Series 7 Financial Advisor Flashcard

Front

What should be considered when recommending a municipal bond to a client?

Back

The client’s risk tolerance and tax bracket.

Front

How can a client select the most cost-effective mutual fund option?

Back

Compare the expense ratios and sales charges of different share classes (A, B, C) to find the best fit for the client’s investment horizon.

Front

What is a characteristic of a closed-end investment company?

Back

Shares trade on secondary markets at market prices.

Front

What crucial factor should be considered in retirement planning?

Back

The client's current age and expected retirement age.

Front

What is a key advantage of investing in an Exchange-Traded Fund (ETF) over a mutual fund?

Back

ETFs can be traded throughout the day on stock exchanges.

Front

Define a municipal bond.

Back

A bond issued by a state, municipality, or county to finance its capital expenditures, often providing tax-free interest income.

Front

What is the difference between front-end load and back-end load in mutual funds?

Back

A front-end load is a fee paid when shares are purchased, while a back-end load is a fee paid when shares are sold.

Front

What does NAV stand for in mutual funds?

Back

Net Asset Value, which is the total value of a fund's assets minus its liabilities, divided by the number of outstanding shares.

Front

What is the primary purpose of diversification in investing?

Back

To reduce risk by spreading investments across various financial instruments, industries, and other categories.

Front

What is the significance of a bond's coupon rate?

Back

The coupon rate is the interest rate the bond issuer pays to bondholders, expressed as a percentage of the bond's face value.