any of the bonds in the fund default, the principal that the investor would be getting back would ___.<br> A. increase<br> B. decrease<br> C. remain the same<br> D. be equal to the market value<br> <br> 13. A unit investment trust that invests in US government bonds that is held in maturity is NOT subject to ___.<br> A. credit worthiness risk<br> B. currency risk<br> C. interest rate risk<br> D. principal risk<br> <br> 14. What is the advantage of buying a unit investment trust that strictly invests in a master limited partnership (compared with a unit investment trust that invests in closed-end funds that invest in the same master limited partnership)?<br> (Select all that apply.)<br> A. It avoids paying several management fees.<br> B. It can generate more income because the management fees are ...
