Deck 13: Investing in Mutual Funds

Question 1

ETFs often distribute large capital gains to their shareholders.

Answer 1

False

Question 2

While ETFs offer many of the benefits of mutual funds,they have the tax-timing disadvantages not present with otherwise comparable mutual funds.

Answer 2

False

Question 3

Investors select and purchase securities held within mutual funds.

Answer 3

False

Question 4

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

Question 5

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

Question 6

Spiders and Diamonds are examples of ETFs.

Question 7

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 8

More people invest in mutual funds than in any other type of investment product.

Question 9

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

Question 10

With open-end mutual funds,investors cannot lose more than they invested.

Question 11

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

Question 12

Exchange-traded mutual funds are actually closed-end mutual funds.

Question 13

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

Question 14

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

Question 15

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

Question 16

Exchange-traded funds can create new shares to meet demand.

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

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

Question 22

A mutual fund is owned by the management company.

Question 23

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

Question 24

The size of a mutual fund's management fee is related to the fund's performance.

Question 25

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

Question 26

A hybrid REIT would invest only in real estate mortgages.

Question 27

All mutual funds have management fees.

Question 28

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 29

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

Question 30

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

Question 31

Loads are transaction charges for mutual funds.

Question 32

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

Question 33

Growth funds are mutual funds designed for short-term investing.

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

A mutual fund cannot charge more than 6.5 percent in total sales charges and fees.

Question 39

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

Question 40

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

Question 41

Asset allocation funds concentrate on one type of investment.

Question 42

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

Question 43

The objective of bond and money market funds is growth.

Question 44

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

Question 45

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

Question 46

Indexed funds have high realized capital gains.

Question 47

The primary investment objective of bond funds is income.

Question 48

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

Question 49

A technology fund is an example of a sector fund.

Question 50

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

Question 51

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

Question 52

A mutual fund always provides active professional investment management.

Question 53

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

Question 54

Asset allocation funds invest in stocks,bonds,and money market securities.

Question 55

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

Question 56

Index funds are actively managed.

Question 57

Sector funds concentrate their holdings in specific targeted markets.

Question 58

Money funds are high in both liquidity and risk.

Question 59

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

Question 60

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

Question 61

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

Question 62

Mutual fund conversion privileges can often be exercised online.

Question 63

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 64

Financial leverage is less of a factor in real estate investment returns than with other types of investments.

Question 65

Real estate depreciation is considered a tax shelter.

Question 66

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

Question 67

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

Question 68

The primary purpose of investing in income property is to produce an attractive annual cash flow.

Question 69

Speculating in raw land is a low-risk investment approach.

Question 70

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

Question 71

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

Question 72

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

Question 73

The expected cash flows of a real estate investment are determined by rent,depreciation,and taxes.

Question 74

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

Question 75

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

Question 76

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

Question 77

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

Question 78

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

Question 79

The lower the R²,the closer the relationship between an ETF and its associated target index.

Question 80

When evaluating a real estate investment,the main consideration is changes in the property value.