Deck 4: Managed Funds and Other Investment Companies

Question 1

ETF is an example of ________.

A)commingled pool
B)unlisted investments
C)listed investments
D)money market fund

Answer 1

C

Question 2

The aims of the ETF include all but which one of the following?

A)achieving the same return as the S&P/ASX 200
B)replicating the S&P/ASX 200
C)achieving guaranteed rates of return
D)keeping management fees very low

Answer 2

C

Question 3

________ invest in low-risk assets.

A)equity funds
B)closed-end funds
C)stable funds
D)open-end funds

Answer 3

C

Question 4

Balanced funds hold both ________.

A)ETFs and A-REITs
B)money market securities and real estates
C)equities and commodity derivatives
D)equities and fixed-income securities

Question 5

Australian Real Estate Investment Trust is an example of ________.

A)commingled pool
B)unlisted investments
C)listed investments
D)money market fund

Question 6

The main investments of growth funds are ________.

A)fixed-income securities
B)real estates
C)commodity derivatives
D)equities securities

Question 7

Equity funds commonly hold about ________ of total assets in money market securities.

A)20%
B)15%
C)10%
D)5%

Question 8

Listed investments are generally ________.

A)commingled pool
B)hedge funds
C)closed-end funds
D)open-end funds

Question 9

Life-cycle funds are ________.

A)growth funds
B)closed-end funds
C)balanced funds
D)stable funds

Question 10

________ is one of the most well-known investment management companies.

A)Macquarie Bank
B)Morningstar
C)Commonwealth Bank
D)Vanguard

Question 11

Which of the following investment policies can be classified as multi-asset funds?

A)Australian Masters Corporate Bond Fund
B)Colonial Australian Equity Fund
C)AMP Stable Fund
D)Blackrock International Equity Fund

Question 12

The industry of Australia's managed funds ranks as the ________ in the Asia-Pacific region.

A)fourth largest
B)third largest
C)second largest
D)largest

Question 13

Compared to listed investments, investors have ________ choice when choosing among unlisted investments.

A)greater
B)less
C)similar
D)the same

Question 14

A-REIT is an example of ________.

A)equity funds
B)fixed-income funds
C)property funds
D)closed-end funds

Question 15

Compared with managed funds, ETFs ________.

A)are tax exempt
B)are free from capital gains taxes
C)offer a potential tax advantage
D)are tax inefficient

Question 16

We can broadly divide the investment policies into two categories, ________.

A)fixed-income funds and equity funds
B)stable funds and growth funds
C)cash funds and equity funds
D)asset class funds and diversified funds

Question 17

The industry of Australia's managed funds ranks as the ________ in the global financial markets.

A)fourth largest
B)third largest
C)second largest
D)largest

Question 18

If an investor wants to sell their ________, they must find another investor who will buy it.

A)equity funds
B)hedge funds
C)closed-end funds
D)open-end funds

Question 19

Investors can only buy or sell ________ at fixed points in time.

A)A-REITs
B)ETFs
C)open-end funds
D)closed-end funds

Question 20

The average maturity of the assets invested by cash funds tends to be a bit more than ________.

A)one month
B)three months
C)six months
D)nine months

Question 21

The ongoing fees of managed funds are usually in the range of ________ per annum.

A)2% to 2.5%
B)1% to 2%
C)0.5% to 1%
D)1% to 2.5%

Question 22

A fund with a ________ can be particularly tax inefficient.

A)low holding in real estate
B)low portfolio turnover rate
C)high holding in real estate
D)high portfolio turnover rate

Question 23

The primary measurement unit used for assessing the value of one's stake in an investment company is ________.

A)Net Asset Value
B)Average Asset Value
C)Gross Asset Value
D)Total Asset Value

Question 24

Rank the following fund categories from most risky to least risky:
I) Equity growth fund
II) Balanced fund
III) Sector fund
IV) Money market fund

A)IV, I, III, II
B)III, II, IV, I
C)I, II, III, IV
D)III, I, II, IV

Question 25

Assume that you have recently purchased 100 shares in an investment company. Upon examining the balance sheet, you note the firm is reporting $225 million in assets, $30 million in liabilities, and 10 million shares outstanding. What is the Net Asset Value (NAV) of these shares?

A)$25.50
B)$22.50
C)$19.50
D)$1.95

Question 26

Which of the following is not a type of managed investment company?

A)Unit investment trusts
B)Closed-end funds
C)Open-end funds
D)Hedge funds

Question 27

Active managers look for ________.

A)speculative opportunities
B)the benefits of diversification
C)only good investment opportunities
D)both good and bad investment opportunities

Question 28

The contribution fee of managed funds is generally around ________ of the value of the investment.

A)2%
B)3%
C)4%
D)5%

Question 29

Which of the following result in a taxable event for investors?
I) Short-term capital gains distributions from the fund
II) Dividend distributions from the fund
III) Long-term capital gains distributions from the fund

A)I only
B)II only
C)I and II only
D)I, II and III

Question 30

Management fees for open-end and closed-end funds, typically range between ________ and ________.

A)1%; 2.5%
B)0.5%; 5%
C)2%; 5%
D)3%; 8%

Question 31

Advantages of investment companies to investors include all but which one of the following?

A)Record keeping and administration
B)Low-cost diversification
C)Professional management
D)Guaranteed rates of return

Question 32

A low-turnover fund such as an index fund may have turnover as low as ________.

A)5%
B)4%
C)3%
D)2%

Question 33

Net Asset Value is defined as ________.

