Deck 14: Mutual Funds: An Easy Way to Diversify

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Question
Mutual funds provide an inexpensive way for investors to diversify and gain access to professional management.
Use Space or
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Question
Mutual funds eliminate the systematic risk through diversification.
Question
Which of the following is a benefit to investing in a mutual fund?

A) Most small investors don't have the time, knowledge or desire to do the research necessary to purchase individual stocks.
B) Mutual fund transaction fees are considerably lower than the brokerage fees most small investors incur buying and selling individual stocks.
C) Most small investors want to be able to invest relatively small amounts of money on a regular basis.
D) All of the above are correct.
E) Only A and B are correct.
Question
Which type of risk can an investor effectively manage by investing in broadly diversified mutual funds?

A) Serial risk
B) Systematic risk
C) Unsystematic risk
D) None of the above is correct.
Question
Mutual fund shareholders directly own the fund's securities.
Question
Mutual funds give smaller investors the same ability to diversify and reduce risk as big investors with a great deal of money have.
Question
For your investment program,you have occasionally been holding a few stocks that you purchased from various brokers.Based on this,which advantages of mutual funds would be appealing to you?

A) Diversification
B) Professional management
C) Avoidance of bad brokers
D) only A and C
E) A, B, and C
Question
Each individual mutual fund hires an investment advisor,generally from the management company,who oversee the particular fund.How is this advisor paid?

A) Hourly
B) Based on a percentage of the commissions charged on an annual basis
C) Based on a percentage of the total value of the fund on an annual basis
D) Annually based on the capital gains realized by the fund
E) None of the above
Question
Because mutual funds trade in such large quantities,they pay far more in terms of commissions.
Question
The trade-off for mutual fund diversification is lower-than-market performance.
Question
Most small investors don't have the time,expertise,or desire to do the research necessary to invest in individual stocks therefore mutual funds are a good solution.
Question
When you own shares in a mutual fund you make money in which of the following ways?

A) As the value of all of the securities held by the mutual fund increase, the value of each mutual fund share also increases.
B) If a fund receives interest or dividends from its holdings this income is passed on to share holders.
C) If the fund sells a security for more than it originally paid for it, the shareholders receive this in the form of capital gains.
D) You receive a portion of the commissions that the fund manager charges for trades.
E) Only A, B and C are correct.
Question
By law,all mutual funds must be broadly diversified.
Question
All mutual funds carry the same level of diversification and exposure to risk.
Question
Principle 8 tells us that diversification reduces

A) risk.
B) costs.
C) profitability.
D) earnings.
E) none of the above.
Question
Which of the following is a disadvantage to mutual fund investing?

A) On average they underperform the market returns.
B) Costs may be high and vary dramatically from fund to fund.
C) Not all mutual funds are truly safe.
D) You cannot diversify away systematic risk.
E) All of the above
Question
The potential lower returns on mutual funds versus the potential returns on individual stocks is due to poor performance by the fund managers.
Question
The investor services that most mutual funds offer include

A) bookkeeping services.
B) checking accounts.
C) automatic systems to add to or withdraw from your account.
D) All of the above are correct.
E) All but B are correct
Question
One disadvantage of mutual fund investments is that they are illiquid.
Question
Why would someone want to give serious attention to investing in mutual funds? At the same time,why would you not invest in them?
Question
Roberta Cartwright puts money each month into a mutual fund that has very few controls;in that,the managers can invest in whatever they want because this type of fund is not regulated by the SEC.Roberta has a(n)________ fund.

A) open-end
B) closed-end
C) hedge
D) no-load
E) back-end load
Question
A unit investment trust is a fixed pool of securities,generally municipal bonds,with each unit representing a proportionate ownership in that pool.
Question
A closed-end fund trades more like common stock than a mutual fund.
Question
An equity REIT investment is limited to mortgages on income producing properties.
Question
Former hedge fund manager Bernie Madoff ran a Ponzi scheme,in which he took money from new investors and used that money to pay earlier investors,all the while pocketing most of the money for himself.In the end,Madoff lost around ________ of his investors' money and ended up behind bars."

A) $100 million
B) $5 billion
C) $25 billion
D) $50 billion
Question
An ________ is a fixed pool of securities,generally municipal bonds.

