Deck 13: Investing in Mutual Funds

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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.

Answer 3

True

Question 4

Spiders and Diamonds are examples of ETFs.

Question 5

Investors select and purchase securities held within mutual funds.

Question 6

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

Question 7

Exchange traded funds can create new shares to meet demand.

Question 8

Load fund charges a fee at the time of purchase.

Question 9

Mutual funds are actually comprised of two or more companies.

Question 10

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

Question 11

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

Question 12

Exchange traded mutual funds are known as closed-end mutual funds.

Question 13

Open-ended mutual funds typically offer more diversification than an individual security.

Question 14

ETFs often distribute large capital gains to their shareholders.

Question 15

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

Question 16

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

Question 17

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

Question 18

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

Question 19

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

Question 20

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

Question 21

A fund's objective must be stated in its prospectus.

Question 22

Loads are transaction charges for mutual funds.

Question 23

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

Question 24

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

Question 25

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

Question 26

A mutual fund with a high 12(b)-1 fee will have a low expense ratio.

Question 27

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

Question 28

When you buy shares in a load fund,you will pay the NAV only.

Question 29

A mutual fund quotation shows NAV $3.16,offer $3.80.If you want to buy 100 shares,you will pay $380.

Question 30

A hybrid real estate investment trusts (REITs)would invest only in real estate mortgages.

Question 31

No-load funds are generally sold directly to the investor without a salesperson.

Question 32

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 33

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

Question 34

When you buy shares in a no-load fund,you will pay the NAV.

Question 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

The difference between the NAV and the offer price represents the commission charge for buying the mutual fund shares.

Question 40

By definition,all ETFs are no-load funds.

Question 41

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

Question 42

Money market funds are traded on the money market,just as closed-end stock funds are traded on the stock market.

Question 43

Sector funds usually restrict their investments to specific industries.

Question 44

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

Question 45

A technology fund is an example of a sector fund.

Question 46

Socially responsible funds have experienced lower return than other types of funds of similar risk.

Question 47

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

Question 48

Index funds have high realized capital gains.

Question 49

Bond mutual funds are always less risky than stock mutual funds.

Question 50

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

Question 51

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

Question 52

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

Question 53

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

Question 54

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

Question 55

Sector funds may include stocks from different indexes.

Question 56

Socially responsible funds abstain from investing in alcohol,gambling,or tobacco stocks.

Question 57

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

Question 58

The investment objective of bond and money market funds is growth.

Question 59

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

Question 60

Index funds are actively managed.

Question 61

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

Question 62

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

Question 63

Investment company earnings result solely from dividends.

Question 64

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

Question 65

Mutual fund conversion privileges can often be exercised using an 800 telephone number.

Question 66

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

Question 67

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

Question 68

Mutual fund performance is usually evaluated by viewing a given size investment for a certain time period.

Question 69

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

Question 70

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 71

Asset allocation funds invest in stocks,bonds,and cash.

Question 72

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

Question 73

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

Question 74

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

Question 75

As of late 2014,housing prices had rebounded from the levels of the housing debacle of 2007-2009.

Question 76

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

Question 77

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

Question 78

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

Question 79

A mutual fund always provides active professional investment management.

Question 80

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