A)book value of assets divided by shares outstanding
B)book value of assets minus liabilities divided by shares outstanding
C)market value of assets divided by shares outstanding
D)market value of assets minus liabilities divided by shares outstanding

Question 34

The investment philosophy of ETFs is ________.

A)pro-active management
B)demi-active management
C)passive management
D)active management

Question 35

The performance fees of managed funds is normally a percentage of the return above ________.

A)the one-year government yield
B)the guaranteed rate of return
C)the risk-free rate
D)the benchmark return

Question 36

Managed funds provide the following for their shareholders:

A)Diversification
B)Professional management
C)Record keeping and administration
D)All of these answers are provided by managed funds.

Question 37

Targeted-maturity funds are ________.

A)growth funds
B)closed-end funds
C)balanced funds
D)stable funds

Question 38

Turnover rates in equity funds in the last decade have typically been around ________ when weighted by assets under management.

A)30%
B)40%
C)50%
D)60%

Question 39

The Vanguard 500 Index Fund tracks the performance of the S&P 500. To do so the fund buys shares in each S&P 500 company ________.

A)in proportion to the market value weight of the firm's equity in the S&P500
B)in proportion to the price weight of the share in the S&P500
C)by purchasing an equal number of shares of each share in the S&P 500
D)by purchasing an equal dollar amount of shares of each share in the S&P500

Question 40

Assume that you have just purchased some shares in an investment company reporting $500 million in assets, $50 million in liabilities, and 50 million shares outstanding. What is the Net Asset Value (NAV) of these shares?

A)$12.00
B)$9.00
C)$10.00
D)$1.00

Question 41

Which of the following funds is usually most tax efficient?

A)Equity funds
B)Bond funds
C)ETFs
D)Specialised sector funds

Question 42

The ratio of trading activity of a portfolio to the assets of the portfolio, is called ________.

A)the reinvestment ratio
B)the trading rate
C)the portfolio turnover
D)the tax yield

Question 43

The assets of a managed fund are $25 million. The liabilities are $4 million. If the fund has 700 000 shares outstanding and pays a $3 dividend, what is the dividend yield?

A)5%
B)10%
C)15%
D)20%

Question 44

The difference between balanced funds and asset allocation funds is that ________.

A)balanced funds invest in bonds while asset allocation funds do not
B)asset allocation funds invest in bonds while balanced funds do not
C)balanced funds have relatively stable proportions of shares and bonds while the proportions may vary dramatically for asset allocation funds
D)balanced funds make no capital gains distributions and asset allocation funds make both dividend and capital gains distributions

Question 45

Managed funds that vary the proportions of funds invested in particular market sectors according to the fund manager's forecast of the performance of that market sector, are called ________.

A)asset allocation funds
B)balanced funds
C)index funds
D)income funds

Question 46

Unlisted investments are often called ________.

A)Unit investment trusts
B)Open-end funds
C)Closed-end funds
D)REITs

Question 47

Advantages of ETFs over managed funds include all but which one of the following?

A)ETFs trade continuously so investors can trade throughout the day
B)ETFs can be sold short or purchased on margin, unlike fund shares
C)ETF providers do not have to sell holdings to fund redemptions
D)ETF values can diverge from NAV

Question 48

A fund that invests in securities worldwide, including the United States, is called a/an ________.

A)stable fund
B)emerging market fund
C)global fund
D)regional fund

Question 49

A mutual fund has total assets outstanding of $69 million. During the year the fund bought and sold assets equal to $17.25 million. This fund's turnover rate was ________.

A)25.00%
B)28.50%
C)18.63%
D)33.40%

Question 50

Consider a mutual fund with $300 million in assets at the start of the year, and 12 million shares outstanding. If the gross return on assets is 18% and the total expense ratio is 2% of the year end value, what is the rate of return on the fund?

A)15.64%
B)16.00%
C)17.25%
D)17.50%

Question 51

Which of the following funds invest in shares of fast growing companies?

A)Balanced funds
B)Growth equity funds
C)REITs
D)Equity income funds

Question 52

Investors who wish to liquidate their holdings in an open-end fund may ________.

A)sell their shares back to the fund at a discount
B)sell their shares back to the fund at net asset value
C)sell their shares on the open market
D)sell their shares at a premium to net asset value

Question 53

Managed funds that hold both equities and fixed-income securities in relatively stable proportions are called ________.

A)income funds
B)balanced funds
C)asset allocation funds
D)index funds

Question 54

A/an ________ is an example of a closed-end fund.

A)ETF
B)samurai
C)Vanguard
D)unlisted investment

Question 55

________ funds stand ready to redeem or issue shares at their net asset value.

A)Closed-end
B)Index
C)Open-end
D)Hedge

Question 56

________ is a false statement regarding open-end funds.

A)'They offer investors a guaranteed rate of return'
B)'They offer investors a well-diversified portfolio'
C)'They redeem shares at their net asset value'
D)'They offer low-cost diversification

Question 57

The greatest percentage of growth fund assets are invested in ________.

A)bond funds
B)equity funds
C)hybrid funds
D)money market funds

Question 58

Higher portfolio turnover ________.
I) results in greater tax liability for investors
II) results in greater trading costs for the fund, which investors have to pay for
III) is a characteristic of asset allocation funds

A)I only
B)II only
C)I and II only
D)I, II and III

Question 59

An official description of a particular managed fund's planned investment policy can be found in the fund's ________.

A)prospectus
B)indenture
C)investment statement
D)12b-1 forms

Question 60

Investors who wish to liquidate their holdings in a closed-end fund may ________.

A)sell their shares back to the fund at a discount if they wish
B)sell their shares back to the fund at net asset value
C)sell their shares on the open market
D)sell their shares at a premium to net asset value if they wish