MTF, UIT, etc

Is a mutual fund required to redeem shares on request, or is it optional?

REQUIRED by law to redeem (buy back) shares on a shareholder's request — it is NOT optional. Also redeems fractional shares, and redemptions use forward pricing.

What causes a mutual fund's NAV per share to DECREASE?

Paying DIVIDEND DISTRIBUTIONS to shareholders (assets leave the fund → NAV drops). Net redemptions do NOT change NAV (money out is offset by shares cancelled). Portfolio appreciation and dividends received INTO the portfolio raise NAV.

How often must investment companies send financial reports to shareholders?

SEMIANNUALLY (twice a year) — one of which must be the audited annual report. Not quarterly, not monthly.

What price does an investor pay when BUYING a mutual fund, and which NAV?

The POP (public offering price) = NAV + sales charge — NOT the NAV. And under forward pricing, you get the NEXT calculated NAV after the order (an 8am order gets that day's 4pm close NAV, shown in the next morning's paper).

Which fund type trades at a PREMIUM or DISCOUNT to NAV?

Only CLOSED-END. If an investor buys above NAV (e.g., $10.40 when NAV is $9.53), it must be closed-end. Open-end (mutual fund) always trades at NAV + load, never at a premium/discount.

Open-end vs. closed-end PRICING — the correct comparison?

Only the OPEN-END bases its price on the next computed NAV (forward pricing). Closed-end trades on supply/demand and can diverge from NAV. (Share-class differences exist but are NOT about pricing — don't pick that on a pricing question.)

What must a majority shareholder vote authorize for an investment company (1940 Act)?

Changing from open-end to closed-end, changing the fund's objectives, or ceasing to be an investment company. It does NOT require a vote to simply invest consistent with the fund's stated objectives (that's normal operation).

Which parts of an exchange-traded futures contract are standardized?

Quantity, quality (grade), and delivery time are all STANDARDIZED. The MARKET PRICE is NOT — it fluctuates continuously. (The delivery price is set; the market price floats.)

Primary motivation for creating structured products?

To increase MARKET COMPLETENESS — 'complete the market' by creating a product for a need nothing else fills. Improving broker-dealer profits may happen but is NOT the answer NASAA wants.

Effect of a mutual fund manager's poor investment results?

NET REDEMPTIONS — investors liquidate faster than new money comes in, so more money flows out than in. (A fund can never sell shares below NAV — that's a distractor.)

Open-end fund — shares, how you buy, pricing?

Unlimited shares (continuously issued and redeemed). Buy/sell directly with the FUND. Always priced at NAV + sales charge, using forward pricing. Does NOT trade intraday — priced once per day.

Closed-end fund — shares, how you buy, pricing?

Fixed number of shares (one-time IPO). Buy/sell on an EXCHANGE with other investors, like a stock. Trades intraday. Price is set by supply and demand — can be at a PREMIUM or DISCOUNT to NAV.

Which fund type can trade at a premium or discount to NAV?

Closed-end — its market price is set by supply/demand and can be above (premium) or below (discount) NAV. Open-end is always priced at NAV plus any load.

What is forward pricing, and which fund uses it?

Forward pricing = you get the NEXT calculated NAV (not the last one). Used by OPEN-END funds, which price once per day. You don't know your exact price when you order. Closed-end funds trade live all day at market prices.

NAV per share formula?

(Total assets − total liabilities) ÷ shares outstanding. The per-share value of the fund's actual holdings.

Open-end fund public offering price (POP)?

POP = NAV + sales charge. That's what a buyer pays for a load fund.

The core open-end vs. closed-end distinction?

Open-end: transact with the FUND (it creates/redeems shares), always priced at NAV. Closed-end: transact with other investors on an EXCHANGE, fixed shares, price can diverge from NAV (premium/discount).

Mutual fund share classes A, B, C — when does each fit?

A: front-end load, low ongoing fees, breakpoints — best for large amounts/long holding. B: back-end declining CDSC, higher ongoing, converts to A, no breakpoints. C: level load, high ongoing fees — best for short holding, worst for long-term.

Breakpoints — what are they and which class?

Volume discounts on the front-end sales charge (Class A only). Letter of intent (13 months, backdate 90 days) and rights of accumulation (existing holdings count, no time limit) help reach them. Encouraging a purchase just below a breakpoint = breakpoint selling (violation).

Which does NOT continuously issue and redeem shares — open-end or closed-end?

Closed-end (fixed share count from its one-time IPO). Open-end continuously issues and redeems. Max sales charge on an open-end fund is 8.5% of the POP.