A) earning trust
B) unit investment trust
C) equity corporation
D) asset diversification company
E) none of the above
Question
What are the two broad types of risks that are associated with investing? Can you avoid them by investing in Mutual Funds?
Question
The term "open end" mutual fund means that this type of investment company can issue an unlimited number of ownership shares.
Question
When you own shares in a mutual fund,you directly own shares of the companies that make up the fund.
Question
Briefly explain the three ways to make money when you own shares in a mutual fund.
Question
A(n)________ is a mutual fund company that has the ability to issue as many shares as investors are willing to purchase.

A) closed-end mutual fund
B) share repurchase fund
C) open-end mutual fund
D) variable share mutual fund
E) none of the above
Question
A unit investment trust usually invests in ________ and an REIT always invests in ________.

A) real estate; agency bonds
B) real estate; municipal bonds
C) real estate; load mutual funds
D) municipal bonds; real estate
E) municipal bonds; real estate bonds
Question
An open-end mutual fund has a fixed number of shares which are sold by the mutual fund at its inception.
Question
The most common and popular form of mutual fund is an open-end mutual fund.
Question
Hedge fund managers charge very high fees,generally taking ________ of the assets under management (even when the fund loses money)along with ________ of the profits-and some take even more.

A) 1 percent; 10 percent
B) 2 percent; 10 percent
C) 2 percent; 20 percent
D) 5 percent; 25 percent
Question
A(n)________ is a fixed pool of securities,generally municipal bonds,with each unit representing a proportionate ownership in that pool.

A) open-end investment company
B) closed-end mutual fund
C) unit investment trust
D) real estate investment trust
Question
Do the advantages of investing in a Mutual Fund outweigh the disadvantages for the average small investor?
Question
Which of the following funds would be the most appropriate investment for the average small investor?

A) No-load open-end fund
B) No-load closed-end fund
C) Front-end load fund
D) Back-end load fund
Question
At the beginning of 2014,bond funds-including both municipal and taxable bond funds-made up the largest segment of the $279 billion closed-end fund market.
Question
Shares in open-end mutual funds are actively traded in secondary markets.
Question
Mutual funds charge high sales loads because their potential returns are much higher than the returns for individual stocks.
Question
Which of the following are passed on to fund share holders through 12b-1 fees?

A) Commissions
B) Advertising expenses
C) Promotional fees
D) Only B and C
E) All of the above
Question
When you own shares of a mutual fund,you can choose to have the dividend and capital gains distributions paid directly to you in the form of cash or you can choose to have them reinvested into additional shares of the fund itself.
Question
Sometimes,when you purchase shares directly from the mutual fund company itself,there will not be a sales load.
Question
The ________ is the value of the mutual fund's holdings,minus any debt,divided by the number of shares outstanding.

A) net worth
B) market value
C) tangible value
D) net asset value
E) none of the above
Question
A mutual fund that does not charge a commission to own its shares is called a

A) free issue fund.
B) market fund.
C) no-load fund.
D) no-charge fund.
E) free-load fund.
Question
Which of the following will affect your capital gains liability?

A) Turnover ratio
B) Changes in net asset value
C) Expense ratio
D) All of the above are correct.
E) Only A and B are correct.
Question
Which of the following statements is true regarding mutual fund load charges?

A) Load funds perform better than no-load funds.
B) Back-end load funds perform better than no-load funds.
C) Load funds perform more poorly than back-end load funds.
D) No-load funds perform just as well as load funds.
E) None of the above
Question
Net asset value is determined by taking the total market value of all the securities held by the mutual fund,subtracting out any liabilities,and dividing the result by the number of shares outstanding.
Question
Tabitha is just beginning to develop her financial portfolio.She does not want to pay commissions to purchase shares in mutual funds,as her friend you would advise her to invest her dollars in ________ funds.

A) load
B) front-load
C) back-load
D) no-load
E) side-load
Question
When comparing which mutual fund to invest in,which of the following would be important to consider?

