PF Ch. 13 Mult. Choice ?’s

All of the following are advantages of a mutual fund except
A. Diversification
B. Professional management
C. Loads of up to 8.5 percent
D. Ease of buying and selling shares
E. All of the above are advantages
B. Professional management
What percentage of all mutual funds are closed-end funds?
A. 7 percent
B. 13 percent
C. 36 percent
D. 84 percent
E. 93 percent
A. 7 percent
Which type of fund has the prices determined by factors of supply and demand like a stock?
A. Closed-end funds
B. SEC government funds
C. Net asset value funds
D. No-load fund
E. Open-end funds
A. Closed-end funds
Which of the following is a fund that invests in stocks or securities contained in an index?
A. Closed-end funds
B. Exchange-traded funds
C. Net asset value funds
D. No-load fund
E. Open-end funds
B. Exchange-traded funds
Whose shares are issued and redeemed by the investment company at the request of investors?
A. Closed-end funds
B. Exchange-traded funds
C. Net asset value funds
D. No-load fund
E. Open-end funds
E. Open-end funds
How is an ETF similar to a closed-end fund?
A. Shares are traded on a securities exchange or in the over-the-counter market.
B. An investor can purchase as little as one share of a fund.
C. Prices are determined by supply and demand and the value of stocks and other investments contained in the portfolio.
D. Prices are determined by investor expectations.
E. All of the above are correct.
E. All of the above are correct.
Which of the following is unique for a closed-end fund?
A. It may contain stocks.
B. Its value is determined by supply and demand.
C. It is not actively managed by professional fund managers.
D. Its price is equal to the net asset value.
E. Its load cannot exceed 2 percent.
B. Its value is determined by supply and demand.
The net asset value is calculated as
A. (Liabilities – value of portfolio) + number of shares outstanding
B. Number of shares outstanding/(liabilities – value of portfolio)
C. (Liabilities – value of portfolio)/number of shares outstanding
D. (Current market value of portfolio – liabilities )/number of shares outstanding
E. Number of shares outstanding/(value of portfolio – liabilities)
D. (Current market value of portfolio – liabilities )/number of shares outstanding
Many mutual funds charge a commission when they are purchased by investors. These are called
A. Load funds
B. Closed-end funds
C. Exchange-traded funds
D. Net asset value funds
E. Open-end funds
A. Load funds
A load fund is allowed to collect a sales fee as high as
A. 0 percent
B. 2 percent
C. 3 – 5 percent
D. 8.5 percent
E. 11.5 percent
D. 8.5 percent
The average load charge for mutual funds is
A. 0 percent
B. 2 percent
C. 3 – 5 percent
D. 8.5 percent
E. 11.5 – 14.5 percent
C. 3 – 5 percent
The average upfront charge for a no-load mutual funds is
A. 0 percent
B. 2 percent
C. 3 – 5 percent
D. 8.5 percent
E. 11.5 – 14.5 percent
A. 0 percent
A no-load mutual fund
A. May allow investors to pay a sale charge
B. Charges commission when you buy shares
C. Uses salespeople to sell the funds
D. Are available only via the Internet
E. Can charge a 12b-1 fee of up to 0.25 percent of its assets
E. Can charge a 12b-1 fee of up to 0.25 percent of its assets
A contingent deferred sales load is known as all of the following except
A. Back-end load
B. B fund
C. Redemption fee
D. Only two of the above are correct
E. All of the above are correct
E. All of the above are correct
A fee charged to defray the costs of advertising and marketing for a mutual fund is called a ____ fee.
A. 3c
B. 12b-1
C. 14c-2
D. 401(k)
E. 403(b)
B. 12b-1
Which of the following is NOT correct about the 12b-1 fee?
A. It is also known as a distribution fee
B. A no-load fund can charge a 12b-1 fee of up to 0.25 percent of its assets
C. It is often an ongoing fee that is charged on an annual basis
D. It needs to be disclosed in the annual report but not in the prospectus
E. It is used to defray the costs of advertising and marketing a mutual fund and commissions paid to a broker who sold shares in the mutual fund
D. It needs to be disclosed in the annual report but not in the prospectus
Which class of shares charges a commission when shares are purchased?
A. A
B. B
C. C
D. K
E. Q
A. A
Which class of shares charges a commission when withdrawals are made during the first five years?
