Question 1

The commission charge for purchasing fund shares that impose an up-front commission charge ____________ percent.

Accepted Answer

The answer of The commission charge for purchasing fund shares...

Question 2

A mutual fund in which new shares are issued and existing shares redeemed by the investment company at the request of investors is called a(n)____________ fund.

Accepted Answer

An open-end fund is the only option described that allows for new shares to be issued and existing shares to be redeemed at the request of investors. Closed-end funds have a fixed number of shares and are not redeemable directly by the investment company. Load and no-load refer to sales charges, which are unrelated to the structure of the fund. Convertible funds involve the ability to convert from one security (such as bonds) to another (such as stocks) and are not applicable to the question at hand.

Question 3

The value of a mutual fund's portfolio minus the mutual fund's liabilities,divided by the number of shares outstanding is called the:

Accepted Answer

The value of a mutual fund's portfolio minus the mutual fund's liabilities, divided by the number of shares outstanding is called the net asset value (NAV). This represents the value of each share in the fund and reflects the current market value of the fund's holdings. Therefore, option D is the correct answer.

Question 4

Mary Cooper just purchased 100 shares in the All-American Fund.The purchase cost for each share was $20.If this fund charges a 5 percent load,what is the total amount of commission she will pay the investment company?

Accepted Answer

100 shares F1F1F1S1F1F1F10 ($20 F1F1F1S1F1F1F10 0.05) = $100.

Question 5

For most mutual funds,the net asset value is calculated:

Accepted Answer

For most mutual funds, the net asset value is calculated on a daily basis. This is because mutual funds invest in various securities and their value can fluctuate frequently based on market conditions. As a result, calculating the net asset value on a daily basis provides investors with an accurate and up-to-date valuation of their investment in the mutual fund.

Question 6

The All-Star Basic Value Fund's portfolio is valued at $210 million.The fund has liabilities of $5 million,and the investment company sponsoring the fund has issued 16,400,000 shares.What is the fund's net asset value?

Accepted Answer

The answer of The All-Star Basic Value Fund's portfolio is...

Question 7

A mutual fund in which shares are issued only when the fund is organized is called a(n)____________ fund.

Accepted Answer

A closed-end fund issues a fixed number of shares during its initial public offering and after that, shares can only be bought or sold in the secondary market, just like stocks. This is different from open-end funds, which continuously issue and redeem shares based on demand. Load and no-load refer to fees charged by the fund, and convertible refers to an option in certain types of securities.

Question 8

The management fee for most mutual funds ranges between ______ percent.

Accepted Answer

The management fee for most mutual funds ranges between 0.25 to 1.5 percent, according to industry standards. Options B, C, D, and E have higher ranges and are not common for most mutual funds.

Question 9

The Capitalist Mutual Fund's portfolio is valued at $45 million.The fund has liabilities of $3 million,and the investment company sponsoring the fund has issued 1,600,000 shares.What is the fund's net asset value?

Accepted Answer

The net asset value (NAV) of the fund is calculated as the total value of the portfolio minus liabilities, divided by the number of shares outstanding.

NAV = (Portfolio value - Liabilities) / Number of shares outstanding 
NAV = ($45 million - $3 million) / 1.6 million 
NAV = $42 million / 1.6 million 
NAV = $26.25

Therefore, the correct answer is B.

Question 10

When an investor purchases shares in a load fund,the average sales charge is usually between ____________ percent.

Accepted Answer

The answer of When an investor purchases shares in a...

Question 11

The New American Enterprise Mutual Fund's portfolio is valued at $120 million.The fund has liabilities of $4 million,and the investment company sponsoring the fund has issued 5,800,000 shares.What is the fund's net asset value?

Accepted Answer

($120 million F1F1F1S1F1F1F10 $4 million) / 5.8 million shares = $20.00.

Question 12

A mutual fund in which investors pay a commission every time they purchase shares is called a(n)____________ fund.

Accepted Answer

A load fund is a mutual fund in which investors pay a commission fee (or "load") every time they purchase shares. This fee is deducted from the initial investment and is usually around 5-6% of the purchase amount. Therefore, option C is the correct answer.

Question 13

The average management fee for all mutual funds is:

Accepted Answer

According to Morningstar, the average management fee for all mutual funds in 2020 was 0.64 percent. This falls within the range of 0.50 to 1 percent, making option C the best choice.

Question 14

When Pete Mills went to withdraw $5,000 from the Nationwide Fidelity Mutual fund,he was informed that the fund would charge 5 percent of the amount withdrawn.What is the dollar amount of the withdrawal charge?

Accepted Answer

5,000 F1F1F1S1F1F1F10 0.05 = $250.

Question 15

A 1 to 5 percent fee that investors pay when they withdraw their investment from a mutual fund is called a:

Accepted Answer

The 1 to 5 percent fee that investors pay when they withdraw their investment from a mutual fund is called a contingent deferred sales load (CDSC). This fee is designed to discourage investors from frequently buying and selling shares in the fund. Choice A is incorrect because there is no specific fee called a withdrawal fee in mutual funds. Choice B is incorrect because the 12b-1 fee is an ongoing fee paid by investors for marketing and distribution expenses. Choice D is incorrect because a front-end load is a fee paid by investors when they initially purchase shares in the fund. Choice E is incorrect because a management fee is a fee paid by investors to compensate fund managers for managing the fund.

Question 16

Which one of the following statements is false?

Accepted Answer

A passively-managed exchange-traded fund manager does not need to make as many decisions as an actively-managed mutual fund manager, as the former simply mirrors the performance of the index without trying to outperform it. Therefore, statement D is false.

Question 17

A mutual fund in which no sales charge is paid by the individual investor is called a(n)____________ fund.

Accepted Answer

A no-load fund is a mutual fund in which no sales charge is paid by the individual investor. This means that the investor only pays the operating expenses of the fund. This is beneficial because it allows the investor to invest all of their money into the fund without having to worry about an additional fee. Therefore, a no-load fund is the best choice for investors who want to keep their costs low.

Question 18

Bob Newsome purchased 250 shares of the Northern Lights Growth Fund.The purchase cost was $30 per share.If this fund charges a 3 percent load,what is the commission amount he will pay the investment company?

Accepted Answer

First, we need to calculate the total cost of the shares Bob purchased:

250 shares * $30 per share = $7,500

Next, we need to calculate the load charged by the investment company:

3% * $7,500 = $225

Therefore, Bob will pay a commission amount of $225 to the investment company. The answer is D.

Question 19

There are about _____ exchange-traded funds.

Accepted Answer

As of 2021, there are over 775 exchange-traded funds (ETFs) listed in the United States, according to the Investment Company Institute. Therefore, the correct answer is D.

Question 20

Approximately ____________ percent of all mutual funds are open-end funds.

Accepted Answer

According to the Investment Company Institute, as of June 2021, approximately 92% of all mutual funds in the United States are open-end funds. Therefore, the best choice is E.

Quiz 16: Investing in Mutual Funds