A) Load
B) Net asset value
C) Expense ratio
D) All of the above are correct.
E) Only A and C are correct.
Question
12b-1 fees are marketing expenses for the mutual fund that are passed on to the fund shareholders.
Question
A mutual fund that does not charge a commission on your ownership shares is referred to as a load fund.
Question
Mutual fund fees and expenses will negatively affect the return you receive on your investment.
Question
"Classes" of mutual funds have different fee arrangements attached to them.
Question
A mutual fund's expense ratio compares the fund's expenses to its total assets.
Question
All distributions from a mutual fund,whether paid out or reinvested,are taxable in the year in which they occur.
Question
In what ways do unit investment trusts and real estate investment trusts resemble mutual funds?
Question
Back-end load mutual funds charge a commission when the investor sells the mutual fund.
Question
Compare and contrast open-end and closed-end mutual funds.
Question
A sector fund is a mutual fund that tries to maximize the degree of diversification.
Question
What does the following mathematical expression yield? (total market value of all securities - liabilities)divided by (total shares outstanding)=

A) asset value.
B) net value.
C) net asset value.
D) net return value.
E) asset return value.
Question
Explain what the three 'classes' of a mutual fund shares are all about.
Question
Explain how sales loads and fund expenses can negatively impact your return on investment in a mutual fund.
Question
You purchased 100 shares of Gibraltar Strength Fund for $12.75 per share.Its current NAV is 18.75 per share.There was a total of $0.25 in dividends and $0.75 in capital gains distributed.What is your total return?

A) 32.00%
B) 37.33%
C) 47.06%
D) 54.90%
Question
Explain how a dividend reinvestment plan is similar to compounding and the time value of money.
Question
Exchange traded funds are mutual funds that trade on an exchange just like individual securities and can be bought or sold throughout the trading day.
Question
What are the tax liabilities concerning investing in a mutual fund?
Question
Briefly describe the cost involved in mutual funds.
Question
You purchased 100 shares of Gibraltar Strength Fund for $20.50 per share.As a result of distribution reinvestment you currently own 120 shares with a NAV of $22.75 per share.What is your total return?

A) 16.67%
B) 20.00%
C) 24.91%
D) 33.17%
Question
Zippo Mutual Fund is one of your best performers.It just announced a year-end distribution of $2.50 per share in capital gains and $4.25 in dividends.Assuming the NAV increased from $31.50 to $43.75,calculate your total annual return.

A) 60.32%
B) 46.87%
C) 26.95%
D) 24.53%
Question
Total returns on mutual funds can be calculated by adding dividends distributed,capital gains distributed,and ________ and dividing this sum by the beginning NAV.

A) beginning NAV - ending NAV
B) ending NAV - beginning NAV
C) dividends undistributed + capital gains undistributed
D) beginning NAV + ending NAV
E) ending NAV + beginning NAV
Question
You purchased 100 shares of a fund for $15.50 per share.Its current NAV is 20.75 per share.There were no distributions.What is your total return?

A) 33.87%
B) 22.33%
C) 79.67%
D) 25.51%
Question
You purchased 500 shares in a mutual fund for $32 NAV.You elected the dividend reinvestment plan and had all dividend and capital gains distributions reinvested in additional shares.You just closed your account and sold 550 shares for $48 NAV.What was your total return on this investment?

A) 24.03%
B) 34.29%
C) 50.86%
D) 65.00%
Question
Money market mutual funds invest primarily in the stocks of publicly traded companies.
Question
Sixty-five percent of Sally's mutual funds are invested in environmentally friendly companies.We can assume Sally has invested in sector funds.
Question
What is the total return for a mutual fund with the following characteristics? beginning NAV = $55.82
Ending NAV = $70.52
Dividends distributed = $2.25
Capital gains distributed = $3.50

A) 29.71%
B) 30.82%
C) 32.26%
D) 36.64%
Question
Tax-exempt money market mutual funds invest in only very short-term municipal debt.
Question
Suppose that the current value of all of a mutual fund's holdings is determined to be $750 million.The fund's liabilities are $125 million and it grew at 20% from last year.It currently has 45 million shares outstanding.What is the fund's NAV?

A) $12.00 per share
B) $13.89 per share
C) $14.40 per share
D) $16.80 per share
Question
You purchased 1,000 shares of fund ABC for $35.00 NAV per share.You elected the dividend reinvestment plan and had all dividend and capital gains distributions reinvested in additional shares.You just closed your account and sold 1,100 shares for $30 NAV.What was your total return on this investment?

A) -6.06%
B) -5.71%
C) 5.71%
D) 6.06%
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Deck 14: Mutual Funds: An Easy Way to Diversify
1
Mutual funds provide an inexpensive way for investors to diversify and gain access to professional management.
True
2
Mutual funds eliminate the systematic risk through diversification.
False
3
Which of the following is a benefit to investing in a mutual fund?