A. A
B. B
C. C
D. K
E. Q
B. B
Which class of shares does not charge a sales load or contingent deferred sales fee and charges a higher 12b-1 fee than the other classes?
A. A
B. B
C. C
D. K
E. Q
C. C
Which of the following types of stock funds invests in stock issued by companies with a long history of paying dividends?
A. Equity income funds
B. Growth funds
C. Index funds
D. International funds
E. Regional funds
A. Equity income funds
Which of the following types of stock funds invests in stock issued by companies expecting higher than average revenue and earnings growth?
A. Equity income funds
B. Growth funds
C. Index funds
D. International funds
E. Regional funds
B. Growth funds
Which of the following stock funds invests in the same companies included in the S&P 500?
A. Equity income funds
B. Growth funds
C. Index funds
D. International funds
E. Regional funds
C. Index funds
Which of the following stock funds invests in stock issued by companies throughout the world outside the United States?
A. Equity income funds
B. Growth funds
C. Index funds
D. International funds
E. Regional funds
D. International funds
Which of the following stock funds invests in stock traded within one area of the world?
A. Equity income funds
B. Growth funds
C. Index funds
D. International funds
E. Regional funds
E. Regional funds
Sally wants to invest in a fund that only invests in stock. Which of the following will meet her needs?
A. Asset allocation funds
B. Balance funds
C. Junk bond funds
D. Midcap funds
E. Short-term corporate bond funds
D. Midcap funds
Thomas wants to invest in a fund that invests in stock, bonds and money market instruments. Which of the following will meet his needs?
A. Asset allocation funds
B. Aggressive growth funds
C. Junk bond funds
D. Midcap funds
E. Short-term corporate bond funds
A. Asset allocation funds
Val wants to invest in a fund whose primary objective is to conserve principal, provide income, and provide long-term growth. Which of the following will best meet her needs?
A. Cyclical funds
B. Balanced funds
C. Junk bond funds
D. Midcap funds
E. Short-term corporate bond funds
B. Balanced funds
An example of a lifecycle fund is a fund that
A. Assists investors with planning for retirement by a specific date
B. Initially invests in conservative securities then changes to invest in more risk-oriented securities as time goes by
C. Invests in shares of other mutual funds in order to increase diversification and asset allocation
D. Has principal protection as its main objective
E. None of the above is an example of a lifecycle fund
A. Assists investors with planning for retirement by a specific date
Time is an important factor when evaluating a mutual fund for which of the following?
A. The existence of the underlying index
B. The life of the companies in the fund
C. The tenure of a fund manager
D. The status of the economy
E. None of the above
C. The tenure of a fund manager
Which of the following is NOT correct?
A. When evaluating a mutual fund, an important question to ask is: How long has the present fund manager been managing the fund?
B. Over the years, the majority of managed mutual funds have failed to outperform the Standard & Poor’s 500 stock index.
C. Managed funds may be open-end funds or closed-end funds.
D. A benchmark of a good fund manager is the ability to increase share value when the economy is good and retain that value when the economy is bad.
E. A managed fund will outperform an index fund only 60 percent of the time.
E. A managed fund will outperform an index fund only 60 percent of the time.
Which of the following is NOT a way one can access reliable information about mutual funds on the internet?
A. Find statistical information from the investment company’s Web page.
B. Obtain current market values for mutual funds by using a search engine, such as http://finance.yahoo.com.
C. Review blogs from amateur investors about their favorite mutual funds.
D. Research reports for mutual funds using professional advisory services.
E. All of the above are reliable sources of information about mutual funds.
C. Review blogs from amateur investors about their favorite mutual funds.
Professional advisory services provide detailed information on mutual funds. Which of the following is NOT a professional advisory service?
A. Dun and Moody’s
B. Lipper Analytical Services
C. Morningstar, Inc
D. Value Line
E. All of the above are professional advisory services that provide information on mutual funds
A. Dun and Moody’s
Professional advisory services provide research on mutual funds in all of the following areas except
A. A historical profile
B. Statistical information
C. Performance, risk analysis, and portfolio analysis
D. Investment philosophy
E. All of the above are included by professional advisory services
E. All of the above are included by professional advisory services
Sally wants to invest in a mutual fund. The mutual fund must provide a(n) ____ to her.
A. Analysis from a financial publication
B. Annual report
C. Prospectus
D. Quarterly report
E. Summary report
C. Prospectus
Which of the following provides some information about mutual funds for free and more detailed information at a cost?
