Deck 23: Mutual Funds

Question 1

Which of these funds allows investors to write checks to access their funds at any time?

A)Equity
B)Money market mutual
C)Index
D)Hybrid

Answer 1

B

Question 2

A mutual fund has a net asset value  ( NAV )of $8.10 and 325 shares outstanding. What is the total market value of the fund?

A)$2,461.15
B)$4,012.34
C)$2,492.30
D)$2,632.50

Answer 2

D

Question 3

Many critics of mutual funds are critical of what aspect of the industry?

A)Hidden administrative fees
B)High advisory fees
C)Slick advertising campaigns
D)Poor returns on investments

Answer 3

C

Question 4

If Jules is interested in investing in a mutual fund and wants to know how the funds will be invested and how the fund has performed in the past, he should read

A)the fund's yearly report.
B)the entry in the Investment Company Fact Book about the fund.
C)articles in the Financial Times about the fund.
D)the fund's  prospectus.

Question 5

Lin redeemed $10,000 worth of mutual fund shares, but only received $9,150 in cash. This is what kind of fee, and what percentage was she charged?

A)Advisory fee, 7.0%
B)Front-end load, 8.5%
C)Back-end load, 7.0%
D)Back-end load, 8.5%

Question 6

Gwen and Ray want to invest in an equity mutual fund for their newborn son and will not need the funds for almost 18 years. They have a better than average income and plan to invest each year. Without taking on too much risk, which type of equity mutual funds are they most likely to consider?

A)An income fund or a global equity fund
B)An aggressive growth fund or an income fund
C)A growth and income fund or an aggressive growth fund
D)A growth fund or a global equity fund

Question 7

At the end of 2014, which of the following accounted for the largest portion of the US mutual fund industry?

A)Money market funds
B)Bond funds
C)Hybrid funds
D)Equity funds

Question 8

Which of the following types of equity funds is considered the most speculative?

A)Aggressive growth funds
B)Income funds
C)Growth and income funds
D)International funds

Question 9

Fred is within about 10 years of retirement and wants to protect the market value of his investment, but also make small gains in capital. He can afford some small risk or losses. What type of funds might he consider?

A)Corporate bond funds and aggressive growth funds
B)Equity growth funds
C)Hybrid funds with an emphasis on bonds
D)Hybrid funds with an emphasis on equities

Question 10

An investor interested in an actively managed fund should invest in which of these funds?

A)Index fund
B)Hybrid fund
C)Equity fund
D)Hedge fund

Question 11

Mutual funds traditionally keep a small percentage of their funds in highly liquid assets such as bank CDs, since some shareholders may want to redeem shares on any given day. What percentage of total assets is typically held in a very liquid form?

A)25%
B)20% to 25%
C)10% to 12%
D)4% to 6%

Question 12

Jack Bogle, former head of The Vanguard Group, recommends that investors own index funds because these funds are

A)"actively managed" and the fees are much higher.
B)not "actively managed" and the fees are much lower.
C)"actively managed" and have a role to play in a saver's portfolio.
D)"actively managed" and outperform the overall market performance.

Question 13

How is the price per share of an open-ended mutual fund determined?

A)Number of outstanding shares divided by the net value of the fund's total assets
B)Net value of the fund's total assets less any liabilities divided by the number of outstanding shares
C)Net value of the fund's total assets divided by the number of outstanding shares
D)Average value of the fund's total assets divided by the number of outstanding shares

Question 14

In regulating mutual funds, which of the following is NOT a responsibility of the Securities and Exchange Commission (SEC)?

A)Prosecute fraud and deceptive sales practices
B)Determine how funds may advertise
C)Regulate structure and operations of mutual funds
D)Determine how investors are kept informed

Question 15

Which of these statements best describes the collective growth of mutual funds from 2008 until 2017?

A)The number of mutual funds remained the same between 2008 and 2017.
B)The number of mutual funds increased approximately 1.5 times between 2008 and 2017.
C)The number of mutual funds doubled between 2008 and 2017.
D)The number of mutual funds tripled between 2008 and 2017.