A) Most small investors don't have the time, knowledge or desire to do the research necessary to purchase individual stocks.
B) Mutual fund transaction fees are considerably lower than the brokerage fees most small investors incur buying and selling individual stocks.
C) Most small investors want to be able to invest relatively small amounts of money on a regular basis.
D) All of the above are correct.
E) Only A and B are correct.
All of the above are correct.
4
Which type of risk can an investor effectively manage by investing in broadly diversified mutual funds?

A) Serial risk
B) Systematic risk
C) Unsystematic risk
D) None of the above is correct.
Unlock Deck
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5
Mutual fund shareholders directly own the fund's securities.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
6
Mutual funds give smaller investors the same ability to diversify and reduce risk as big investors with a great deal of money have.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
7
For your investment program,you have occasionally been holding a few stocks that you purchased from various brokers.Based on this,which advantages of mutual funds would be appealing to you?

A) Diversification
B) Professional management
C) Avoidance of bad brokers
D) only A and C
E) A, B, and C
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
8
Each individual mutual fund hires an investment advisor,generally from the management company,who oversee the particular fund.How is this advisor paid?

A) Hourly
B) Based on a percentage of the commissions charged on an annual basis
C) Based on a percentage of the total value of the fund on an annual basis
D) Annually based on the capital gains realized by the fund
E) None of the above
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
9
Because mutual funds trade in such large quantities,they pay far more in terms of commissions.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
10
The trade-off for mutual fund diversification is lower-than-market performance.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
11
Most small investors don't have the time,expertise,or desire to do the research necessary to invest in individual stocks therefore mutual funds are a good solution.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
12
When you own shares in a mutual fund you make money in which of the following ways?

A) As the value of all of the securities held by the mutual fund increase, the value of each mutual fund share also increases.
B) If a fund receives interest or dividends from its holdings this income is passed on to share holders.
C) If the fund sells a security for more than it originally paid for it, the shareholders receive this in the form of capital gains.
D) You receive a portion of the commissions that the fund manager charges for trades.
E) Only A, B and C are correct.
Unlock Deck
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k this deck
13
By law,all mutual funds must be broadly diversified.
Unlock Deck
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k this deck
14
All mutual funds carry the same level of diversification and exposure to risk.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
15
Principle 8 tells us that diversification reduces

A) risk.
B) costs.
C) profitability.
D) earnings.
E) none of the above.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
16
Which of the following is a disadvantage to mutual fund investing?

A) On average they underperform the market returns.
B) Costs may be high and vary dramatically from fund to fund.
C) Not all mutual funds are truly safe.
D) You cannot diversify away systematic risk.
E) All of the above
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
17
The potential lower returns on mutual funds versus the potential returns on individual stocks is due to poor performance by the fund managers.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
18
The investor services that most mutual funds offer include

A) bookkeeping services.
B) checking accounts.
C) automatic systems to add to or withdraw from your account.
D) All of the above are correct.
E) All but B are correct
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
19
One disadvantage of mutual fund investments is that they are illiquid.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
20
Why would someone want to give serious attention to investing in mutual funds? At the same time,why would you not invest in them?
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
21
Roberta Cartwright puts money each month into a mutual fund that has very few controls;in that,the managers can invest in whatever they want because this type of fund is not regulated by the SEC.Roberta has a(n)________ fund.

A) open-end
B) closed-end
C) hedge
D) no-load
E) back-end load
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
22
A unit investment trust is a fixed pool of securities,generally municipal bonds,with each unit representing a proportionate ownership in that pool.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
23
A closed-end fund trades more like common stock than a mutual fund.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
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k this deck
24
An equity REIT investment is limited to mortgages on income producing properties.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
25
Former hedge fund manager Bernie Madoff ran a Ponzi scheme,in which he took money from new investors and used that money to pay earlier investors,all the while pocketing most of the money for himself.In the end,Madoff lost around ________ of his investors' money and ended up behind bars."

A) $100 million
B) $5 billion
C) $25 billion
D) $50 billion
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
26
An ________ is a fixed pool of securities,generally municipal bonds.

