Series 7 Top-Off Exam Quiz Lesson 46 Unit Investment TrustsThis is Series 7 Top-Off Exam Quiz Lesson 46 Unit Investment Trusts

1. It is a specific portfolio of bonds that is self-liquidating.A. unit investment trustB. open-end mutual fundC. closed-end mutual fundD. hedge fund

2. The unit investment trust is regulated by the Investment Company Act of 1940.A. TrueB. False

3. What is the implication of a unit investment trust being self-liquidating?A. The investor will get back over time the principal plus interest.B. The net asset value of the trust is independent from the market value.C. The trust is free from ownership risk.D. There is a constant interest rate until the trust’s maturity.

4. Which of the following is true about a unit investment trust which invests in fixed income investments?(Select all that apply.)A. Buying the trust is buying shares of beneficial interest.

B. Holding the unit investment trust to its maturity returns the investment (assuming no defaults).C. If the trust is sold prior to maturity, it has more interest rate risk than other fixed income portfolio.D. Unlike a bond, this trust is a fixed portfolio.

5. A fixed income unit investment trust differs from an open-end mutual fund in such a way that ___.(Select all that apply.)A. A fixed income unit investment trust is self-liquidating; an open-end mutual fund is not.B. An open-end mutual fund has breakpoints; a fixed income unit investment trust has none.C. An open-end mutual fund is perpetual; a fixed income unit investment trust is not.D. An open-end mutual fund pays a little, if any, management fee; a fixed income unit investment trust pays very high management fees.

6. A unit investment trust does not expand nor contract in size once issued.A. TrueB. False

7. Unit investment trusts can invest in ___.(Select all that apply.)A. closed-end fundsB. corporate bondsC. government securitiesD. equities

8. The shares of beneficial interest in a unit investment trust can be redeemed prior to maturity.A. TrueB. False

9. A unit investment trust that invests in a master limited partnership will receive a ___ at the end of the year.A. 1099-DIVB. 1601FC. CF-213D. K-1

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?A. 0.01%B. 0.09%C. 0.99%D. 1%

11. It is a unit investment trust used to fund variable annuities.A. fixed income unit investment trustB. municipal bond unit investment trustC. participating unit investment trustD. stock unit investment trust

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 ___.A. increaseB. decreaseC. remain the sameD. be equal to the market value

13. A unit investment trust that invests in US government bonds that is held in maturity is NOT subject to ___.A. credit worthiness riskB. currency riskC. interest rate riskD. principal risk

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)?(Select all that apply.)A. It avoids paying several management fees.B. It can generate more income because the management fees are lower.C. It has lower interest rate risk.D. It receives the simpler 1099-DIV at the end of the year.

15. These are risk-free investments.A. direct government securitiesB. closed-end funds

C. unit investment trustsD. treasury bonds

16. When a unit investment trust closes, the investor can ___.(Select all that apply.)A. get the proportion of the securities held in the trustB. roll it over into the next unit investment trustC. sell the sharesD. take a liquidation

17.