Chapter 10

Question 1

UIT (unit investment trust)

Answer 1

unmanaged, self liquidating vehicle

- Bond or equity investment

Question 2

REIT

Answer 2

Closed end real estate fund

• Equity reit’s invest in property
• Mortgage reit’s are a bond like investment
• Hybrid reit has both components of above

Question 3

RELP

Answer 3

Real estate limited partnership

usually with a planned 10-12 year liquidation

Question 4

REMIC

Answer 4

Real estate mortgage investment conduits

Question 5

ETF’s

Answer 5

ETF’s trade live
index funds trade @ COB
Every ETF has a creation unit (i.e. 500,000 shares equals total portfolio)
Can buy on margin with ETF not index fund

Question 6

Closed end funds

Answer 6

• trade daily in the secondary market
• trade on exchanges or over the counter
• no prospectus
• price is a function of supply and demand
• commonly trade at a discount to NAV
• can convert to open ended. usually impose a penalty for redemption if this happens.

Question 7

Why mutual funds typically underperform their benchmark?

Answer 7

Fee structure
They hold a large percentage of the market
Usually hold a large percent of cash

Question 8

Mutual Fund Share Classes

Answer 8

Class A - usually large front end load, no or minimal 12b-1, hold for a long period of time.

Class B - Back end load, usually 12b-1 fees, usually convertible to A.

Class C - Minimal or no front/back end loads, significant 12b-1 fees, short term holding period.

Question 9

Open end investment company

Answer 9

Mutual Fund

• Can only buy or sell from that mutual fund.
• Pay NAV + load (if any)
• Redeem at NAV - load (if any)

Question 10

NAV

Answer 10

portfolio market value - total liabilities / no. of outstanding shares

Question 11

Investment Company

Answer 11

Any type of vehicle by which investors pool their money in order to purchase investments.