Deck 13: Investing in Mutual Funds

Question 1

Closed-ended mutual funds are guaranteed,they cannot lose value.

Answer 1

False

Question 2

A closed-end investment company can create an unlimited number of shares.

Answer 2

False

Question 3

An open-end investment company is commonly known as a mutual fund.

Answer 3

True

Question 4

Spiders and Diamonds are examples of ETF's.

Question 5

Mutual funds are actually comprised of two or more companies.

Question 6

Closed-end mutual funds can trade at either a discount or a premium from their net asset value.

Question 7

ETF often distribute large capital gains to their shareholders.

Question 8

Exchange traded funds can create new shares to meet demand.

Question 9

Investors select and purchase securities held within mutual funds.

Question 10

Closed-end mutual funds always charge an upfront fee to make a purchase.

Question 11

It is almost impossible to lose money in a mutual fund as the result of fraud or the mutual fund company's bankruptcy.

Question 12

The net asset value (NAV)per share is found by dividing the market value of the fund's securities less the fund's liabilities by the number of shares outstanding.

Question 13

The price an investor can sell his shares of an open-end mutual fund share is the net asset value.

Question 14

Exchange traded mutual funds are known as closed-end mutual funds.

Question 15

Open ended mutual funds can be traded on an intraday basis.

Question 16

There are more closed-end investment companies than there are open-end companies.

Question 17

Open ended mutual funds companies buy their shares back from investors at NAV.

Question 18

Closed end mutual funds companies buy their shares back from investors at NAV.

Question 19

Open ended mutual funds typically offer more diversification than an individual security.

Question 20

The most important advantage of a mutual fund is pooled diversification.

Question 21

A fund's objective must be stated in its prospectus.

Question 22

All no load funds charge an upfront fee to purchase shares of a mutual fund.

Question 23

Low-load funds do not charge a commission upon initial purchase.

Question 24

Loads are transaction charges for mutual funds.

Question 25

A 12(b)-1 fee can only be charged by a load mutual fund.

Question 26

A unit investment trust represents an interest in a managed pool of investments.

Question 27

Exchange-traded funds have characteristics of both closed-end and open-end funds.

Question 28

A mutual fund prospectus is required to fully disclose all fund fees and expenses.

Question 29

A mutual fund quotation shows NAV $3.16,offer $3.80.If you want to buy 100 shares,you will pay $380.

Question 30

A real estate investment trust that invests only in mortgages is called an equity trust.

Question 31

The difference between the NAV and the offer price represents the commission charge for buying the mutual fund shares.

Question 32

The price per share of a closed-end investment fund could be lower than its NAV.

Question 33

When you buy shares in a no-load fund,you will pay the NAV.

Question 34

A hybrid REIT would invest only in real estate mortgages.

Question 35

Mutual funds are governed by the Investment Company Act of 1940.

Question 36

A fund custodian keeps shareholder records.

Question 37

Back-ended load funds offer more liquidity to investors than no-load funds.

Question 38

When you buy shares in a load fund,you will pay the NAV.

Question 39

By definition,all ETF are no-load funds.

Question 40

A mutual fund with a high 12(b)-1 fee will have a low expense ratio.

Question 41

Balanced funds invest in a proportionate amount of common and preferred stocks and bonds.

Question 42

Indexed funds have high realized capital gains.

Question 43

Mutual funds may be classified by the types of securities they purchase.

Question 44

For most investors,the best way to deal in foreign securities is through an international mutual fund.

Question 45

Phone switching is only allowed among funds in a fund family.

Question 46

Equity-income funds emphasize capital appreciation in their investment goals.

Question 47

No-load funds are generally sold directly to the investor without a salesperson.

Question 48

Balanced funds invest in a mix of utility and growth equities.

Question 49

The objective of bond and money market funds is growth.

Question 50

Load fees charged on mutual funds help insure that the fund is well managed and that the investor's yields will be greater than those on no-load funds.

Question 51

Generally speaking,socially responsible funds abstain from investing in alcohol,gambling,or tobacco stocks.

Question 52

Sector funds usually restrict their investments to specific industries.

Question 53

Growth-and-Income funds invest most of their capital in common stocks.

Question 54

Bond mutual funds are always less risky than stock mutual funds.

Question 55

Aggressive growth funds typically buy stocks with high PE ratios and stocks with volatile price fluctuations.

Question 56

A fund's prospectus would provide information about a fund's fee structure.

Question 57

Sector funds may include stocks from different indexes.

Question 58

Money market funds are traded on the Money Market,just as closed-end stock funds are traded on the stock market.

Question 59

Value funds typically invest in stocks that do not pay dividends and have a high price/earning ratio.

Question 60

Growth funds are mutual funds designed for short term investing.

Question 61

The major reason that investors use mutual funds is their contractual plans which force regular investing.

Question 62

If a mutual fund provides for automatic reinvestment,the reinvested dividends will not be taxed until the shares are redeemed.

Question 63

Investment company earnings result solely from dividends.

Question 64

Dividend income,capital gains distributions,and changes in the fund's share price are all sources of return for a mutual fund.

Question 65

By using automatic reinvestment plans,dividend and capital gains are used to automatically buy additional shares in the fund.

Question 66

An investor with a small amount of money should stick to using loaded-funds instead of no-load funds.

Question 67

Index funds are actively managed.

Question 68

Socially responsible funds have experienced lower return than other types of funds of similar risk.

Question 69

Dividend income and capital gains distributions are taxed at identical tax rates.

Question 70

A technology fund is an example of a sector fund.

Question 71

Asset allocation funds invest in stocks,bonds,and cash.

Question 72

The major benefit to small investors of mutual funds is diversification.

Question 73

Morningstar,Wiesenberger,and Value line are companies that provide information about mutual funds to investors.

Question 74

A mutual fund always provides active professional investment management.

Question 75

Global mutual funds can invest both in domestic and international stocks.

Question 76

A mutual fund's price per share will increase if its underlying holdings increase in value.

Question 77

Systematic withdrawal plans offer the investor options as to the liquidation of the fund.

Question 78

The approximate yield on a mutual fund depends only on the fund's dividend income and capital gains distributions.

Question 79

Mutual fund conversion privileges can often be exercised using 800 numbers.

Question 80

Conversion privileges allow investors to exchange one fund's shares for that of another,as long as the funds are in the same fund family.