A) earning trust
B) unit investment trust
C) equity corporation
D) asset diversification company
E) none of the above
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
27
What are the two broad types of risks that are associated with investing? Can you avoid them by investing in Mutual Funds?
Unlock Deck
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Unlock Deck
k this deck
28
The term "open end" mutual fund means that this type of investment company can issue an unlimited number of ownership shares.
Unlock Deck
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Unlock Deck
k this deck
29
When you own shares in a mutual fund,you directly own shares of the companies that make up the fund.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
30
Briefly explain the three ways to make money when you own shares in a mutual fund.
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31
A(n)________ is a mutual fund company that has the ability to issue as many shares as investors are willing to purchase.

A) closed-end mutual fund
B) share repurchase fund
C) open-end mutual fund
D) variable share mutual fund
E) none of the above
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
32
A unit investment trust usually invests in ________ and an REIT always invests in ________.

A) real estate; agency bonds
B) real estate; municipal bonds
C) real estate; load mutual funds
D) municipal bonds; real estate
E) municipal bonds; real estate bonds
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33
An open-end mutual fund has a fixed number of shares which are sold by the mutual fund at its inception.
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34
The most common and popular form of mutual fund is an open-end mutual fund.
Unlock Deck
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Unlock Deck
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35
Hedge fund managers charge very high fees,generally taking ________ of the assets under management (even when the fund loses money)along with ________ of the profits-and some take even more.

A) 1 percent; 10 percent
B) 2 percent; 10 percent
C) 2 percent; 20 percent
D) 5 percent; 25 percent
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
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36
A(n)________ is a fixed pool of securities,generally municipal bonds,with each unit representing a proportionate ownership in that pool.

A) open-end investment company
B) closed-end mutual fund
C) unit investment trust
D) real estate investment trust
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37
Do the advantages of investing in a Mutual Fund outweigh the disadvantages for the average small investor?
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38
Which of the following funds would be the most appropriate investment for the average small investor?

A) No-load open-end fund
B) No-load closed-end fund
C) Front-end load fund
D) Back-end load fund
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Unlock for access to all 136 flashcards in this deck.
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39
At the beginning of 2014,bond funds-including both municipal and taxable bond funds-made up the largest segment of the $279 billion closed-end fund market.
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40
Shares in open-end mutual funds are actively traded in secondary markets.
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41
Mutual funds charge high sales loads because their potential returns are much higher than the returns for individual stocks.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
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k this deck
42
Which of the following are passed on to fund share holders through 12b-1 fees?

A) Commissions
B) Advertising expenses
C) Promotional fees
D) Only B and C
E) All of the above
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Unlock for access to all 136 flashcards in this deck.
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43
When you own shares of a mutual fund,you can choose to have the dividend and capital gains distributions paid directly to you in the form of cash or you can choose to have them reinvested into additional shares of the fund itself.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
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44
Sometimes,when you purchase shares directly from the mutual fund company itself,there will not be a sales load.
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45
The ________ is the value of the mutual fund's holdings,minus any debt,divided by the number of shares outstanding.

A) net worth
B) market value
C) tangible value
D) net asset value
E) none of the above
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
46
A mutual fund that does not charge a commission to own its shares is called a

A) free issue fund.
B) market fund.
C) no-load fund.
D) no-charge fund.
E) free-load fund.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
47
Which of the following will affect your capital gains liability?

A) Turnover ratio
B) Changes in net asset value
C) Expense ratio
D) All of the above are correct.
E) Only A and B are correct.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
48
Which of the following statements is true regarding mutual fund load charges?

A) Load funds perform better than no-load funds.
B) Back-end load funds perform better than no-load funds.
C) Load funds perform more poorly than back-end load funds.
D) No-load funds perform just as well as load funds.
E) None of the above
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Unlock for access to all 136 flashcards in this deck.
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49
Net asset value is determined by taking the total market value of all the securities held by the mutual fund,subtracting out any liabilities,and dividing the result by the number of shares outstanding.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
50
Tabitha is just beginning to develop her financial portfolio.She does not want to pay commissions to purchase shares in mutual funds,as her friend you would advise her to invest her dollars in ________ funds.

A) load
B) front-load
C) back-load
D) no-load
E) side-load
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
51
When comparing which mutual fund to invest in,which of the following would be important to consider?

