Which of the following statements regarding CMOs is false?

A. CMOs are zero-coupon bonds that are backed by real estate.

B. Relative to other bonds, CMOs are illiquid.

C. CMO investors are divided into classes, and the class determines when the investor will receive payments of principal.

D. CMOs are considered to have lower risk and, therefore, offer lower returns.

Which of the following is not considered to be a “security” as defined by the Securities Exchange Act of 1934?

A. an interest in an oil drilling lease

B. a collateral trust certificate with an initial maturity of 5 years

C. a straddle that expires in 3 months

D. a bankers’ acceptance, issued with a maturity of 4 months

The Invest4U Mutual Fund is a regulated investment company under Internal Revenue Code Subchapter M. This means that:

A. Invest4U must submit an annually-updated prospectus to the IRS as well as to the SEC.

B. Invest4U does not itself have to pay taxes on any dividend or capital gain income it receives and distributes to its shareholders.

C. Invest4U is a UIT.

D. Invest4U is a non-diversified management company.

Which of the following activities are permitted during the “cooling off” period associated with a new offering?

I. A preliminary prospectus may be provided to prospective investors.

II. The security can be registered in any states in which it will be sold.

III. The management of the issuing firm may give interviews in which they discuss the market for their products and future revenue expectations.

IV.

The underwriter of the issue may run a tombstone advertisement in the Wall Street Journal to announce the upcoming offering.

A.

I only

B.

I and IV only

C.

I, II and IV only

D.

I, III and IV only

Andy and Annie Raggedy own their own graphics art business that they operate out of their home and, happily, generate enough income to meet their current needs. The couple is planning on having children in the not too distant future,

however, and they want to start putting money aside for their children's college education and also want to start saving for retirement more aggressively.

Which of the following describes one of their primary investment objectives?

A. tax-exempt income

B. preservation of capital

C. current income

D. capital appreciation