Deck 13: Investing in Mutual Funds

Question 1

Investors select and purchase securities held within mutual funds.

Answer 1

False

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

Mutual funds are actually comprised of two or more companies.

Question 10

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 11

Exchange traded funds can create new shares to meet demand.

Question 12

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

Question 13

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

Question 14

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

Question 15

Spiders and Diamonds are examples of ETF's.

Question 16

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

Question 17

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

Question 18

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

Question 19

ETF often distribute large capital gains to their shareholders.

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

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

Question 25

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

Question 26

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 27

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

Question 28

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

Question 29

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

Question 30

Loads are transaction charges for mutual funds.

Question 31

By definition,all ETF are no-load funds.

Question 32

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

Question 33

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

Question 34

A hybrid REIT would invest only in real estate mortgages.

Question 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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

Question 41

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

Question 42

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

Question 43

Sector funds usually restrict their investments to specific industries.

Question 44

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

Question 45

Sector funds may include stocks from different indexes.

Question 46

The objective of bond and money market funds is growth.

Question 47

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

Question 48

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

Question 49

Index funds are actively managed.

Question 50

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

Question 51

A technology fund is an example of a sector fund.

Question 52

Indexed funds have high realized capital gains.

Question 53

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

Question 54

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

Question 55

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

Question 56

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

Question 57

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

Question 58

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

Question 59

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

Question 60

Growth funds are mutual funds designed for short term investing.

Question 61

A guarantee of expected fund's future performance is its past performance.

Question 62

Mutual fund performance is usually evaluated by viewing a given size investment for a certain time period.

Question 63

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

Question 64

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

Question 65

A mutual fund always provides active professional investment management.

Question 66

Advantages of exchange traded funds over mutual funds include a broader market focus.

Question 67

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

Question 68

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

Question 69

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

Question 70

Investment company earnings result solely from dividends.

Question 71

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

Question 72

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.

Question 73

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

Question 74

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

Question 75

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

Question 76

Index funds,while trying to match market performance,consistently underperform market benchmarks.

Question 77

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

Question 78

The individual manager of a mutual fund has little to do with a fund's success.

Question 79

ETFs are set up to protect investors from capital gains taxes better than most mutual funds can.

Question 80

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