Question 1: What do 12b-1 fees pay and what is the maximum amount that these fees can be?
Question 2: What regulatory changes have been adopted or are being considered to deal with abuses in the mutual fund industry?
Quantitative Problems
Question 3: On January 1, a mutual fund has the following assets and prices at 4:00 pm.
Stock Shares Owed Price
1 1,000 $1.97
2 5,000 $48.26
3 1,000 $26.44
4 10,000 $67.49
5 3,000 $2.59
An investor sends the fund a check for $50,000. If there is no front-end load, calculate the new number of shares and price per share. Assume the manager purchases 1,800 shares of stock 3, and the rest is held as cash
Question 4: How are insurance companies able to predict their losses from claims accurately enough to let them price their policies such that they will make a profit?
Question 5: Distinguish between defined-benefit and defined-contribution pension plans.
Question 6: Your rich uncle dies. Leaving you a life insurance policy worth $100,000. The insurance company also offers you an option to receive $8,225 per year for 20 years, with the first payment due today. Which option should you use?
Question 7: What does it mean to say that investment bankers underwrite a security offering? How is this different from a best-efforts offering?
Question 8: Why would an investment banker advise a firm to issue a security using best efforts rather than under-writing?