Securities Industry Essentials (SIE) Quiz: Compare Investment Companies

What this quiz covers

This quiz focuses on Compare Investment Companies, giving you a quick way to practice the rules, question types, and explanations that matter most for Securities Industry Essentials (SIE).

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

Question 1

1. The Federal Reserve, because it sets NAV calculation standards for funds.
2. The SEC, under federal securities laws for registration and prospectuses. (correct answer)
3. The IRS, because it approves prospectuses and sets sales charge limits.
4. FINRA only, because the SEC does not regulate investment companies.

Question 2

1. Closed-end pricing is set by supply and demand; open-end uses NAV. (correct answer)
2. Closed-end uses next computed NAV; open-end uses intraday market quotes.
3. Both are priced intraday based on exchange bid and ask quotations.
4. Both are priced once weekly based on audited portfolio valuations.

Question 3

1. Shares are issued and redeemed continuously based on investor demand. (correct answer)
2. Shares are limited after IPO and trade only in secondary markets.
3. Shares trade intraday at negotiated prices between investors and dealers.
4. Shares are issued only at maturity when the trust terminates.

Question 4

1. Both use NAV as the intraday market price on an exchange.
2. Mutual funds transact at NAV; closed-end market price may differ from NAV. (correct answer)
3. Closed-end funds redeem at NAV daily; mutual funds trade at discounts.
4. Neither calculates NAV; both use only bid and ask quotations.

Question 5

1. Orders receive the NAV calculated after the order is received. (correct answer)
2. Orders receive yesterday's NAV to prevent dilution of existing shareholders.
3. Orders execute at intraday market prices set by buyers and sellers.
4. Orders execute at a fixed offering price that never changes.

Question 6

1. Investors typically sell shares to other investors in the secondary market. (correct answer)
2. Investors redeem shares with the issuer at NAV at any time intraday.
3. Investors must wait until maturity to receive NAV from the sponsor.
4. Investors can only sell shares back to the fund once per quarter.

Question 7

1. Investors buy and sell shares directly with the fund company. (correct answer)
2. Investors trade shares only on an exchange with other investors.
3. Investors negotiate prices with dealers, independent of NAV calculations.
4. Investors can transact only at maturity when the trust terminates.

Question 8

1. NAV is calculated continuously and used for intraday trading prices.
2. NAV is calculated once daily; orders receive the next computed NAV. (correct answer)
3. NAV equals the fund's market price, which is set by supply and demand.
4. NAV is calculated weekly, and shares are priced at last week's NAV.

Question 9

1. It continuously creates and redeems shares based on daily investor flows.
2. It issues a fixed number of shares, then trades in the secondary market. (correct answer)
3. It maintains a fixed portfolio and terminates on a stated maturity date.
4. It is priced once daily and investors always transact at NAV.

Question 10

1. A closed-end fund, as it trades on an exchange
2. An open-end fund, as it consists of a managed portfolio of redeemable units (correct answer)
3. A unit investment trust, as its portfolio is fixed and unmanaged
4. A hedge fund, as it is only available to accredited investors

Question 11

1. NAV + Sales Charge. (correct answer)
2. the market price determined by supply and demand.
3. NAV - Sales Charge.
4. the average price of the fund's shares over the last 30 days.

Question 12

1. The ex-dividend date is set by the SEC.
2. Open-end funds do not pay dividends.
3. The ex-dividend date is set by the fund's board of directors. (correct answer)
4. There is no ex-dividend date for open-end funds.

Question 13

1. Both types of funds have a fixed number of shares after their IPOs.
2. Open-end funds have a fixed capitalization, while closed-end funds can issue new shares at any time.
3. Closed-end funds have a fixed capitalization, while open-end funds have a continuously changing capitalization. (correct answer)
4. Both types of funds continuously offer new shares to investors.

Question 14

1. sales charge paid to the fund.
2. redemption fee paid to the fund.
3. commission paid to a broker-dealer. (correct answer)
4. contingent deferred sales charge.

Question 15

1. open-end fund.
2. unit investment trust.
3. closed-end fund. (correct answer)
4. money market fund.

Question 16

1. UITs are actively managed while closed-end funds are not.
2. closed-end fund shares trade in the secondary market, while UIT units are redeemable. (correct answer)
3. closed-end funds have a termination date, while UITs exist in perpetuity.
4. UITs can issue senior securities, while closed-end funds cannot.

Question 17

1. Class A shares with breakpoint discounts and low annual distribution fees.
2. Class C shares with level loads and generally higher ongoing expenses. (correct answer)
3. Class B shares with front-end loads and no contingent deferred sales charge.
4. Institutional shares requiring a sales charge and high 12b-1 fees.

Question 18

1. Registration with the SEC and delivery of a prospectus to investors. (correct answer)
2. Exemption from SEC oversight because they are pooled investments.
3. Daily prospectus updates filed after each portfolio trade is executed.
4. Guarantee of principal because SEC registration provides investor protection.

Question 19

1. Mutual funds have fixed portfolios; UITs are actively managed.
2. Mutual funds are actively managed; UIT portfolios are generally fixed. (correct answer)
3. Both maintain fixed portfolios and never rebalance holdings.
4. Both are actively managed and trade intraday on exchanges.

Question 20

1. All share classes charge identical sales loads and identical 12b-1 fees.
2. Different classes vary by sales charges and ongoing fees like 12b-1. (correct answer)
3. Share classes change the fund's portfolio holdings and investment objective.
4. Share classes determine whether the fund trades intraday on exchanges.