Question 1

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$5,000 from the Nationwide Fidelity Mutual fund,he was informed that the fund would charge 5 percent of the amount withdrawn.What is the dollar amount of the withdrawal charge?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 2

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

Accepted Answer

A "load" fund is a mutual fund in which investors have to pay a commission every time they purchase shares. This commission is known as a "load" and is usually a percentage of the invested amount. Therefore, option C is the correct choice. Options A, B, D, and E are incorrect as they don't describe the characteristics of a load fund.

Question 3

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

Accepted Answer

Load funds typically charge a sales fee or commission, known as a load, which is often between 2% and 5% of the investment amount.

Question 4

Another name for a mutual fund that charges a contingent deferred sales load is a ____________ fund.

Accepted Answer

A mutual fund that charges a contingent deferred sales load is commonly referred to as a Class B fund.

Question 5

The value of a mutual fund's portfolio minus the mutual fund's liabilities,equals a figure that when divided by the number of shares outstanding,gives you the:

Accepted Answer

The value of a mutual fund's portfolio minus the mutual fund's liabilities is referred to as net assets. When divided by the number of shares outstanding, it gives you the net asset value (NAV) per share, which represents the per-share value of the mutual fund. Therefore, the correct choice is D, net asset value. The book value is the value of a company's assets minus its liabilities, which is not relevant in this context. Outstanding balance is not a relevant term in this context either. LIBOR rate is the London Interbank Offered Rate, an interest rate benchmark used in financial instruments, but not relevant in this context. Accounting value is not a widely used term in the mutual fund industry.

Question 6

A mutual fund whose shares are issued and redeemed by the investment company at the request of investors is called a ____________ fund.

Accepted Answer

An open-end fund is the only type of fund where shares are issued and redeemed by the investment company at the request of investors. Closed-end funds issue a fixed number of shares that are traded on an exchange, and the price is determined by supply and demand. Load and no-load funds refer to the fees charged by the investment company, and convertible funds are a type of bond that can be converted into shares of stock.

Question 7

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

($45 million F1F1F1S1F1F1F10 $3 million) / 1.6 million shares = $26.25

Question 8

The All-Star Basic Value Fund's portfolio is valued at $210 million.The fund has liabilities of $5 million,and the fund's net asset value is $12.50.What is the fund's number of shares outstanding?

Accepted Answer

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

Question 9

Another name for a mutual fund that doesn't charge a sales load or a contingent deferred sales fee,but does charge an ongoing higher 12b-1 fee is a class ____________ fund.

Accepted Answer

Class C funds are also known as level-load funds, as they charge a higher ongoing 12b-1 fee instead of an upfront sales load or deferred sales fee. This ongoing fee is typically around 1% per year and is used to pay for distribution and marketing expenses. While Class C funds may be suitable for investors who plan to hold the fund for a short period of time, they can lead to higher expenses over the long term compared to Class A or Class I funds that do not charge ongoing 12b-1 fees.

Question 10

A fee that some investment companies charge for distributing and marketing a mutual fund is called a:

Accepted Answer

The fee that some investment companies charge for distributing and marketing a mutual fund is called a 12b-1 fee. A 14A-1 fee pertains to proxy solicitations, an 18-2 fee pertains to closed-end funds, and there are no fees called 403 or 401 fees.

Question 11

Bob Newsome purchased 250 shares of the Northern Lights Growth Fund.The purchase cost was $30 per share and the total commission was $225.What is the load being charged by the fund?

Accepted Answer

(250 shares) F1F1F1S1F1F1F10 ($30 F1F1F1S1F1F1F10 load) = $225; 225 / (250 F1F1F1S1F1F1F10 30) = load; 225 / 7500 = .03 = 3 percent

Question 12

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

Accepted Answer

The net asset value (NAV) of most mutual funds is calculated daily, at the end of each trading day. This reflects the current value of the fund's assets minus any liabilities, divided by the number of shares outstanding. Investors can use the NAV to determine the price per share of the mutual fund.

Question 13

The sales charge for purchasing fund shares that impose an up-front commission is____________ percent of the purchase price.

Accepted Answer

The sales charge for purchasing fund shares that impose an up-front commission is as high as 8 1/2 percent of the purchase price.

Question 14

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

Accepted Answer

A contingent deferred sales load (also known as a back-end load) is a fee that is deducted from an investor's proceeds when they withdraw their investment from a mutual fund. This fee is typically a percentage of the withdrawal amount and serves as compensation for the fund company's sales charges and other expenses.

Question 15

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

Accepted Answer

A closed-end fund issues a fixed number of shares when it is initially organized and those shares trade on stock exchanges like any other stock, rather than being bought and sold directly through the mutual fund company. This is different from an open-end fund, which issues new shares whenever an investor wants to buy in and redeems shares whenever an investor wants to sell out.

Question 16

The average management fee for all mutual funds is:

Accepted Answer

According to recent data, the average management fee for all mutual funds is between 0.50 and 1 percent. This fee covers the cost of managing the fund, including research, administrative costs, and management fees for the fund's portfolio manager. While some funds may have lower fees, and others may have higher fees, this is the average range for most mutual funds.

Question 17

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

Accepted Answer

A no-load mutual fund does not charge any sales fee or commission to the individual investor. This means that the entire investment amount is used to purchase fund shares, unlike a load fund where a percentage of the investment goes towards paying the sales charge. Therefore, a no-load fund is often considered a more cost-effective option for investors.

Question 18

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

Accepted Answer

The typical management fee for mutual funds ranges between 0.25 to 1.5 percent, as stated in the question. None of the other ranges mentioned in the options are correct based on this information.

Question 19

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 20

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.

Quiz 16: Investing in Mutual Funds