Sample Exam Questions
A characteristic of ETFs structured as Unit Investment Trusts (UITs) is that they:
- Have an indefinite life
- Have a termination date
- Do not trade intraday on an exchange
- Distribute dividends immediately
If the unleveraged index of a 2x daily leveraged ETF gained 8% on Day 1 and then declined 10% on day two, the overall loss for the leveraged fund over the two trading days is:
- 2.8%
- 4%
- 7.2%
- 14.6%
ETNs have all of the following characteristics except:
- Their returns are linked to the return of a market benchmark
- They can be shorted
- They distribute dividends and other distributions from a benchmarked index
- They trade on stock exchanges
Which of the following statements is true regarding ETFs?
- Individual investors have the ability to purchase and redeem ETF shares directly from the ETF provider in creation units
- The creation and redemption of ETFs is generally regarded as “in-kind” exchanges of assets
- They sell or redeem their individual shares at net asset value
- All of the above
When large blocks of ETF shares are redeemed, individual underlying holdings:
- With the highest cost basis are typically provided to the redeemer
- With the lowest cost basis are typically provided to the redeemer
- With the highest cost basis are exchanged for holdings with the lowest cost basis by the redeemer
- With the lowest cost basis are exchanged for the shares with the highest cost basis by the redeemer
