When Jack e-mails some of his existing retail clients with a summary of the tax article, he must

submit a copy of the e-mail to a principal of the company, but he does not need to do so prior to

sending the e-mail. Since this was sent to Jack’s existing retail customers, it falls under the category

of “correspondence,” which does not need to be approved by a principal beforehand, but is subject

to review and supervision requirements.

The true statement regarding a mutual fund’s expenses is that a mutual fund’s record maintenance

fees cannot exceed 0.25% of average net assets. Mutual funds are permitted to have both front-end

loads and charge 12b-1 fees, and the expense ratio of a mutual fund can exceed 1.0% (although a

common recommendation is to select a fund with an expense ratio ≤ 1.0%.) Mutual fund families

have the option of charging an “exchange fee” when an investor switches between their funds.

Of the selections, only 12b-1 fees and management fees are included in the expense ratio of the

fund. Brokerage costs that the fund incurs when it buys and sells securities are not included (which is

why a fund’s turnover ratio is important to consider.) Redemption fees are paid by the shareholder to

the fund, so it would not be included in a fund’s expense ratio since it is not an expense of the fund.

As a value fund, Glamourless invests primarily in stocks with low earnings growth rates.

Because these firms don’t need as much money to support a high growth rate, they tend to have

high dividend yields. Their betas are generally less than 1.0, the average stock beta. Value stocks are

generally out of favor, which results in low price-earnings ratios since investors aren’t clamoring to

buy them.

The Investment Company Act of 1940 regulates the organizational structure and day-to-day

operations of investment companies. The Act includes requirements regarding a fund’s capital

structure, the custody of its assets, its investment activities, and the duties of a fund’s board of

directors, among other things. The Securities Act of 1933 regulates the offering of a fund’s shares

and requires that prospective investors be provided with a prospectus. The Securities Exchange Act

of 1934 regulates secondary market activities in investment company shares and includes laws

governing the principal underwriters and brokers and dealers who sell investment company shares.

The Investment Advisers Act of 1940 regulates investment advisers and includes laws pertaining to

their registration and recordkeeping, custodial, and reporting responsibilities.

Based on the information provided, an investor who wants to buy shares of the URMoney Mutual

Fund will pay $47 a share. Since the fund is a no load fund, the shares can be purchased at the net

asset value per share of the fund. Net asset value per share (NAVPS) = (market value of fund’s assets

- fund liabilities) ÷ total number of share outstanding, so NAVPS = ($620 million - $150 million) ÷ 10

million shares = $47.

The total return reported by a mutual fund includes both the dividend and interest income earned by

the fund and any increase in the fund’s net asset value. It includes both the return on dividends and

interest income and the return due to the capital appreciation of the fund’s value.

Price discovery is not a potential advantage associated with investing through a mutual fund. The net

asset value of the fund determines its price, not the interaction of buyers and sellers in the market.

All the other choices are advantages of investing through a mutual fund.

If Annie, who lives on the west coast, enters an order to redeem 500 shares at 12 P.M. her time on

October 9th, the order will be executed at the net asset value calculated at the end of that trading

day, which is $10.10. Orders received prior to 4 P.M. Eastern Standard Time (EST) are required to be

processed at the net asset value of the fund determined at the end of that some trading day, and 12

P.M. in Seattle is 3 P.M. on the east coast.

Only Mr. and Mrs. Smith and Mrs. Smith and her 8-year-old daughter, Susie, can combine their funds

in order to meet the breakpoint and get the reduced sales charge. Investments made by a husband

and a wife and by a parent on their own account and on a custodial account for a minor child can be

combined toward the total needed to reach the breakpoint. (The child cannot be an adult, however.)

Investments made by siblings and investment clubs cannot be combined to meet a breakpoint.