SIE (Securities Industry Essentials) Practice Exam

All of the following investment companies carry investment risk to the holder EXCEPT:

1. Closed-end fund

2. Open-end fund

3. Hedge fund

4. Fixed UIT

The correct answer is: Fixed UIT

A Closed-end funds are investment companies that issue a fixed number of shares to investors through an initial public offering (IPO). These shares then trade on secondary markets and their value is determined by market demand, similar to stocks. This form of investment carries a certain amount of risk, as the value of the shares can fluctuate based on market conditions. B: Open-end funds, also known as mutual funds, allow investors to buy and sell shares at any time. The value of these shares is determined by the Net Asset Value (NAV) of the underlying assets. This type of investment can also carry risk, as the value of the underlying assets can change. C: Hedge funds are private investment vehicles that are available only to certain accredited investors. They often use risky investment strategies such as leveraging and short-selling to seek high returns. Due to the high-risk nature of these investments, they are not suitable for all investors. D: Fixed UITs (Unit Investment Trusts) are a type of investment company that is created for a specific period of time, typically 15-24 months. They hold a fixed portfolio of securities and their value is directly linked to the performance of those securities. As a result, there is very little risk to the