Question 16

The most expensive annual fees paid by mutual fund shareholders are __________ fees.

A)administrative services
B)advertising
C)advisory
D)sales commission

Question 17

A "no-load" fund does NOT charge

A)for marketing expenses.
B)an advisory fee.
C)a sales charge at purchase.
D)for administrative services.

Question 18

Alexis is just out of college and wants to save aggressively for a house. She is willing and able to take on a moderate amount of risk and has a time line of 10 years to save a down payment. Which of these funds might she be most likely to consider?

A)Treasury bond funds
B)A target date hybrid fund
C)Mortgage bond funds
D)A real return hybrid fund

Question 19

When Lauren purchased shares in a mutual fund, she was charged a 5% fee at the time of the purchase. This is what kind of fee?

A)12b-1 fee
B)Back-end load
C)Front-end load
D)Advisory fee

Question 20

Which act defines a mutual fund?

A)Federal Reserve Act of 1913
B)Investment Company Act of 1940
C)Securities Exchange Act of 1934
D)Depository Institutions Deregulation and Monetary Control Act of 1980

Question 21

Which of the following generally sells at a premium or discount from its NAV?

A)Hedge fund
B)Exchange-traded fund
C)Close-ended fund
D)Real estate investment trust

Question 22

Rudy has a mutual fund investment with low fees. He is not concerned about the fees over the long run. How is his thinking flawed?

Question 23

Compare the management of index funds versus that of hybrid funds.

Question 24

Which of these statements most accurately describes both an unregistered financial advisor and a registered investment advisor?

A)Both are interested and willing to work with relatively low net worth investors; only the registered advisor is overseen by the SEC.
B)Both charge fees to manage funds; only a registered investment advisor is legally obligated to put his investors' interests ahead of his own.
C)Registered investment advisors tend to charge lower fees; unregistered financial advisors charge higher fees but take on more clients.
D)Registered investment advisors and unregistered financial advisors most often charge an annual fee.

Question 25

Which of the following are traded daily on stock exchanges at market-determined prices?

A)Real estate investment trusts
B)Close-ended funds
C)Most bond funds
D)Exchange-traded funds

Question 26

The __________ Act requires hedge funds with more than $100 million to register with the SEC.

A)Sarbanes-Oxley
B)Dodd-Frank
C)Gramm - Leach-Bliley
D)Investment Advisors

Question 27

Which of the following is categorized as an "alternative asset"?

A)Hedge fund
B)Exchange-traded fund
C)Close-ended fund
D)Real estate investment trust

Question 28

Which of the following is NOT a common characteristic of hedge funds?

A)Track an index, like the S&P 500
B)Seek to be market-neutral
C)Require investors to commit funds for several years
D)Are limited to high net worth individuals

Question 29

In a close-ended fund, the investment company can also  buy back shares or allow investors to redeem their shares at any time.

Question 30

Which of the following can be exempt from federal income taxes?

A)Close-ended funds
B)Real estate investment trusts (REITs)
C)Hedge fund
D)Exchange-traded funds

Question 31

Nathan purchased shares in a mutual fund through an initial public offering, and now no shares are issued and shares cannot be redeemed. What kind of fund did he invest in?

A)Equity fund
B)Close-ended fund
C)Municipal bond fund
D)Hedge fund

Question 32

Why do equity fund investors need to have a long-term investment horizon? What kind of time frame is considered appropriate for equity investments?

Question 33

After the collapse of the Long Term Capital Management hedge fund in 1998-which threatened the stability of the entire financial system-hedge funds came under more scrutiny. 
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Question 34

Close-ended funds always sell at a premium above their NAV.

Question 35

Index funds are popular among investors because of low fees and ease of diversification, which are possible because the  fund manager purchases  the stocks that make up the index and does not actively buy and sell shares to outperform the  index .