A) Load
B) Net asset value
C) Expense ratio
D) All of the above are correct.
E) Only A and C are correct.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
52
12b-1 fees are marketing expenses for the mutual fund that are passed on to the fund shareholders.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
53
A mutual fund that does not charge a commission on your ownership shares is referred to as a load fund.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
54
Mutual fund fees and expenses will negatively affect the return you receive on your investment.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
55
"Classes" of mutual funds have different fee arrangements attached to them.
Unlock Deck
Unlock for access to all 136 flashcards in this deck.
Unlock Deck
k this deck
56
A mutual fund's expense ratio compares the fund's expenses to its total assets.
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57
All distributions from a mutual fund,whether paid out or reinvested,are taxable in the year in which they occur.
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58
In what ways do unit investment trusts and real estate investment trusts resemble mutual funds?
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59
Back-end load mutual funds charge a commission when the investor sells the mutual fund.
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60
Compare and contrast open-end and closed-end mutual funds.
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61
A sector fund is a mutual fund that tries to maximize the degree of diversification.
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62
What does the following mathematical expression yield? (total market value of all securities - liabilities)divided by (total shares outstanding)=

A) asset value.
B) net value.
C) net asset value.
D) net return value.
E) asset return value.
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63
Explain what the three 'classes' of a mutual fund shares are all about.
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64
Explain how sales loads and fund expenses can negatively impact your return on investment in a mutual fund.
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65
You purchased 100 shares of Gibraltar Strength Fund for $12.75 per share.Its current NAV is 18.75 per share.There was a total of $0.25 in dividends and $0.75 in capital gains distributed.What is your total return?

A) 32.00%
B) 37.33%
C) 47.06%
D) 54.90%
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66
Explain how a dividend reinvestment plan is similar to compounding and the time value of money.
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67
Exchange traded funds are mutual funds that trade on an exchange just like individual securities and can be bought or sold throughout the trading day.
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68
What are the tax liabilities concerning investing in a mutual fund?
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69
Briefly describe the cost involved in mutual funds.
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70
You purchased 100 shares of Gibraltar Strength Fund for $20.50 per share.As a result of distribution reinvestment you currently own 120 shares with a NAV of $22.75 per share.What is your total return?

A) 16.67%
B) 20.00%
C) 24.91%
D) 33.17%
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71
Zippo Mutual Fund is one of your best performers.It just announced a year-end distribution of $2.50 per share in capital gains and $4.25 in dividends.Assuming the NAV increased from $31.50 to $43.75,calculate your total annual return.

A) 60.32%
B) 46.87%
C) 26.95%
D) 24.53%
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72
Total returns on mutual funds can be calculated by adding dividends distributed,capital gains distributed,and ________ and dividing this sum by the beginning NAV.

A) beginning NAV - ending NAV
B) ending NAV - beginning NAV
C) dividends undistributed + capital gains undistributed
D) beginning NAV + ending NAV
E) ending NAV + beginning NAV
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73
You purchased 100 shares of a fund for $15.50 per share.Its current NAV is 20.75 per share.There were no distributions.What is your total return?

A) 33.87%
B) 22.33%
C) 79.67%
D) 25.51%
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74
You purchased 500 shares in a mutual fund for $32 NAV.You elected the dividend reinvestment plan and had all dividend and capital gains distributions reinvested in additional shares.You just closed your account and sold 550 shares for $48 NAV.What was your total return on this investment?

A) 24.03%
B) 34.29%
C) 50.86%
D) 65.00%
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75
Money market mutual funds invest primarily in the stocks of publicly traded companies.
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76
Sixty-five percent of Sally's mutual funds are invested in environmentally friendly companies.We can assume Sally has invested in sector funds.
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77
What is the total return for a mutual fund with the following characteristics? beginning NAV = $55.82
Ending NAV = $70.52
Dividends distributed = $2.25
Capital gains distributed = $3.50

A) 29.71%
B) 30.82%
C) 32.26%
D) 36.64%
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78
Tax-exempt money market mutual funds invest in only very short-term municipal debt.
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79
Suppose that the current value of all of a mutual fund's holdings is determined to be $750 million.The fund's liabilities are $125 million and it grew at 20% from last year.It currently has 45 million shares outstanding.What is the fund's NAV?

A) $12.00 per share
B) $13.89 per share
C) $14.40 per share
D) $16.80 per share
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80
You purchased 1,000 shares of fund ABC for $35.00 NAV per share.You elected the dividend reinvestment plan and had all dividend and capital gains distributions reinvested in additional shares.You just closed your account and sold 1,100 shares for $30 NAV.What was your total return on this investment?

A) -6.06%
B) -5.71%
C) 5.71%
D) 6.06%
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