A. Financial publications
B. Internet
C. Mutual fund annual report
D. Newspapers
E. Professional advisory services
E. Professional advisory services
Which of the following provides a means of monitoring the value of your mutual fund investments, but not as much information as the other options listed to conduct a more complete evaluation?
A. Financial publications
B. Internet resources
C. Mutual fund annual report
D. Newspapers
E. Professional advisory services
D. Newspapers
Which of the following contains a letter from the president of the investment company, detailed financial information, a schedule of investments, and a letter from the fund’s independent auditors?
A. Financial publications
B. Internet
C. Mutual fund annual report
D. Newspapers
E. Professional advisory services
C. Mutual fund annual report
How do mutual funds provide returns to their shareholders?
A. Income dividends
B. Capital gain distributions
C. Capital gains
D. All of the above
E. None of the above
D. All of the above
Cash paid to shareholders that is NOT related to the sale of securities in the fund’s portfolio is called
A. Capital gain distribution
B. Income dividend
C. Capital gain
D. Mutual fund money
E. Fund taxes
B. Income dividend
Payments to investors related to the sale of securities in the fund’s portfolio are
A. Capital gain distributions
B. Income dividends
C. Capital gains
D. Mutual fund money
E. Fund taxes
A. Capital gain distributions
When you sell your shares in a mutual fund, you may receive a profit called
A. Capital gain distribution
B. Income dividend
C. Capital gain
D. Mutual fund money
E. Fund taxes
C. Capital gain
Which of the following is true about mutual funds and taxes?
A. Capital gain distributions are taxed when you sell your shares
B. Income dividends are taxed quarterly
C. Investment companies are required to send each shareholder a year-end statement that specifies how much each received in dividends and capital gain distributions
D. Capital gains distributions are not taxed
E. Taxes can be eliminated if you hold your mutual fund shares in your 401(k) retirement account
C. Investment companies are required to send each shareholder a year-end statement that specifies how much each received in dividends and capital gain distributions
If you hold mutual fund shares in your Roth individual retirement account, the taxes will be
A. Deferred
B. Eliminated
C. Evaluated
D. Payable immediately
E. None of the above
B. Eliminated
A problem with mutual funds is
A. Professional management
B. The possibility to eliminate taxes if held in a Roth individual retirement account
C. Being required to report reinvested income dividends and capital gain distributions on your federal tax return
D. Tax deferral if the fund is held in a retirement account like a 401(k) account
E. The diversification offered to investors
C. Being required to report reinvested income dividends and capital gain distributions on your federal tax return
All of the following are valid ways to purchase mutual funds except
A. Regular account transaction
B. Voluntary savings plan
C. Contractual savings plan
D. Reinvestment plan
E. All of the ways listed are valid
E. All of the ways listed are valid
Melinda wants to withdraw some money from her mutual fund. Which of the following is NOT an option available?
A. Write a check
B. Sell a certain number of shares each investment period
C. Withdraw a fixed percentage of asset growth
D. Withdraw all income dividend and capital gain distributions earned each investment period
E. Withdraw all principal and leave interest dividends and capital gain distributions in the account
E. Withdraw all principal and leave interest dividends and capital gain distributions in the account
The investments in the Alamo Basics Contingency Fund have a current market value of $730 million. The fund also has liabilities that total $45 million. If this mutual fund has 25 million shares, what is the net asset value per share? (current market – liabilites)/ shares outstanding
A. $1.80
B. $27.40
C. $29.20
D. $31.00
E. $26.50
B. $27.40
The investments in the Already Been Counted Fund have a current market value of $575 million. The fund also has liabilities that total $35 million. If this mutual fund has 40 million shares, what is the net asset value per share?
A. $0.875
B. $13.50
C. $14.375
D. $15.25
E. None of the above
B. $13.50
The Anderson Balanced mutual fund charges a sales load of 5.25 percent. If you invest $25,000, how much must you pay in commissions?
A. $5.25
B. $52.50
C. $131.25
D. $1,312.50
E. $4761.90
D. $1,312.50
The Anderson Balanced mutual fund charges a sales load of 5.25 percent. If you invest $25,000, how much of your investment will actually be used to purchase shares in the fund? (subtract load charge)
A. $20,238.10
B. $23,687.50
C. $24,868.75
D. $24,947.50
E. $25,000.00
B. $23,687.50