Question 1

The Hirt & Block mutual fund has assets of $147 million, liabilities of $7 million and 7 million shares outstanding. What is the net asset value per share?

Accepted Answer

Net asset value per share = (Assets - Liabilities) / Shares outstanding= ($147 million - $7 million) / 7 million= $140 million / 7 million= $20 per share

Question 2

Characteristics of mutual funds include everything except:

Accepted Answer

Growth funds invest in new, risky companies to attempt to maximize earnings potential.

Question 3

Under dollar-cost averaging, the investor buys a:

Accepted Answer

Under dollar-cost averaging, the investor buys a fixed dollar's worth of a given security at regular intervals regardless of the security's price or the current market outlook.

Question 4

The following are all characteristics of money market funds, except:

Accepted Answer

Money market funds do not require minimum deposits.

Question 5

A fund is set up to charge a load. Its net asset value is $17.70 and its offer price is $18.60. What percentage of the net asset value does the load represent?

Accepted Answer

The load is the difference between the offer price and the net asset value, which is $18.60-$17.70 = $0.90.

To find the percentage of the net asset value that the load represents, divide the load by the net asset value and multiply by 100:

($0.90/$17.70) x 100% = 5.08%

Therefore, the answer is B) 5.08%.

Question 6

When a mutual fund you own buys and sells securities in its portfolio,

Accepted Answer

When you buy fund shares, a portfolio of stocks already exists, and these stocks are held at either a gain or a loss. In rapidly rising bull markets, you may be buying into mutual funds that have large accumulated gains; if the manager decides to take those gains, you will have to pay the capital gains tax, even though the net asset value of your shares did not change.

Question 7

Which of the following is not a disadvantage of investing in mutual funds?

Accepted Answer

Sector funds are riskier than diversified funds. Sector funds are a type of mutual fund.

Question 8

Mutual funds have several disadvantages. Which of the following would apply?

Accepted Answer

Diversification of assets to reduce risk is an advantage.

Question 9

Exchange-Traded Funds offer the investor many advantages over open-end and closed-end mutual funds. Which of the following are comparative advantages?

Accepted Answer

One advantage of ETFs is that the assets in the portfolios are marked to market continuously, and you can trade them all day long at a price that is almost exactly the net asset value of the stocks in the index.

Question 10

A fund is set up to charge a load. Its net asset value is $17.70 and its offer price is $18.60. What is the dollar value of the load (commission)?

Accepted Answer

The load (commission) is the difference between the offer price and the net asset value. Thus, it is $18.60 - $17.70 = $0.90.

Question 11

A fund is set up to charge a load. Its net asset value is $17.70 and its offer price is $18.60. What percentage of the offer price does the load represent?

Accepted Answer

The load is the difference between the offer price and the net asset value, which is $18.60 - $17.70 = $0.90. The percentage of the load relative to the offer price is ($0.90 / $18.60) * 100 = 4.84%.

Question 12

When you buy a mutual fund, you:

Accepted Answer

When you buy fund shares, a portfolio of stocks already exists, and these stocks are held at either a gain or a loss. In rapidly rising bull markets, you may be buying into mutual funds that have large accumulated gains; if the manager decides to take those gains, you will have to pay the capital gains tax-even though the net asset value of your shares did not change.

Question 13

The growth fund category of funds would include:

Accepted Answer

The pursuit of capital appreciation is the emphasis with growth funds. This class of funds includes those called aggressive growth funds and those concentrating on more stable and predictable growth.

Question 14

A characteristic of a closed-end fund is that:

Accepted Answer

You cannot buy the shares directly from the fund (except at the inception of the fund) because of the limitation on shares outstanding.

Question 15

One disadvantage of investing through mutual funds is

Accepted Answer

With more than 8,100 mutual funds from which to choose, an investor has as much of a problem in selecting a mutual fund as a stock.

Question 16

The Hirt & Block mutual fund has assets of $147 million, liabilities of $7 million and 7 million shares outstanding. The shares trade at $21.60 per share. What is the percentage load fee?

Accepted Answer

To find the percentage load fee, we need to first calculate the net asset value (NAV) per share:

NAV per share = (assets - liabilities) / number of shares outstanding
NAV per share = (147 - 7) / 7
NAV per share = 20.00

The load fee is the difference between the offer price (what investors pay) and the NAV per share. Since the shares trade at $21.60 per share and the NAV per share is $20.00, the load fee is:

Load fee = offer price - NAV per share
Load fee = $21.60 - $20.00
Load fee = $1.60

To calculate the percentage load fee, we divide the load fee by the offer price and multiply by 100%:

Percentage load fee = (load fee / offer price) x 100%
Percentage load fee = ($1.60 / $21.60) x 100%
Percentage load fee = 7.41%

Therefore, the answer is C.

Question 17

The difference between a load fund and a no-load fund is that:

Accepted Answer

No-load funds do not charge commissions, and are sold directly by the investment company.

Quiz 4: Investment Companies: Mutual Funds, Exchange-Traded Funds, Closed-End Funds, and Unit Investment Trusts